The basic idea
On a long project, billing and work rarely move in lockstep. You might bill a large deposit before work starts, or finish a phase before you can invoice it. A WIP schedule lists each open job with its contract amount, estimated total cost, costs to date, and billings to date.
Percent complete
A common method estimates how complete a job is by comparing costs incurred so far with total estimated costs. If a job is estimated to cost $100,000 and $40,000 has been spent, it’s roughly 40% complete. That method depends on the cost estimate being kept up to date.
Overbilling and underbilling
Multiply percent complete by the contract amount to estimate revenue earned. Compare that with what you’ve billed:
- Overbilled: you’ve billed more than you’ve earned. The cash is in hand, but the work still has to be done, which can create a cash squeeze later.
- Underbilled: you’ve done more work than you’ve billed. That can signal billing delays or a job running over budget.
Who needs one
WIP schedules matter most for businesses with longer projects, progress billing or retainage, and they’re often requested by bonding companies and lenders. Shorter service work usually doesn’t need one. Advanced construction reporting, including WIP and retainage, is scoped separately where needed. Exact methods and requirements should be confirmed with your CPA.
This guide is general information, not tax, legal or accounting advice for your specific situation.