Construction companies operate in a unique financial landscape. They have ongoing projects and costs that change, which can make it hard to keep track of their money.
Because of this, Work in Progress (WIP) schedule reports have become an important part of accounting for construction projects. They help companies keep accurate records of how much their projects cost and how much money they are making.
If you work in the construction business, you need to know how important WIP reports are and what makes a good WIP report. This article will talk in-depth about these topics, and we'll even give you a free sample report.
Read on to find out how WIP schedules can change the way you handle your money and keep your projects on track.
What is a Work in Progress (WIP) Schedule?
A Work in Progress schedule (WIP report) shows if a project is overbilled or underbilled, which shows who is paying for the project. It also makes it easy for contractors to keep track of what work has been done, how much has been paid for it, and what still needs to be done.
Having an accurate WIP report allows you to:
Ensure everyone on the team understands the billing process
Monitor the progress of a job or project
Identify any cash flow issues or profit concerns.
Why is a WIP Schedule Report Important?
The WIP report is an important financial reporting tool for construction companies. It shows whether a project is over or under-billed, indicating if the company is cash positive or negative. If a project is under-billed, you are financing the project, which is bad for your cash flow. But the goal is to get cash into the project through proper overbilling, which means using the client's money.
This information is crucial for external users such as project stakeholders, bankers, and sureties who need to see financials to obtain bonding and understand how much bonding a company may qualify for.
Internally, project managers rely on WIP schedules for several critical tasks, including:
Tracking project progress
Identifying potential delays or cost overruns
Estimating project costs
Managing cash flow
Making informed decisions on scheduling, budgeting, and resource allocation
In addition to these uses, the WIP report is an important way for project managers to keep stakeholders, clients, and team members informed about the progress of the project and its financial status.
How To Create An Effective WIP Report
Elements of a WIP Report
Now let’s talk about what you should put in your WIP report to make it as beneficial as possible for you and your team.
When making a WIP report, each row should represent a different job. Most Work in Progress schedules will include the:
Current Contract Value
Estimated Costs At Completion
Costs Incurred
% Complete
Earned Revenue
Total Billed
Over/Under Billed
Sample WIP Schedule Report Supported By CFMA
With our sample report, which is backed by CFMA, you can see how powerful a well-organized WIP report can be. This comprehensive report provides a clear overview of project progress and financials, helping you keep your construction projects on track and within budget.
Don't miss out on this valuable resource! Simply leave your email below to receive full access to our WIP report sample. It's completely free and easy to download. Start taking control of your construction projects today!
Download the sample Work in Progress (WIP) schedule here:
How to Calculate WIP Report?
The following steps are required to calculate construction work in progress:
Step 1: Percentage of Work Completed |
Step 2: Earned Revenue |
Step 3: Over/Underbilling |
1. Percentage Of Completion = Costs Incurred / Estimated Cost at Completion
2. Earned Revenue = % Complete (POC) x Contract Value
3. Over / Under Billings= Total Billed - Earned Revenue
Three Key Indicators For a Useful WIP Report
Estimated Cost at Completion (ECAC): This is the projected total cost of the project when it's completed in the future. It defines the expected scope of the project in terms of the contractor's cost. Changing the ECAC can significantly impact the percent completion of each job and the revenue recognized in each period.
Cost Incurred: This is the actual cost incurred to date on the project. Accurately tracking the cost incurred is crucial for determining progress and earnings. Incorrect allocation of job costs can result in inaccurate earnings.
Total Billed: This is the total amount invoiced to the client for the work completed to date. Although billings don't determine profitability, they have a significant impact on a company's cash flow. Overbilling, which uses the client's money to finance the project, is optimal for cash flow. Underbilling, on the other hand, represents future billing on work that has already been completed and can negatively impact cash flow.
By monitoring these indicators, contractors can identify potential problems early on and take corrective action to keep the project on budget and schedule.
In Conclusion,
Accurate and real-time WIP schedules are game-changers for construction companies. They provide detailed insights into project status, expenses, revenues, percent completion, and billing status. You can then use these insights to monitor budgets, spot risks, bill properly, and maintain projects on track and profitable.
Don't settle for poor financial performance. Partner with CCA to maximize your success! Take control of your projects today and ensure that you are always ahead of the game.