WIP Schedule Explained: A Construction Bookkeeper's Complete Guide

A Work-in-Progress (WIP) schedule is the most critical financial report in construction accounting. It shows the relationship between costs incurred, revenue earned, and the remaining work to complete — giving you a real-time picture of project profitability before the job is finished.

What Is a WIP Schedule?

A WIP schedule lists every active project and shows, for each one: the contract value, costs incurred to date, percentage complete, revenue earned to date (which may differ from what has been billed), and the over/under billing position. The key insight a WIP schedule provides is whether you are overbilling or underbilling on each project — both of which can cause serious cash flow problems.

Over-Billing vs Under-Billing

Over-billing (billing more than you have earned) creates a deferred revenue liability on your balance sheet. It feels good in the short term because cash is coming in — but it means you have obligations you have not yet fulfilled. Under-billing (billing less than you have earned) is a receivable — money you have earned but not yet invoiced. It ties up cash in work-in-progress and can signal collection risk.

How to Build a WIP Schedule

For each active project: 1) Determine the total estimated cost to complete. 2) Calculate percentage complete = costs to date ÷ total estimated cost. 3) Calculate earned revenue = contract value × percentage complete. 4) Compare earned revenue to actual billings to date. The difference is your over or underbilling position.

Why Monthly WIP Reports Matter

A WIP schedule produced once a year at tax time is useless. Produced monthly, it tells you which projects are heading toward a loss while there is still time to act. It is also required by many lenders and bonding companies — construction firms that provide clean monthly WIPs get better terms.

Frequently Asked Questions