How to read a WIP schedule (and what over/under billings tell you)

If you run a construction company and someone’s handed you a WIP schedule and expected you to automatically know what it means, you are not alone. It is one of the most important reports in your entire financial package, and one of the least explained.

Here’s what it shows, how to read it in a few (ok, maybe fifteen) minutes, and why over billings and under billings can tell you something about your business that your P&L cannot.

What is the purpose of a WIP schedule?

WIP stands for work in progress. The schedule exists because construction accounting has a timing problem that most other industries do not deal with: you bill jobs on a schedule that doesn’t necessarily match how much work you have completed.

You might bill 40% of a contract at a milestone, but you have only really finished 25% of the work. Or you’ve completed 60% of the job but have only invoiced for 40%. Your bank account and your P&L do not know the difference. The WIP schedule is the report that reconciles what you have billed against what you have earned, job by job.

Without it, you are judging how a job is doing by how much cash has come in, which is not the same thing as how much work is actually done. A job can look fine because the checks are clearing, right up until it wraps and the numbers do not add up to a profit.

The core columns, in plain English

Every WIP schedule looks a little different depending on the software, but they all boil down to the same handful of numbers per job:

Contract value. The total amount the job is worth.

Estimated costs. Your current best estimate of total cost for the whole job.

Costs incurred to date. What has actually been spent on the job through this reporting period.

Percent complete. Costs incurred to date divided by estimated total costs. This is the standard, though some contractors use units completed or engineering estimates instead, especially on jobs where cost isn't a reliable proxy for progress.

Earned revenue. Contract value multiplied by percent complete. This is what you have actually earned based on progress, regardless of what you have billed.

Billed to date. What you have invoiced the customer through this period.

Over/under billing. The difference between earned revenue and billed to date. This is the number that matters most!

What over billing actually means

Over billing means you have billed more than you have earned. You invoiced $400,000 on a job, but based on percent complete, you have only earned $350,000 of it.

That $50,000 is money you have collected for work you have not done yet. It is not profit, and on your balance sheet it shows up as a liability, billings in excess of costs, because you owe that work to the customer.

A little over billing is normal and even healthy. It means you are front-loading cash, which helps with payroll and material costs on that job. A lot of over billing, especially concentrated in a couple of large jobs, is a warning sign. It usually means one of two things: your estimate on that job was aggressive and the real costs are going to eat into that cushion, or you are relying on billings from newer jobs to cover costs on older jobs that are underwater. That second pattern is how contractors get into real trouble. It works right up until your pipeline slows down and there’s no more billing left to prop up the ones behind it.

What under billing actually means

Under billing is the opposite. You have earned more than you have billed. You have completed $500,000 worth of work but only invoiced for $420,000.

That $80,000 is real revenue sitting on your balance sheet as an asset, costs in excess of billings, but it is not cash yet. You have essentially given the customer free financing on your own work.

Under billing usually points to one of a few things: your billing schedule does not match your actual pace of work, you are behind on submitting change orders, or you are simply slow getting invoices out the door. Occasionally it is a sign the job is running over budget and costs are accumulating faster than anyone billed for.

Chronic under billing is a cash flow problem hiding in plain sight. Profitable jobs can still create a cash crunch if the revenue keeps outrunning the cash actually coming in.

Why your P&L will not tell you this

Your P&L shows revenue and expenses in aggregate, across every job, for the period. It will not tell you that Job A is over billed by $60,000 while Job B is under billed by $55,000. Those two numbers might roughly cancel out at the company level and everything looks fine on paper, while one job is quietly bleeding and another is loaning the company money it does not realize it has extended. It is the same reason a healthy-looking P&L can mask problems AI-assisted tools will not catch — the aggregate number hides exactly the detail that matters.

A job cost report will show you revenue and expenses job by job too, but it will not tell you whether the billing on that job is ahead of or behind the actual work. The WIP schedule is the report built specifically to catch that gap.

How to use it every month

Scan every job for two things:

Jobs with unusually large over billings relative to their size. Ask why. Is it intentional front-loading, or is the cost estimate no longer realistic?

Jobs with growing under billings over multiple months. Ask why. Is billing behind schedule, or is the job behind on progress and nobody has flagged it yet? Are change orders to blame?

Any job where percent complete has jumped sharply in one period, or barely moved for several periods, deserves a second look. Those are usually where the estimate and reality have started to disagree.

The WIP schedule can also surface a bad estimate before a job is done. Cost-based percent complete only measures money spent, not actual field progress. If a superintendent says a job is 75% done but the WIP shows 90% complete by cost, the original cost estimate was too low, and you’re going to spend more than budgeted to finish. Watch for that gap on individual jobs, and watch for the same estimator or the same type of job landing over budget at completion more than once. A single overrun is bad luck. A pattern might be flagging an estimating problem.

Frequently asked questions

What is a WIP schedule?

A WIP (work in progress) schedule is a report that compares what a contractor has billed on a job against what they have actually earned based on percent complete. It shows the gap between billing and progress, job by job.

What does over billing mean in construction?

Over billing means a contractor has invoiced a customer for more than the work completed so far. It shows up on the balance sheet as a liability, billings in excess of costs, since the contractor still owes that work.

What does under billing mean in construction?

Under billing means a contractor has completed more work than they have invoiced for. It shows up on the balance sheet as an asset, costs in excess of billings, and represents revenue that has not been collected yet.

How do you calculate percent complete on a WIP schedule?

The most common method is cost-to-cost: costs incurred to date divided by total estimated costs for the job. Some contractors use units completed or engineering estimates instead, especially on jobs where cost is not a reliable measure of progress.

How often should a contractor review their WIP schedule?

Monthly, and job by job rather than just the company total. Reviewing it only once a year for a bank or bonding company means problems on individual jobs go unnoticed until they show up as a loss at completion.

Read it monthly, not once a year

Reviewed job by job, every month, a WIP schedule catches a job going sideways before it shows up as a surprise loss at completion. Reviewed once a year for the bank or bonding company, and you find out the same thing after it’s too late to pivot.

If your WIP schedule has never been explained to you the way it should have been, or you’re not confident the numbers on it are right, that is exactly the kind of gap our fractional controller and advisory services are meant to close.

Book a discovery call and we’ll walk through what your WIP schedule is telling you.