A WIP schedule (work in progress schedule) is a report that lists every open construction contract on one line and shows, for each one, the contract value, the estimated cost at completion, the cost incurred to date, the resulting percentage complete, the revenue that should have been earned at that percentage, and the amount actually billed. The gap between earned and billed is what makes the report matter: billing ahead of the work produces overbilling (a liability), and billing behind it produces underbilling (an asset). Sureties and bankers read the WIP before the profit and loss statement, because it is the only report that shows whether open jobs are actually profitable.
A WIP schedule is the single most important financial report a construction company produces. Sureties read it before they read your P&L. Bankers read it before they extend your line of credit. And smart contractor owners read it before they accept the next job. Here is what it shows, how to read it, and the five mistakes that cost contractors money.
If you run a construction company and you do not have a current WIP (work in progress) schedule on your desk, you are running blind. The P&L tells you what happened. The bank statement tells you what you have. The WIP schedule is the only report that tells you whether the jobs you are running are actually profitable and whether you have enough cash to finish them.
Most generalist accountants either skip the WIP entirely or produce one that is so wrong it does more harm than good. This post explains what a WIP schedule actually is, the three calculations that matter, the format a surety expects to see, and the common mistakes that show up on contractor balance sheets every quarter.
What a WIP schedule actually shows.
A WIP schedule lists every open construction contract on one line, and for each contract it shows:
- Total contract value (including approved change orders)
- Total estimated cost at completion
- Gross profit (contract value minus estimated cost)
- Costs incurred to date
- Estimated cost to complete
- Percentage complete (based on cost)
- Revenue earned to date
- Amount billed to date
- Over-billed or under-billed amount
You can run any single job through our free WIP over/under billing calculator to see these numbers instantly. That last column, over-billed or under-billed, is the entire point of the report. It tells you whether each job is generating cash ahead of its earned revenue (good for cash flow, normal early in jobs) or generating earned revenue ahead of cash billed (a cash flow red flag and often a sign of slow billing or unapproved change orders).
The 3 calculations that matter.
1. Percentage of completion
The standard formula:
Percentage complete = Costs incurred to date ÷ (Costs incurred + Cost to complete)
Note: the denominator is not the original budget. It is the current best estimate, which means the accuracy of the cost-to-complete number drives everything. If your project manager guesses on cost-to-complete, your entire WIP is fiction.
2. Revenue earned to date
Revenue earned = Percentage complete × Contract value
This is the revenue that GAAP says you have earned, regardless of how much you have billed. For a $1 million contract that is 40 percent complete, you have earned $400,000 of revenue even if you have only billed $300,000 so far.
3. Over-billed or under-billed
Over-billed = Amount billed to date − Revenue earned to date (when positive)
Under-billed = Revenue earned to date − Amount billed to date (when positive)
Over-billed shows up on your balance sheet as a liability called "billings in excess of costs and earnings." Under-billed shows up as an asset called "costs and earnings in excess of billings." Both have major implications, which we get into below.
The three calculations on one job, start to finish
Here is the full sequence on a single contract, so the arithmetic is visible rather than implied.
| Step | Calculation | Result |
|---|---|---|
| Contract value | Original contract plus approved change orders | $1,000,000 |
| Cost incurred to date | From the job cost report | $300,000 |
| Cost to complete | Current PM estimate, not the original budget | $450,000 |
| 1. Percentage complete | 300,000 ÷ (300,000 + 450,000) | 40% |
| 2. Revenue earned | 40% × 1,000,000 | $400,000 |
| Billed to date | From the billing register | $300,000 |
| 3. Under-billed | 400,000 − 300,000 | $100,000 asset |
Read the last line carefully. This job has performed $100,000 of work it has not yet invoiced. That is $100,000 of cash sitting in the field instead of the bank, and it is the single most common reason a contractor with a profitable backlog still cannot make payroll. Note also that the estimated total cost is now $750,000 against a $1,000,000 contract, a 25 percent gross margin. If the original estimate was 30 percent, this job is fading, and the WIP is where that shows up first.
What a real WIP line looks like.
| Job | Contract | Est Cost | Cost to Date | Cost to Complete | % Comp | Earned | Billed | Over/Under |
|---|---|---|---|---|---|---|---|---|
| Project A | $1,000,000 | $850,000 | $340,000 | $510,000 | 40% | $400,000 | $425,000 | +$25,000 Over |
| Project B | $2,400,000 | $2,100,000 | $1,260,000 | $840,000 | 60% | $1,440,000 | $1,300,000 | -$140,000 Under |
| Project C | $580,000 | $495,000 | $45,000 | $450,000 | 9% | $52,200 | $87,000 | +$34,800 Over |
| Total | $3,980,000 | $3,445,000 | $1,645,000 | $1,800,000 | — | $1,892,200 | $1,812,000 | -$80,200 Net Under |
The exact format above, with all formulas built in: percent complete, earned revenue, over/under billing, and totals calculate automatically. No email required, no signup. Just download and start entering jobs.
Download the Template (.xlsx)That sample WIP tells you three things at a glance. Project A is healthy with minor over-billing. Project B is significantly under-billed ($140,000 of earned revenue not yet invoiced, which is real cash sitting on the sidelines). Project C is in mobilization with normal early-stage over-billing. The company as a whole is net under-billed by $80,000, meaning the team needs to catch up on billings.
Why sureties read the WIP before the P&L.
When a surety underwrites your bonding capacity, they are answering one question: can this contractor finish their current backlog and cover any losses without running out of cash? The WIP schedule answers that question more directly than any other report. Specifically, sureties look for:
- Backlog vs working capital. A contractor with $5 million of backlog and $200,000 of working capital is at risk. The WIP shows the backlog (sum of cost-to-complete across all jobs).
- Over-billing concentration. Heavy over-billing might mean great cash management, or it might mean the contractor is taking customer money for work not yet done and will eventually have to perform that work with no incoming cash. Sureties hate that pattern.
- Gross profit fade. Comparing original estimated gross profit to current estimated gross profit, job by job. Fade means jobs are getting worse than expected. Consistent fade across multiple jobs is a major red flag.
- Job size concentration. One job that is 60 percent of total backlog is a concentration risk. If it goes sideways, the whole company is at risk.
A clean, accurate, surety-formatted WIP schedule produced monthly is one of the highest-leverage investments a $1M to $5M contractor can make. We routinely help clients increase bond capacity by 30 to 50 percent in the first year just by cleaning up WIP presentation, without any change to underlying financial reality.
The 5 WIP mistakes we see every quarter.
1. Stale cost-to-complete estimates
The project manager filled it out at the start of the job and never updated it. By month three, the estimate is meaningless and the percentage complete is whatever the algebra spits out. Fix: a 15-minute monthly project manager check-in is enough to keep cost-to-complete current.
2. Missing or unapproved change orders
Work has been done, the contract value has effectively changed, but the change order has not been formally approved by the owner. If you include it, you are inflating contract value. If you exclude it, you are understating earned revenue and overstating cost-to-complete percentage. The right answer is to track approved and unapproved change orders separately and update each as status changes.
3. Not reconciling WIP to the general ledger
The WIP says total earned revenue is $1.89 million. The P&L says construction revenue is $2.1 million. The two should tie out exactly. When they do not, one of them is wrong and the owner is making decisions on bad data.
4. Ignoring retainage
Retainage held back by the owner is real revenue earned but not yet collected. It belongs on the balance sheet as a retainage receivable, not buried in regular AR. Most surety bonding analyses calculate working capital with retainage handled separately, and a contractor whose WIP and balance sheet ignore retainage looks worse than they actually are.
5. Treating WIP as a year-end exercise
WIP done once a year for the tax return is useless for running the business. By the time the schedule is built, the data is 12 months stale and the jobs in question have already closed. Build WIP monthly, review it weekly during job-active periods, and use it as a decision-making tool, not a reporting tool.
When to update the WIP schedule.
The honest minimum is monthly, tied to the month-end close. The right answer for growing contractors is weekly during periods of active jobs, with the full monthly close ensuring the WIP ties to the GL and the bank.
The cadence matters because WIP is forward-looking. A current WIP answers questions like "Can we afford to bid that new project right now?" and "Which jobs are eating cash this quarter?" A stale WIP can only answer historical questions.
Getting the WIP ready before bonding season.
For most contractors, bonding season is whenever the surety asks for year-end statements and the renewal gets underwritten. That's when the WIP gets its hardest read of the year, so it pays to clean it up in the 60 days before, not the week of. Here's the order we'd work in:
- Re-estimate cost to complete on every open job with the project manager, line by line. A stale estimate is the first thing an underwriter questions.
- Settle the change orders. Get pending ones approved or pulled out of contract value, and track unapproved ones separately.
- Tie the WIP to the general ledger. Earned revenue on the WIP should equal construction revenue on the P&L, and the over and under billings should match the balance sheet.
- Bill what's underbilled. Large underbillings at year end read as slow billing or a fading job. Invoicing earned work before the close fixes both the cash and the picture.
- Pull retainage into its own account on both the receivable and payable side, split by what's collectible in twelve months.
- Add the completed contracts schedule for the last two or three years, with original and final gross profit per job, so the surety can see your estimating track record.
Do that, and the conversation with your surety starts from a clean set of numbers you can explain. The full picture of what underwriters weigh is in our guide to bonding capacity.
The bottom line for contractor owners.
If your accountant cannot produce a WIP schedule that ties to your GL, that breaks down by job with current cost-to-complete numbers, that handles retainage correctly, and that presents in the format a surety expects, you do not have a construction-specialized accountant. You have a generalist who took on a construction client.
That distinction is the difference between qualifying for the next size of bond, knowing which jobs to bid and which to walk from, and running a profitable backlog you can actually finish. WIP is not a compliance exercise. It is the operating dashboard of a construction business.