What Is a WIP Schedule, and Why Does Your Bank Want It?

A WIP schedule is a job-by-job report that compares what you have billed on each open contract with what you have earned based on the work completed. WIP stands for work in progress. The schedule shows whether each job is overbilled or underbilled, how much profit it is producing, and how much work is left.

For a contractor, the income statement alone cannot answer those questions, because billing and earning run on different timelines. That is why banks, bonding companies, and CPAs ask for a construction WIP schedule, and why it is worth reading even when nobody is asking. This guide covers what goes on one, how the math works, and what the people reading it look for.

What Is a WIP Schedule?

A WIP schedule, also called a WIP report or a schedule of contracts in progress, lists every contract that is underway, one job per row. For each job it shows the contract value, the costs incurred so far, the total cost you now expect, how far along the job is, how much revenue you have earned, and how much you have billed.

The gap between earned and billed is the point. Progress billing rarely tracks the work exactly. A front-loaded schedule of values can put your billings ahead of the work, while a late pay application or an unbilled change order can leave them behind it. The WIP schedule measures that gap on every job and adds it up across the company.

What Goes on a WIP Schedule?

Formats vary, but most schedules carry the same core columns:

• Contract value: the original contract plus approved change orders.
• Estimated total cost: what you now expect the whole job to cost, updated as the job moves.
• Cost to date: everything spent and recorded against the job through the report date.
• Percent complete: cost to date divided by estimated total cost.
• Earned revenue: percent complete multiplied by the contract value.
• Billed to date: everything you have invoiced on the job so far.
• Over or under billing: billed to date minus earned revenue.
• Estimated gross profit: contract value minus estimated total cost, in dollars and as a margin.

Many schedules also show cost to complete, which is estimated total cost minus cost to date: the dollars of work still ahead on each job.

How Do You Calculate Overbilling and Underbilling?

The math takes three steps, and every input comes from your job costing or your estimates:

1. Percent complete equals cost to date divided by estimated total cost.
2. Earned revenue equals percent complete multiplied by the contract value.
3. Over or under billing equals billed to date minus earned revenue.

A positive result means the job is overbilled. A negative result means it is underbilled. Measuring progress by cost this way is called the cost-to-cost method, and it is the most common approach because it runs on numbers you already track.

A Worked Example

Here is a simple schedule for a contractor with three jobs underway:

The office build-out is overbilled by $60,000. The contractor has billed more than the work performed so far, so when the remaining half of the job gets built, there will be $60,000 less left to bill for it.

The retail renovation is underbilled by $50,000. The work is done and the costs are paid or owed, but the invoice has not gone out. Until it does, the contractor is financing the customer’s project.

The medical office is billed exactly right, and it is still the job that needs attention. It was bid at an estimated cost of $400,000, which meant $100,000 of expected gross profit. The current estimate is $460,000, so the expected profit has fallen to $40,000. That drop is called profit fade, and it gets its own section below.

Across all three jobs, $60,000 of overbilling and $50,000 of underbilling net to $10,000 overbilled. That is why lenders and sureties read the individual jobs and not only the total: a net number can hide a large problem on one job.

Is Overbilling Good or Bad?

Neither position is automatically good or bad. What matters is the size, the trend, and the reason behind it.

What Overbilling Tells You

Overbilling means you have billed ahead of the work, so on the balance sheet it is a liability: you owe the customer work for money you have already billed. Some overbilling is common, especially early in a job when mobilization and front-loaded billing put cash ahead of the work, and it can help fund a job without borrowing. The risk is treating it as profit. That cash belongs to work you have not done yet, and sureties read heavy overbilling as a sign that project money is funding the rest of the business.

What Underbilling Tells You

Underbilling means the work is ahead of the invoices, so it shows up as an asset. A small, short-lived underbilling can simply mean a billing cycle that trails the field. A persistent one often points to something else: slow pay applications, change orders that were performed but never approved or billed, or costs running over budget. Surety underwriters know this, and they may discount underbillings on troubled jobs when they calculate your working capital.

Why Does Your Bank Want Your WIP Schedule?

A contractor’s financial statements are only as believable as the job estimates behind them, and the WIP schedule is where those estimates live. That puts it in front of several readers:

• Your bank. Lenders use it to judge working capital and the quality of your balance sheet, and to check covenant figures that depend on job-level numbers.
• Your surety. Bonding companies review it for profit fade, billing patterns, and the work you are carrying, and they often ask for a list of completed contracts alongside it.
• Your CPA. Year-end revenue and gross profit on your financial statements come from it, which is why it needs to tie to your general ledger.
• You. It shows a job drifting while there is still time to act, and it makes your cash flow forecast more honest than the bank balance alone.

If you bond your work, expect your surety to ask for it with your year-end financial statements, and often with interim statements during the year.

What Is Profit Fade?

Profit fade is a drop in a job’s expected gross profit as the job moves forward. The medical office in the example faded from an expected margin of 20 percent to 8 percent. Some movement is normal, since estimates sharpen as the work progresses, and margins can grow as well as shrink. A pattern of fade across many jobs is different. It tells a surety or lender that your bids start out too optimistic, and that the profit on today’s schedule may not hold either.

How Often Should You Update a WIP Schedule?

Monthly, as part of the month-end close. A schedule built once a year for the CPA describes jobs that have already finished or already gone wrong. Updated monthly and tied to the general ledger, it flags a problem while you can still bill the change order, adjust the schedule, or change how the job is staffed.

The work is shared. Accounting supplies the cost to date and the billings. Project managers supply the estimated cost to complete, which is the most important input on the schedule. A controller reviews the result each month and asks why anything moved. At year-end, the December 31 schedule becomes the basis for your financial statements, which is why it belongs on every contractor’s year-end accounting checklist.

Common WIP Schedule Mistakes

• Stale cost estimates. If costs are running over and nobody updates the estimated total cost, the cost-to-cost math treats the overrun as progress. Percent complete rises, earned revenue rises, and the job looks more profitable and more underbilled than it is.
• Costs that miss the cutoff. A supplier invoice that arrives after the close, or a field purchase nobody coded to a job, leaves cost to date too low and understates progress.
• Unapproved change orders in the contract value. Counting work the customer has not agreed to pay for inflates earned revenue, and it is a common reason underwriters question underbillings.
• A schedule that does not tie to the books. Revenue, costs, and billings on the WIP should agree with the general ledger. When they do not, nobody can trust either one.
• Spending overbillings. Cash billed ahead of the work belongs to the work still ahead. Treating it as profit is how a contractor with a full backlog runs short of cash.
• Waiting to book a losing job. When a job is projected to lose money, accounting rules generally require recognizing the entire expected loss as soon as it becomes evident, rather than spreading it over the remaining work.

Does Your WIP Schedule Match Your Tax Return?

Not necessarily, and that is normal. The WIP schedule drives revenue on the financial statements that your bank and surety read. Your tax return can follow different rules, and some contractors qualify for exceptions that let them use a different method for long-term contracts. Our homebuilder bookkeeping guide walks through one of these, the home construction exception. The two sets of numbers can legitimately differ, and how your contracts are treated for tax is a decision to make with your CPA.

Book a Free Consultation

If your WIP schedule only gets built when the bank asks for it, it is not doing its job. Fox & Partners works with construction businesses on job costing, WIP reporting, and the month-end close discipline that holds up under lender scrutiny, with fractional CFO support when the conversation turns to financing. Book a free consultation and we will look at how your jobs are performing today.