Construction Accounting
Construction Management
Construction WIP Reports: Using Software to Keep Revenue and Risk in Balance
Why the WIP Schedule Is Your Financial Early Warning System
A well-run construction company lives and dies by its work-in-progress (WIP) schedule. The WIP report shows how far along each job is, how much you’ve billed and how much profit is left. When WIP is wrong—or built from stale spreadsheets—you can end up over-recognizing profit, missing cash issues or shocking your bonding company.
Modern construction accounting software automates WIP calculations, pulls in live job cost data and gives owners a clear view of overbillings, underbillings and profit fade.
Understanding the Basics: Percent Complete and Job Status
Most construction WIP schedules rely on the percentage-of-completion method for revenue recognition. At a basic level, this means:
- Percent complete = Cost to date / Estimated total cost.
- Earned revenue = Contract value × Percent complete.
- Over/underbilling = Billed to date – Earned revenue.
Construction accounting systems store contract values, change orders, costs and billings in one place, so these calculations can run automatically for every job each month.
Feeding WIP with Accurate Job Cost and Forecasts
A WIP schedule is only as good as the data behind it. If PMs never update estimated cost at completion (EAC) or if job costs lag reality by weeks, your WIP becomes a guess. Good software and process design:
- Encourage PMs to update forecasts monthly inside the system, not offline.
- Pull real-time labor and material costs directly from payroll and AP.
- Include committed costs (POs, subs) in EAC calculations.
When forecasted costs and quantities are kept current, WIP becomes a reliable mirror of job performance.
Overbillings, Underbillings and What They Really Mean
WIP reports highlight overbillings (billed more than earned) and underbillings (billed less than earned). Neither is automatically good or bad—but trends matter.
- Overbillings can be healthy for cash flow, but chronic overbillings with fading margin may signal under-estimated jobs.
- Underbillings may indicate slow billing, scope creep or poor change order management, all of which put pressure on cash and risk.
Construction WIP software makes it easy to sort and filter jobs by over/underbilling status and drill into the reasons.
WIP for Bonding, Banking and Stakeholders
Bonding companies and banks scrutinize WIP schedules to assess your health. They want to see:
- Reasonable margins that don’t swing wildly quarter to quarter.
- Timely and consistent updates to forecasts and costs.
- Controlled underbillings—because big underbilled positions look like unrecorded losses.
When your WIP is generated straight from your construction accounting system, with audit trails and supporting job data, you build credibility with outside stakeholders.
Linking WIP to Project Management
WIP shouldn’t live only in the accounting department. Integrations between construction management software and accounting let PMs:
- See how their schedules, change orders and productivity affect WIP.
- Review WIP positions (over/under) on their jobs and discuss adjustments.
- Collaborate with accounting on realistic EAC numbers.
This turns WIP from a “finance report” into a shared performance tool.
Automating WIP Calculations and Reporting
Instead of hand-building WIP schedules in spreadsheets, modern systems:
- Pull contract, cost and billing data from live jobs.
- Apply consistent rules for percent complete and revenue recognition.
- Generate WIP reports by job, division, region or PM.
Controllers can tweak assumptions when needed, but most of the heavy lifting is handled by the software, reducing errors and close cycle time.
Final Thoughts
Construction WIP reporting is where project performance, cash flow and financial reporting come together. When you connect job data, enforce forecasting discipline and use construction accounting software to automate the math, WIP stops being a quarterly headache and becomes a monthly steering wheel for the business.
- Top Expert
Nathan Rowan
Program Research, Editor, Expert in ERP, Cloud, Financial Automation
