What Is a WIP Report? Percentage of Completion Explained

A WIP report (work-in-progress report) lists every open job and compares what you have billed against what you have actually earned. It is the fastest way to spot overbilling, underbilling, and fading profit while there is still time to fix them, and it is the first thing banks, sureties, and CPAs ask a contractor for.

What is a WIP report?

A WIP report, also called a WIP schedule, is a table of every job in progress. For each job it shows the contract value, the estimated cost to complete, the cost spent so far, the percent complete, the revenue earned to date, and the amount billed to date. The gap between earned and billed is the number that matters.

• Shows every open job on one page, in dollars
• Compares earned revenue to billed revenue per job
• Flags overbillings, underbillings, and profit fade early
• Standard request from bonding agents, lenders, and accountants

How does the percentage-of-completion method work?

The percentage-of-completion method recognizes revenue as the work is performed instead of waiting for the job to finish. The most common way to measure progress is cost-to-cost: the share of budgeted cost you have spent is the share of the job you have earned.

• Percent complete = costs to date ÷ total estimated costs
• Earned revenue = percent complete × contract value
• Earned gross profit = earned revenue − costs to date
• Update estimated costs honestly; a stale budget makes every number below it wrong

Under GAAP, percentage of completion is the standard way to recognize revenue over time on long-term contracts. For taxes, federal law generally requires the percentage-of-completion method for long-term contracts, with exceptions for home construction contracts and for smaller contractors who meet an average gross receipts test and expect the job to finish within two years. The IRS construction industry guide covers the details. Confirm the right method for your company with your CPA.

What are overbillings and underbillings?

Compare what you have billed to what you have earned and every job lands in one of three spots.

• Overbilled: billed more than earned. The extra cash is not profit yet. On the books it is a liability, often labeled billings in excess of costs and estimated earnings.
• Underbilled: earned more than billed. You have financed the work with your own cash. It shows as an asset, costs and estimated earnings in excess of billings.
• Even: billings match earned revenue. Cash and work are in step.

Modest, deliberate overbilling from front-loaded schedules of values is common and keeps cash flow healthy. Large or chronic underbillings are the red flag: they usually mean unbilled change orders, cost overruns, or billing that has fallen behind the work.

A worked example

Here is a simple three-job WIP schedule. First the inputs:

Percent complete is cost to date divided by estimated cost. Now apply it to the contract value and compare with billings:

Job A has billed $20,000 ahead of the work; that cash belongs to the remaining scope, not the profit line. Job B has done $17,500 of work it has not billed; the first question is whether a change order or a missed pay app is hiding in that number. Job C is in step.

How do you read a WIP report?

The report is a set of questions, not just a table. Walk it job by job.

• Big underbilling: is there an unapproved change order, a cost overrun, or a pay app that never went out?
• Big overbilling: is the remaining budget enough to finish the work the cash was collected for?
• Profit fade: is estimated gross profit shrinking from month to month? Falling margins mid-job are the earliest honest warning a job is in trouble
• Estimated costs unchanged for months: is anyone actually re-forecasting?

Who asks for WIP reports?

• Sureties review WIP schedules before issuing or renewing bonding capacity
• Banks ask for them with financial statements on lines of credit
• CPAs need them to recognize revenue correctly at period end
• You need them to catch problem jobs while they can still be fixed

A clean, current WIP schedule is one of the strongest credibility signals a small contractor can hand any of them.

How do you build one?

You need three inputs per job, all current: the contract value including approved change orders, the estimated cost to complete, and the costs and billings to date.

• Pull contract value and approved change orders from the contract record
• Pull costs to date from job costing, including labor, materials, subs, and equipment
• Pull billings to date from your invoices and pay apps
• Re-forecast estimated cost to complete each month; this is the step most contractors skip
• Update monthly at minimum, and before any bank or surety meeting

Our free job cost tracker template is a simple place to start capturing the cost side. For the wider picture, see construction accounting basics and cash flow forecasting.

How does software help with WIP tracking?

A WIP schedule is only as good as its inputs, and the inputs live in three different places for most contractors: contracts in one file, costs in another, billings in a third. Contractor software like Werx keeps them on the same job record.

• Budget-to-actual cost tracking shows costs to date per job in real time
• Invoices and AIA-style pay apps live on the same project as the costs
• Field time flows into job labor costs daily instead of at month end
• QuickBooks Online sync keeps the books matched to the jobs

Key takeaways

• A WIP report compares earned revenue to billed revenue on every open job
• Percent complete = costs to date ÷ estimated costs; earned revenue = percent complete × contract value
• Overbilling is a liability, not profit; chronic underbilling usually hides change orders or overruns
• Re-forecast estimated costs monthly, or the whole schedule lies
• Sureties, banks, and CPAs all read WIP schedules; a clean one builds real credibility