If you run a construction business and your profit swings wildly month to month, the problem is usually not your work — it is how your jobs are measured. A work-in-progress (WIP) schedule is the tool that tells you the truth about where each job really stands. Here is what it is and why it matters.
What is a WIP schedule?
A WIP schedule is a report that shows the status of each ongoing job: how much you have earned, how much you have billed, and how those two compare. For contractors, revenue is earned as work gets done, but billing follows its own schedule — so at any moment you are usually either ahead of or behind where your billing should be. The WIP schedule lines those up, job by job, so you can see the real financial position of your projects instead of guessing from your bank balance.
What does over-billed and under-billed mean?
Over-billed means you have billed more than you have earned; under-billed means you have earned more than you have billed. Both matter:
- Over-billed (billings in excess of costs): you have collected ahead of the work. That cash is really a liability — you still owe the work — and spending it like profit is how contractors get into trouble.
- Under-billed (costs in excess of billings): you have done work you have not billed for yet. That is money you have earned but not collected, and it can quietly strain cash flow.
A WIP schedule flags both so you can bill appropriately and avoid nasty surprises at the end of a job.
How is a WIP schedule calculated?
It is built on the percentage of completion of each job. In simple terms, you compare the costs incurred so far to the total estimated costs to find how far along a job is, then apply that percentage to the contract value to find how much revenue you should have recognized. Comparing that earned revenue to what you have actually billed reveals whether the job is over- or under-billed. The math depends entirely on accurate job costs and realistic estimates — which is why job costing and WIP go hand in hand.
Why do lenders and bonding companies want a WIP?
Because it is the clearest picture of a contractor's real financial health. Sureties and banks know that a construction company's bank balance can look great while its jobs are deeply over-billed — meaning the cash is already spoken for. A clean, accurate WIP schedule shows them you understand your jobs, bill appropriately, and are not borrowing against work you still owe. For many contractors, a reliable WIP is a requirement for bonding capacity and financing, not a nice-to-have. Our Accounting & Bookkeeping team builds WIP reporting that holds up to that scrutiny.
How often should I update my WIP schedule?
Monthly, at minimum — and more often on fast-moving jobs. A WIP schedule is only useful if it is current, because job status changes constantly as costs come in and billings go out. Updating it as part of your monthly close keeps you from drifting into over-billed cash traps and catches margin problems while there is still time to act. Contractors who review WIP every month tend to catch fading jobs early; those who look only at year-end often find out too late.
How does WIP affect my taxes and year-end?
Your WIP schedule feeds directly into year-end financials and, for many contractors, into how income is recognized for taxes. Larger contractors are often required to use percentage-of-completion accounting, where the WIP schedule determines how much revenue and profit land in the current year versus the next. Even for smaller contractors not required to use it, an accurate WIP at year-end gives your accountant the information needed to report job income correctly and plan around it. A sloppy or missing WIP at year-end can mean overstated or understated profit — and a surprise tax bill. Keeping it current all year makes the year-end close and tax prep dramatically smoother.
If your job profitability is a black box or your bonding company is asking for better reporting, a solid WIP schedule changes everything. We are happy to help you build one.