If you run a construction company and someone has ever asked you for a "WIP schedule," you have probably produced one, handed it over, and never looked at it again. That is a missed opportunity. The work-in-progress schedule is the most informative single page in contractor accounting, and it is the page your surety reads first — before the income statement, before the balance sheet.
Here is what it contains, what it reveals, and what it tells an underwriter about your company.
What a WIP schedule actually is
A work-in-progress schedule lists every open contract as of the reporting date, with a row of numbers for each job:
- Contract value — the original contract plus approved change orders
- Estimated total cost — what you now believe the job will cost when finished
- Costs incurred to date — what you have actually spent so far
- Estimated cost to complete — estimated total cost minus costs incurred
- Percent complete — costs incurred divided by estimated total cost
- Revenue earned — contract value multiplied by percent complete
- Billings to date — what you have actually invoiced
- Over- or underbilling — the difference between billings and earned revenue
That last line is the one that matters most, and it is the one contractors most often misunderstand.
Overbilling is a loan, not a profit
If you have billed $600,000 on a job where you have only earned $480,000, you are overbilled by $120,000. That $120,000 is sitting in your bank account, and it feels like money. It is not. It is a liability — on a properly prepared balance sheet it appears as "billings in excess of costs and estimated earnings," which is a wordy way of saying you owe this work to a customer who has already paid for it.
Contractors who front-load billings — and most do, deliberately, for good cash-flow reasons — build up a cushion of overbillings across their open jobs. That cushion funds mobilization on the next project. It works fine until volume drops. When jobs close out and no new ones replace them, the overbillings reverse, cash drains fast, and a company that looked healthy six months ago cannot make payroll. This is the single most common way a profitable contractor fails.
Underbilling is the mirror image and is usually worse news: it means you have performed work you have not invoiced. Sometimes that is unapproved change order work, which is a collection problem waiting to happen. Sometimes it means your billing is simply behind, which is free financing you are extending to your customer.
The estimate is the whole ballgame
Notice how many lines on the schedule depend on one number: estimated total cost. Percent complete comes from it. Revenue earned comes from percent complete. Gross profit comes from revenue earned. If the estimated cost to complete is optimistic, every figure downstream is overstated — and the correction arrives later, all at once, in a quarter where nothing appeared to go wrong.
This is why experienced reviewers compare the current WIP against prior periods job by job. A job where estimated total cost keeps climbing while percent complete barely moves is a job in trouble, and it is visible on the schedule months before it is visible in the bank account.
What the surety is looking for
A surety underwriter is deciding how much work you can safely take on. They read the WIP for four things:
- Job fade — are gross profit percentages on individual jobs declining from period to period? Fade suggests estimating problems or field control problems.
- Concentration — how much of your backlog is one customer or one project? A single large job going bad can take the company with it.
- Overbilling reliance — how much of your working capital is really customer money? Heavy overbilling with thin equity is a red flag.
- Consistency with the financials — does the WIP tie to the income statement and balance sheet? If it does not, the underwriter discounts everything.
That last point deserves emphasis. When job cost reports and the general ledger disagree, the underwriter cannot tell which is right, so they assume the less favorable answer. Contractors regularly lose bonding capacity not because their results are poor but because their reporting is inconsistent. Fixing the tie-out between job costing and the GL is often the fastest way to increase a bonding line — faster than another good year.
Why the review engagement matters
Most sureties will not underwrite meaningful capacity on internally prepared statements. They want financial statements from an independent CPA, typically a review engagement, with the WIP schedule included as supplementary information. A review provides limited assurance — the CPA performs analytical procedures and inquiry and reports that they are not aware of any material modifications needed.
The firm performing that review has to be enrolled in a peer review program, and underwriters increasingly ask to see the peer review report. Ours carries a rating of pass, the highest available.
What to do with this
Produce a WIP schedule monthly, not annually. Compare each job to the prior month. Ask the project manager about any job where estimated cost to complete moved and percent complete did not. Reconcile the schedule to your general ledger every time, and fix the differences rather than explaining them.
Do that for two quarters and you will know more about your company than most contractors ever do — and your surety will notice.
We prepare WIP schedules, reconcile job costing to the general ledger, and issue reviewed and compiled financial statements for contractors across Texas. More on how we work with construction companies.