What is a WIP schedule, and does my construction company need one?

A work in progress (WIP) schedule is a monthly report that compares, job by job, how much of each contract you have earned against how much you have billed. It shows which jobs are overbilled, which are underbilled, and whether your P&L is overstating or hiding profit. If you run more than a few jobs at once, you need one.

What a WIP schedule actually shows

For every open job, a WIP schedule lines up the contract value (including approved change orders), estimated total cost, cost to date, percent complete, revenue earned to date, and amount billed to date. The gap between earned and billed is the number that matters.

• Overbilled: you have invoiced more than you have earned. The cash looks great, but you owe that work back to the customer.

• Underbilled: you have done work you have not invoiced yet. The job is quietly financing itself out of your bank account.

• Fade: the estimated margin on the job is shrinking month over month. This is the earliest warning you get that a job is going wrong.

Why your P&L alone is not enough

A P&L records what you invoiced and what you spent. On a contractor's books, those two things rarely line up in the same month. A big progress billing makes one month look like a windfall; a heavy materials month makes the next look like a loss. Neither tells you whether the jobs are actually making money. The WIP schedule corrects for timing so the profit you see matches the work you did.

Signs you need one now

• You are surprised by your year-end numbers.

• Cash is tight even though the P&L says you are profitable.

• You cannot say, today, which of your open jobs is running over.

• A bonding company, surety or bank has asked for one.

What it takes to produce one

The schedule is only as good as the job costing underneath it. Every labor hour, material invoice and subcontractor bill has to be coded to the right job, and estimates to complete have to be updated honestly. Once that is in place, building the WIP each month is routine. Getting it in place is usually the real project.

If you want a second set of eyes on your own numbers, book a free 20 minute call with Julia at calendly.com/juliaspahiu.

Edi & Sienna Group provides bookkeeping, accounting and fractional CFO services. We are not a licensed public accounting firm and this post is general information, not tax, legal or accounting advice for your specific situation.