Ask a bank or surety company what they want to see from a contractor, and the answer is almost always the same: a current work-in-progress (WIP) schedule. It is the single report that shows whether your jobs are making the money you bid, and whether your billing is keeping up with the work. This guide explains how a WIP schedule works, how to read over and under billing, and how to keep one accurate every month.
What a WIP schedule is
A WIP schedule lists every open job with the same set of columns. It turns job cost reports and billing records into one view of profit and cash across all your projects.
| Column | What it means |
|---|---|
| Contract value | Original contract plus approved change orders |
| Estimated total cost | Your current best estimate of the full cost to finish |
| Cost to date | Actual job costs posted so far |
| Percent complete | Cost to date ÷ estimated total cost |
| Revenue earned | Contract value × percent complete |
| Billed to date | Everything invoiced, including retainage held |
| Over / (under) billing | Billed to date − revenue earned |
Overbilling and underbilling explained
Overbilling means you have invoiced more than you have earned. It shows on the balance sheet as a current liability, “billings in excess of costs and estimated earnings.” A little overbilling is healthy for cash flow, but the cash is owed work. Spend it as profit and you will be short when the job winds down.
Underbilling means you have done more work than you have invoiced. It is a current asset, “costs and estimated earnings in excess of billings.” Persistent or growing underbilling is a red flag: missed pay applications, unapproved change orders, or a job running over budget that makes percent complete look higher than it is.
A worked example
A $500,000 contract has an estimated cost of $400,000. After $180,000 of costs, the job is 45% complete, so $225,000 of revenue is earned. If you have billed $250,000, you are overbilled by $25,000. Estimated gross profit is $100,000 (20%), and $45,000 of it has been earned so far.
What banks and bonding companies look for
- Gross profit fade: jobs whose profit shrinks from one month to the next.
- Large underbillings, especially on jobs near completion.
- Overbillings that are not backed by cash in the bank.
- Estimates that are updated regularly, not left at the original bid.
Keeping your WIP schedule accurate
- Job cost everything: code every bill, payroll hour and subcontractor invoice to a job and cost code. See our construction job costing guide.
- Record retainage separately as retainage receivable and payable.
- Update estimated cost to complete monthly with your project managers.
- Close the books monthly before preparing the schedule, so costs and billings are complete.
- Reconcile the WIP totals to the balance sheet and book the over and under billing adjustment.
Percentage of completion vs completed contract
Larger contractors generally recognize revenue over time using percentage of completion. Smaller contractors that meet the IRS gross receipts test may be able to use the completed-contract method for tax purposes on certain contracts. Your CPA will decide which method applies. Either way, the WIP schedule is how you manage the jobs.
Key takeaways
- A WIP schedule compares revenue earned with billings for every open job.
- Overbilling is a liability, underbilling is an asset, and both need explaining.
- Accurate job costing and monthly estimate updates make the schedule trustworthy.
- Banks and sureties rely on it for credit and bonding decisions.
Our construction bookkeeping services include monthly job costing and a WIP schedule built from reconciled books.
Frequently asked questions
What is a WIP report in construction?
A work-in-progress report shows each open job’s contract value, estimated cost, cost to date, percent complete, revenue earned, billings and over or under billing. Contractors use it to manage profit and cash, and lenders use it to judge financial health.
How do you calculate over and under billing?
Divide cost to date by estimated total cost to get percent complete, multiply by contract value to get revenue earned, then subtract revenue earned from billings to date. A positive number is overbilling; a negative number is underbilling.
Is underbilling an asset or a liability?
Underbilling is a current asset, costs and estimated earnings in excess of billings. Overbilling is a current liability, billings in excess of costs and estimated earnings.
How often should a WIP schedule be updated?
Monthly, after the books are closed and estimated costs to complete have been reviewed with project managers.
