What Your WIP Schedule Is Telling Your Banker (Even If You Aren't Reading It)

Most contractors treat the work-in-progress schedule as something the accountant produces once a year so the surety company will renew the bond line. That is a costly way to think about it. The WIP schedule is the only report that tells you whether the profit on your income statement is real, and it is the first page a lender or bonding agent turns to.

What the schedule actually does

On a job that spans months, cash in and cost out almost never line up with the work performed. The WIP schedule reconciles the three. For every open contract it lays out:

Column	What it answers
Contract value	What you will be paid, including approved change orders
Cost to date	What you have actually spent
Estimated cost to complete	What it will take to finish
Percent complete	Cost to date divided by total estimated cost
Earned revenue	Contract value multiplied by percent complete
Billed to date	What you have invoiced

The gap between earned revenue and billed to date is the number that matters. Bill more than you have earned and you are overbilled. Bill less and you are underbilled.

Overbilled, underbilled, and why anyone cares

Overbilling is not automatically bad. Front-loading a schedule of values is normal practice, and it funds the job. But an overbilled position is borrowed money. That cash belongs to work you have not performed yet, and it has to be earned back through costs that are still coming. A company that runs heavily overbilled across every job is financing itself with customer deposits, and it will feel the squeeze the moment new work slows down.

Underbilling is usually the worse sign. It means you have spent money the owner has not yet been asked to pay for. That is unapproved change order work, slow billing, or a schedule of values that no longer matches the job. Underbillings sit on the balance sheet as an asset, and lenders discount them heavily because they are the hardest thing on the sheet to collect.

The mistakes that show up most often

• A stale cost to complete. Percent complete is driven entirely by the estimate to finish. If the project manager has not revisited that number since the bid, every figure below it on the schedule is wrong.

• Change orders in limbo. Costs get coded to the job the day the work happens. The contract value does not move until the change order is approved. The result looks exactly like a job going bad.

• Committed costs that are not accrued. Material delivered and installed but not yet invoiced by the supplier understates cost to date and overstates the profit you are booking.

• Annual-only preparation. A schedule prepared in March for a December year-end tells you about problems you could have fixed in September.

• Weak job cost coding. If labor and burden are not landing on the right job in the first place, the schedule cannot be fixed downstream.

Make it a monthly habit

Run the schedule every month, review it with the field, and compare the gross profit percentage on each job to the number you bid. A fade of a few points on one project is a conversation. The same fade appearing across four projects is a pattern, and catching that pattern in month three instead of month eleven is usually the difference between a lean year and a loss.