How to Read a WIP Schedule (and What Your Banker and Bonding Agent See)

If you run a construction company and your CPA hands you a “WIP schedule” once a quarter, you already know it’s important. Your banker asks for it, your bonding agent lives by it. But a lot of owners have never had anyone walk them through what the columns actually mean. This guide does that, in plain English, one column at a time.

By the end you’ll be able to look at your own work-in-progress schedule and answer the three questions that matter most: Am I making money on this job? Am I billing ahead of or behind the work? And what is my surety seeing when they decide how much bonding to extend?

What a WIP schedule is, in one sentence

A work-in-progress schedule is a snapshot, as of one date, of every open contract you have, showing how far along each job is, how much profit you’ve earned so far, and whether you’ve billed your customer more or less than the work you’ve actually completed.

That last part is the whole point. On a long project, the money coming in (your progress billings) almost never lines up perfectly with the work going out (your costs and earned profit). The WIP schedule measures that gap. A general-purpose profit and loss statement can’t, which is exactly why construction needs its own accounting discipline.

The percentage-of-completion method

Most contractors recognize revenue using percentage of completion. The idea is simple: if a job is 60% finished, you’ve earned 60% of the contract’s revenue and profit, regardless of what you’ve billed or collected.

The standard way to measure “percent complete” is the cost-to-cost method:

Percent complete = Costs incurred to date ÷ Total estimated costs

So if you’ve spent $600,000 on a job you expect to cost $1,000,000 in total, you’re 60% complete. That single percentage drives almost everything else on the schedule.

Reading the schedule column by column

Here’s a simplified two-job WIP schedule. We’ll define each column underneath.

Contract price is the total you’ll be paid if nothing changes, including approved change orders. Keeping change orders current here is critical; an unapproved change order that you’ve already started working is a classic source of a distorted schedule.

Estimated total cost is your best current projection of what the whole job will cost. Estimated gross profit is just contract price minus that estimate.

Costs incurred to date is what you’ve actually spent so far. Divide it by estimated total cost and you get percent complete.

Earned revenue is percent complete times the contract price. For Job A: 70.6% × $1,000,000 = $706,000. This is the revenue accounting says you’ve truly earned, no matter what you’ve invoiced.

Billed to date is what you’ve actually invoiced the customer.

Over / (under) billing is the headline number: earned revenue minus billings.

Overbillings vs. underbillings: the number everyone reads first

This is the column your banker and bonding agent flip to before anything else.

An underbilling (Job A, shown as a negative $56,000) means you’ve earned more than you’ve billed. You’ve done $706,000 of work but only invoiced $650,000. That $56,000 is value you’ve created but haven’t sent an invoice for yet. It shows up on your balance sheet as an asset (“costs and estimated earnings in excess of billings”).

An overbilling (Job B, $34,000) means you’ve billed ahead of the work, having invoiced $500,000 against $466,000 earned. It sits on your balance sheet as a liability (“billings in excess of costs and estimated earnings”) because, in effect, your customer has paid you for work you still owe them.

What your surety underwriter actually looks for

When a bonding company reads your WIP, they’re not just checking profitability. They’re stress-testing your reliability. A few things they watch:

• Profit fade. If a job’s estimated gross profit keeps dropping from one WIP schedule to the next, that’s profit fade, and it tells an underwriter your estimating or cost control is slipping. Consistent fade can cost you bonding capacity faster than a single bad job.
• Underbillings relative to equity. Heavy underbillings tie up working capital. A surety wants to see that you’re financing the work through billings, not out of your own pocket.
• Job borrow. If your overbillings across all jobs are propping up your cash position, the underwriter wants to know whether that cash is really yours or whether it’s effectively a customer advance you’ll have to work off.

The takeaway: a clean, current, conservative WIP schedule is one of the cheapest ways to protect and grow your bonding program.

Five things that quietly corrupt a WIP schedule

1. Stale cost estimates. If the estimate-at-completion isn’t updated as the job evolves, percent complete and earned revenue are both wrong.
2. Unapproved or unrecorded change orders. Work in the field that isn’t in the contract price creates phantom underbillings.
3. Costs in the wrong period. A big supplier invoice booked late spikes percent complete the moment it lands.
4. “Materials on site” counted as cost incurred. Materials delivered but not yet installed can overstate how complete a job really is.
5. Retainage confusion. Retainage held by your customer affects cash, not earned revenue, so mixing the two distorts the picture.

Most of these come down to the same root issue: the WIP schedule is only as honest as the job-cost data feeding it.

The bottom line

A WIP schedule isn’t accounting paperwork. It’s the clearest financial picture you have of whether your jobs are actually making money, and it’s the document your banker and surety trust most. Learn to read the over/under-billing column, keep your cost estimates current, and watch for profit fade, and you’ll catch problems while you can still do something about them.