Work in Progress (WIP) Schedules: Why Every Contractor Needs One
If you run a construction business with jobs that stretch across months, a regular profit and loss statement won't tell you the whole story. That's where a Work in Progress (WIP) schedule comes in — it's one of the most important reports in construction accounting, and one of the most misunderstood.
What Is a WIP Schedule?
A WIP schedule compares, job by job, how much revenue you've earned based on actual progress against how much you've billed the client so far. It answers a simple but critical question: are you ahead of your billings, or behind?
For each active job, it looks at:
Contract amount — the total value of the job
Costs incurred to date — what you've actually spent so far
Estimated costs to complete — what's left to spend
Percent complete — costs incurred divided by total estimated costs
Revenue earned to date — contract amount × percent complete
Amount billed to date — what you've actually invoiced the client
Over/under billing — the difference between what's earned and what's billed
Why WIP Schedules Are Needed
1. They reveal over-billing and under-billing. If you've billed more than you've earned, you're over-billed — you're essentially using the client's money to fund work you haven't finished yet. If you've earned more than you've billed, you're under-billed — you've done the work but haven't invoiced for it, which quietly drains your cash flow.
2. They protect cash flow. Under-billing is a silent cash flow killer. A job can look "on track" while the business is actually starving for cash because billing has fallen behind progress.
3. They catch cost overruns early. Comparing costs incurred to estimated costs to complete highlights jobs that are running over budget while there's still time to react — instead of finding out at the very end.
4. They're required by lenders and bonding companies. Banks, sureties, and bonding agents almost always want to see WIP schedules before extending credit or issuing bonds. Clean, accurate WIP reporting is often the difference between getting bonded for a bigger job or not.
5. They make percentage-of-completion accounting possible. Most construction companies recognize revenue using the percentage-of-completion method, which relies entirely on accurate WIP data. Without it, your revenue recognition — and your financial statements — aren't reliable.
A Simple Example
Say a job has a $200,000 contract, and so far you've incurred $80,000 in costs against an estimated total cost of $160,000.
Percent complete: $80,000 ÷ $160,000 = 50%
Revenue earned to date: 50% × $200,000 = $100,000
Amount billed to date: $70,000
Since you've earned $100,000 but only billed $70,000, you're under-billed by $30,000. That's $30,000 of work you've completed but haven't invoiced for — cash that should be in your pipeline but isn't yet.
How Often Should You Update WIP Schedules?
Monthly is the standard for most contractors. Updating WIP alongside your regular month-end close keeps billing aligned with progress, catches problems while they're still small, and keeps your financials ready any time a lender or bonding company asks.
The Bottom Line
A WIP schedule turns "how's this job going?" from a gut feeling into a number. It shows you exactly where billing and progress have drifted apart, protects your cash flow, and gives lenders and sureties the confidence to keep backing your business. For any contractor running jobs longer than a month or two, it isn't optional — it's one of the most valuable reports you can have.
Need Help Building Reliable WIP Schedules?
Setting up accurate, month-over-month WIP reporting takes the right job costing structure behind it. Oakridge Accounting Services, based in Phoenix, Arizona, helps construction businesses build WIP schedules, track over- and under-billing, and put financial reports in place that hold up with lenders and bonding companies. Visit www.oakridgeaccountingservices.com to learn more or schedule a conversation.
This is general information, not accounting advice for your specific situation.
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