Construction projects generate massive amounts of financial data before the first invoice hits the client. A work in progress report captures this critical gap, showing exactly how much work your teams have completed compared to what has been billed. This financial snapshot tracks percent complete, costs to date, and the difference between earned revenue and actual billings across every active contract.
We rely on WIP reports to identify overbilling and underbilling situations that can derail cash flow and project profitability. When leadership and project managers review these reports regularly, they spot cost overruns, schedule delays, and billing discrepancies while there’s still time to correct course and keep projects profitable.
What Should A Construction WIP Report Include?
We structure each WIP report with one row per project to maintain clear project visibility. This format allows us to compare multiple jobs quickly and spot patterns across our portfolio.
The contract value column captures the total agreement amount, including approved change orders. Original estimated costs reflect our initial project budget, while revised estimated costs show updated figures based on field conditions and scope changes.
Actual costs to date track all expenses incurred through the reporting period. This includes direct labor, materials, equipment, and subcontractor payments already processed through our accounting system.
Critical Financial Columns
The cost to complete figure demands constant attention from our project teams. We calculate this as revised estimated costs minus actual costs to date, but field conditions often require manual adjustments.
Percentage of completion drives most other calculations in the report. We derive this by dividing actual costs to date by revised estimated costs, though we sometimes adjust based on physical progress assessments.
Earned or recognized revenue shows what we should bill based on work completed. Billed revenue includes both invoiced amounts and retention held by clients.
Performance Tracking Elements
Over/under billing reveals the difference between billed and recognized revenue. This metric immediately shows which projects need billing attention or budget adjustments.
We track estimated profit as contract value minus revised estimated costs. Profit to date multiplies estimated profit by percentage of completion to show earned profit.
Budgeted margin and revised margin columns help us monitor profitability changes. Variance from original margin highlights projects that deviated from initial expectations.
Operational Data Points
Committed costs capture purchase orders and subcontracts we have signed but not yet paid. This prevents surprise budget overruns from approved commitments.
Start, target, and actual completion dates track schedule performance. These dates help us correlate cost overruns with schedule delays.
We assign each project to a specific project manager and business unit. This accountability structure helps us identify patterns in performance across different teams.
Project status indicates current phase: mobilizing, active construction, punchlist, or closed. This helps prioritize which projects need immediate attention.
The cost-to-complete figure anchors the entire report’s accuracy. If this estimate strays from reality, every calculation becomes unreliable. We validate these figures weekly with project managers who understand actual field conditions and remaining scope.
How Do You Calculate Percent Complete, Earned Revenue, And Over/Under Billing?
WIP calculations follow straightforward formulas that drive accurate project financial reporting. We rely on these core calculations to measure project progress and ensure revenue recognition aligns with actual work completed.
Essential Calculation Formulas
The primary formula for measuring project completion uses actual costs against revised estimates. Percent complete equals actual costs to date divided by revised estimated costs. This percentage forms the foundation for all other WIP calculations.
Cost to complete represents the work remaining on each contract. Cost to complete equals revised estimated costs minus actual costs to date. This figure directly impacts cash flow projections and resource planning decisions.
Earned revenue reflects the portion of contract value we can recognize based on completion percentage. Earned revenue equals contract value multiplied by percent complete. This calculation ensures revenue recognition matches actual progress rather than billing schedules.
Profit And Billing Calculations
Project profitability requires tracking both estimated and realized profit figures. Estimated profit equals contract value minus revised estimated costs. Profit to date equals estimated profit multiplied by percent complete, showing earnings achieved through current work.
Over/under billing identifies the gap between what we have billed and what we have earned. Over/under billing equals actual revenue billed and retained minus recognized revenue. Positive numbers indicate underbilling; negative numbers show overbilling.
When projects show significant overbilling, we track the funds carefully since this represents future work cash flow rather than current profit. Underbilled amounts indicate we have completed work that remains unbilled to the client.
Methods For Setting Revised Estimates
Accurate revised estimated costs depend on accepted measurement methods that reflect project realities. The cost-to-finish method combines actual costs to date plus estimated costs to finish, providing a ground-up view of total project expenses.
Some projects benefit from units complete tracking, measuring physical progress against total units planned. This works well for repetitive work like installing fixtures or pouring concrete where progress correlates directly with completed units.
We also use percentage complete assessments based on work phases or milestones achieved. This approach suits complex projects where costs alone do not fully represent progress, such as design phases or permit approvals that require significant effort but minimal material costs.
How To Run A WIP Report And Who Should Review It?
We generate WIP reports at two distinct levels to maintain comprehensive oversight. Company-wide WIP reports provide leadership with portfolio visibility across all active projects, while job-level WIP reports give us granular control over individual contract performance. This dual approach ensures we capture both strategic trends and project-specific issues that could impact profitability.
The frequency depends on project complexity and business volume, but we typically update our WIP reports weekly or monthly throughout the project life cycle. Weekly reviews work well for fast-moving projects or when cash flow monitoring requires tighter control. Monthly reviews suit more stable projects where costs accumulate predictably. The key principle remains consistent: decisions must reflect current costs, not outdated financial snapshots.
Three core groups participate in our WIP review process. Leadership uses these reports to track overall company performance, identify trends across projects, and make strategic resource allocation decisions. Our accounting team validates cost data, ensures proper revenue recognition, and maintains the financial accuracy that keeps our reporting compliant and reliable.
Project managers bring essential field context that transforms raw numbers into actionable intelligence. They understand when change orders will affect future costs, how weather delays impact schedule and budget, and whether scope shifts require updated cost-to-complete estimates. Without this field perspective, WIP reports become mere accounting exercises rather than management tools.
We rely on real-time project and accounting data rather than static spreadsheets. Real-time data integration reduces manual entry errors and provides the current visibility we need for accurate decision-making. This approach eliminates the lag time that makes traditional spreadsheet-based reporting less effective for active project management.
What Common WIP Mistakes Should Construction Teams Avoid?
Percent spent rarely equals percent complete. This fundamental mistake leads countless teams astray when they assume that reaching 60% of budget means 60% completion. We track actual work progress through field assessments, not just costs incurred. A project might consume 70% of its budget while completing only 50% of the scope due to material cost overruns or inefficient labor allocation.
Committed costs demand attention beyond paid invoices. We monitor purchase orders, subcontract agreements, and approved change orders that create future payment obligations. These commitments affect our cost-to-complete calculations and cash flow projections. When we ignore committed costs, our WIP report shows false profit margins that disappear once bills arrive.
Data entry errors create cascading problems throughout the report. A misplaced decimal point or incorrect cost code can skew percentage calculations and revenue recognition. We implement verification procedures and regular data audits to catch these mistakes early. Small errors compound quickly in percentage-based calculations, making accuracy essential at every input level.
Overbilling represents future work cash flow, not profit. When we bill ahead of completion, those funds belong to future project phases. Treating overbilling as earned profit creates cash shortages during later project stages. We maintain clear distinctions between cash received and revenue earned based on actual completion percentages.
Over and under billing must connect to our P&L and balance sheet for complete financial accuracy. These amounts appear as assets or liabilities, affecting our overall financial position. When WIP adjustments remain isolated from our main financial statements, we lose sight of true project impact on company-wide performance. Proper integration reveals actual cash flow risks and profit trends across our portfolio.
Real-time cost and revenue tracking prevents decisions based on outdated information. Weekly or monthly updates keep our WIP calculations relevant to current project conditions. Static spreadsheets updated sporadically miss critical changes in material costs, labor efficiency, or scope modifications that affect completion percentages and billing schedules.
Cost-to-complete estimates require constant refinement as project conditions evolve. This single figure drives our entire WIP calculation accuracy. When we let these estimates grow stale, every subsequent calculation becomes unreliable. Change orders, productivity changes, and market conditions demand regular estimate updates to maintain WIP report credibility.
Conclusion and Next Steps
A dependable work in progress report serves as the financial backbone for construction operations. It helps control cash flow by revealing whether projects draw from company resources or generate positive working capital. We use these reports to spot risks before they compound into significant losses and maintain project profitability across our portfolio.
Successful WIP implementation requires standardizing report columns across all projects, selecting consistent calculation methods for earned revenue and percent complete, and establishing a regular review cadence that keeps pace with project developments. We involve project managers to validate field realities against accounting numbers, ensuring cost-to-complete estimates reflect actual site conditions rather than outdated assumptions. Keeping start dates, current costs, and billing records updated in real time prevents the data lag that leads to poor decisions. Linking over/under billing amounts directly to financial statements creates the transparency that stakeholders need for accurate reporting.
Ready to implement effective WIP reporting for your construction projects? Contact EB3 Construction to discuss how we can help optimize your project financial management.
