What Is a WIP Schedule? A Plain-English Guide for Contractors

If a bonding agent or banker has ever asked for your WIP, you are not alone in wondering exactly what they want. The work-in-progress schedule is the single most useful report a contractor can have, and it is less complicated than it sounds.

A WIP schedule lists every open job and answers three questions: how far along is it, how much have we earned, and have we billed too much or too little? It is how you catch a job that is losing money while there is still time to fix it.

The columns on a WIP schedule

Every WIP schedule looks a little different, but they all come down to the same handful of numbers for each job:

• Contract amount: the original contract plus approved change orders.
• Estimated total cost: what you now expect the whole job to cost. This is the number that has to be updated every month.
• Cost to date: what you have actually spent on the job so far.
• Percent complete: cost to date divided by estimated total cost. This is called the cost-to-cost method, and it is the most common.
• Earned revenue: contract amount times percent complete. This is the revenue you have actually earned so far.
• Billed to date: what you have invoiced the customer so far.
• Over or under billing: billed to date minus earned revenue.

A worked example

Say you have a $500,000 job that you now expect to cost $400,000. You have spent $240,000 so far and billed the customer $340,000.

This job is over billed by $40,000. You have collected cash for work you have not done yet. That is not bad by itself, and many contractors bill ahead on purpose to fund the job. But that $40,000 is really a liability: you still owe the customer that work. Spend it as if it were profit and you can run short of cash before the job is done.

If billed to date were lower than earned revenue, the job would be under billed. That means you have done work you have not invoiced yet. Under billing is an asset on paper, but it usually means cash is sitting in the field instead of your bank account. Large or growing under billings are a red flag to sureties, because they can be a sign of unapproved change orders or a job that is in trouble.

Why your surety and bank care

Sureties and lenders use the WIP schedule to judge whether you can finish the work you have and take on more. They look at how profit on each job changes from one schedule to the next. A job that was 18% gross profit last quarter and is 9% now is called margin fade, and it gets noticed. Consistent, accurate WIP schedules that tie to your financial statements build trust, and that trust supports your bonding capacity.

Common WIP mistakes

1. 1Never updating the estimated total cost. If the estimate is still the original bid, percent complete is wrong and profit looks better than it is until the job closes.
2. 2Using billing percentage as percent complete. Percent complete should come from costs, not from how much you have invoiced.
3. 3Leaving out change orders. Approved change orders belong in the contract amount, and their costs belong in the estimate.
4. 4Costs coded to the wrong job. If materials and labor land in overhead or on another job, every number on the schedule is off. Good WIP starts with good job costing.
5. 5Only doing it at year-end. A once-a-year WIP tells you what already went wrong. A monthly WIP tells you what is going wrong while you can still act.

Getting started

A WIP schedule is only as good as the job costing behind it. If your costs are not coded to jobs today, start there, then build the schedule from that data each month. If you would rather have it done for you, that is exactly what our WIP reporting service does.