WIP Report for Contractors: How to Track Work in Progress and Over/Under Billing
Quick Answer
A WIP report lists every open job with its contract amount, estimated total cost, costs to date, percent complete, revenue earned, amount billed and whether the job is overbilled or underbilled. Percent complete is often figured as costs to date divided by estimated total cost. Earned revenue equals the contract amount times percent complete. If you have billed more than you have earned, the job is overbilled; if less, it is underbilled. Accurate labor and material costs by job are what make the report reliable.
Your bank balance can look great in a month when you're actually losing money, and terrible in a month when you're doing fine. For contractors, cash comes in based on billing schedules, not on how much work is done, so the checking account doesn't tell you where jobs really stand. A work-in-progress report, or WIP report, does.
A WIP report shows each open job's progress, earned revenue, billing and expected profit in one table. It catches jobs that are losing money while there's still time to act, shows whether you're ahead or behind on billing and is often requested by bonding companies, lenders and accountants, especially at year-end. This guide explains how to build one, with a free template. Your CPA can help you set up the method that fits your accounting.
What Is a WIP Report?
A WIP report, also called a WIP schedule, is a summary of every job that has started but isn't finished. For each job, it compares how much of the work is done with how much you've billed and how much the job is expected to make.
| Column | What it means |
|---|---|
| Contract amount | Total contract value, including approved change orders |
| Estimated total cost | Current estimate of all costs to finish the job |
| Estimated gross profit | Contract amount minus estimated total cost |
| Costs to date | Labor, materials, equipment and subcontractor costs so far |
| Percent complete | How much of the job is done (often costs to date ÷ estimated total cost) |
| Earned revenue | Contract amount × percent complete |
| Billed to date | Total invoiced to the client so far |
| Over/(under) billing | Billed to date minus earned revenue |
| Cost to complete | Estimated total cost minus costs to date |
Free WIP Report Template
Work-in-Progress Report
As of: ______ | Prepared by: __________ | Reviewed by: __________
| Job | Contract amount | Est. total cost | Est. gross profit | Costs to date | % complete | Earned revenue | Billed to date | Over billed | Under billed |
|---|---|---|---|---|---|---|---|---|---|
| Total |
How to Calculate Each Column
- Contract amount: original contract plus approved change orders.
- Estimated total cost: your current best estimate of total job cost, updated as the job goes.
- Costs to date: actual costs posted to the job: labor, materials, equipment and subs.
- Percent complete: costs to date ÷ estimated total cost (the cost-to-cost method).
- Earned revenue: contract amount × percent complete.
- Over/under billing: billed to date minus earned revenue. Positive means overbilled; negative means underbilled.
Worked Example
Job A: Contract $200,000. Estimated total cost $150,000. Costs to date $90,000. Billed to date $130,000.
Percent complete: $90,000 ÷ $150,000 = 60%
Earned revenue: $200,000 × 60% = $120,000
Billing position: $130,000 − $120,000 = $10,000 overbilled
Estimated gross profit: $50,000; gross profit earned to date: $120,000 − $90,000 = $30,000
Job B: Contract $80,000. Estimated total cost $64,000. Costs to date $16,000. Billed to date $12,000.
Percent complete: $16,000 ÷ $64,000 = 25%
Earned revenue: $80,000 × 25% = $20,000
Billing position: $12,000 − $20,000 = $8,000 underbilled
Overbilling vs. Underbilling
| Overbilling | Underbilling | |
|---|---|---|
| Meaning | Billed more than earned | Earned more than billed |
| Cash effect | Cash ahead of the work | Cash behind the work; you're financing the job |
| On financial statements | Often shown as a liability | Often shown as an asset |
| Risk | Can hide a losing job; cash may be needed to finish | Cash flow strain; may signal slow billing or cost overruns |
| What to do | Make sure the cash is there to finish the work | Bill promptly and check whether costs are running over |
Some overbilling is normal and healthy, since it means you're not financing your clients' jobs. But large overbillings can mask problems, and spending that cash on other things can leave you short when the job needs finishing. Consistent underbilling often means slow invoicing or costs running ahead of the estimate. See project billing.
Profit Fade: The Warning Sign to Watch
Profit fade happens when a job's estimated gross profit shrinks from month to month as the estimated total cost rises. A job sold at 25% margin that drops to 18%, then 12%, is fading. The WIP report shows fade early, when you can still act: tighten labor, review change orders, talk to the client or adjust the plan.
| Month | Contract | Est. total cost | Est. gross profit | Margin |
|---|---|---|---|---|
| August | $200,000 | $150,000 | $50,000 | 25% |
| September | $200,000 | $158,000 | $42,000 | 21% |
| October | $200,000 | $166,000 | $34,000 | 17% |
Why Accurate Job Costs Matter
The whole WIP report rests on costs to date and the estimate to complete. If labor hours aren't assigned to the right job, or materials are posted late, percent complete and earned revenue are wrong, and the report gives false comfort or false alarms.
- Labor: have employees clock in to the job and cost code they're working on. See job cost codes and how to track labor costs by job.
- Materials: tie purchase orders and receipts to the job. See the purchase order template.
- Equipment: charge equipment use to jobs at a set rate if you track it.
- Subcontractors: post sub invoices to the job when received.
- Timing: post costs through the WIP date before running the report.
Updating Estimated Total Cost
The estimate to complete should be updated by someone who knows the job, usually the project manager, not left at the original bid. Each month, ask: based on what's left to do, what will this job really cost? Update for change orders, overruns and remaining labor. A stale estimate makes percent complete look higher than it is. See project budget tracking and earned value management.
Other Ways to Measure Percent Complete
| Method | How it works | When it fits |
|---|---|---|
| Cost-to-cost | Costs to date ÷ estimated total cost | Most common; works when costs track progress |
| Labor hours | Hours to date ÷ estimated total hours | Labor-heavy jobs |
| Units completed | Units installed ÷ total units | Repetitive work |
| Physical estimate | PM's judgment of work done | A check on the other methods |
Cost-to-cost can be thrown off when big material purchases land early in a job. Compare it with labor hours or a field estimate when something looks off. Ask your CPA which method fits your accounting.
How Often to Run a WIP Report
Monthly is the standard for most contractors, right after costs and billing for the month are posted. Year-end WIP is especially important because it affects your financial statements and is often reviewed by your CPA, lender or surety. Quarterly is the minimum for small contractors with few jobs.
Who Uses the WIP Report
| User | Why they care |
|---|---|
| Owner | Which jobs make or lose money; cash position |
| Project managers | Job progress, costs and billing |
| Accountant or CPA | Revenue recognition and financial statements |
| Bonding company | Ability to take on and finish work |
| Bank or lender | Health of the business and cash needs |
Running a Monthly WIP Meeting
- Post all costs and invoices through month-end.
- Have project managers update estimated total cost for their jobs.
- Run the WIP report.
- Review jobs with profit fade, large overbillings or underbillings.
- Decide actions: bill, adjust labor, pursue change orders.
- Record decisions and follow up next month.
Keep it to an hour and focus on exceptions. See project progress reports.
Example: A Commercial Electrical Contractor
An electrical contractor had a strong bank balance going into the fall and assumed the year was profitable. Its first real WIP report showed two jobs heavily overbilled and fading: one sold at 22% margin was now projected at 6%, mostly from labor overruns hidden by crews clocking time to the wrong jobs. The owner required crews to clock in to the correct job and cost code, had PMs update cost-to-complete monthly and held a WIP meeting the second week of each month. The next quarter, fade was caught within weeks instead of at job closeout, and the year-end WIP went to the surety without surprises.
Common Mistakes
- Using the original bid as the estimated total cost forever.
- Labor charged to the wrong job or not charged at all.
- Missing change orders in the contract amount.
- Late material and sub costs.
- Ignoring overbillings and spending the cash.
- Running WIP only at year-end.
- No follow-up on fading jobs.
WIP Report Checklist
| Step | Done? |
|---|---|
| List all open jobs | |
| Update contract amounts with approved change orders | |
| Post labor, materials, equipment and subs to each job | |
| Update estimated total cost for each job | |
| Calculate percent complete and earned revenue | |
| Compare to billed to date | |
| Flag overbilling, underbilling and fade | |
| Review in a monthly WIP meeting |
Labor Hours as a Reality Check
Labor is often the most variable cost on a job and the hardest to see in real time. Compare labor hours used with labor hours estimated for each job on the WIP report. If a job is 50% complete by cost but has used 75% of its labor hours, something is off: either the cost estimate is wrong or the crew is running behind. Hours by job and cost code from your time clock make this check quick.
| Job | Est. labor hours | Hours to date | % of hours used | % complete (cost) | Flag? |
|---|---|---|---|---|---|
| ☐ | |||||
| ☐ | |||||
| ☐ |
Change Orders and the WIP Report
Unapproved change orders cause a lot of WIP confusion. If the crew is doing extra work that isn't in the contract amount yet, costs go up while revenue doesn't, and the job looks like it's fading. Track pending change orders separately, get them approved and priced quickly and add them to the contract amount once approved. Ask your CPA how pending change orders should be handled in your WIP. See the change order form.
Closed Jobs and Final Numbers
When a job is finished, remove it from the WIP report and compare final results with the original estimate: contract amount, total cost, gross profit and labor hours. These closed-job reviews are where you learn how to bid better. If a type of job always runs over on labor, raise your labor estimate next time. Keep a simple closed-job log by job type.
| Job | Type | Bid margin | Final margin | Bid hours | Actual hours | Lesson |
|---|---|---|---|---|---|---|
Year-End WIP
Year-end WIP often matters more than any other month because it feeds your annual financial statements and taxes and is often reviewed by your CPA, bank or surety. Before December 31, make sure all labor through year-end is clocked to the right jobs, materials received are posted, subcontractor invoices are in and project managers have updated estimates to complete. Clean year-end WIP makes the accountant's work faster and your financial statements more reliable. See the end-of-year checklist.
Small Contractors and Simple WIP
You don't need complex accounting software to start. Even a contractor with three or four open jobs can build a simple WIP table each month: contract amount, estimated cost, costs to date, billed to date. The key is consistent, accurate job costs. Start simple and add columns as your business grows. Your CPA can help you match your WIP to your financial statements when you're ready.
Job Cost Reports Behind the WIP
The WIP report is a summary. Behind each line should be a job cost report showing costs by category, such as labor, materials, equipment and subs, and by cost code. When a job looks off on the WIP report, the job cost report shows where. Make sure your project managers can pull both. See labor distribution reports.
Getting Project Managers to Own Their Numbers
The most accurate WIP reports come from project managers who own their job estimates. Give each PM a simple monthly task: review costs to date, update the estimate to complete and explain any change of more than a few percentage points in margin. When PMs see the WIP report each month and are asked about fading jobs, they start watching labor and materials more closely during the month, not just at review time.
Reading the WIP Totals
Look at the totals row, not just individual jobs. Total overbillings minus total underbillings shows whether, across all jobs, you're ahead or behind on billing. Total estimated gross profit on open jobs shows the profit still to come. If total underbilling is growing month after month, cash flow will tighten even if every job looks profitable. If total overbilling is large, make sure that cash isn't being spent on overhead before the jobs are finished.
Sharing WIP With Your Team
Share a simplified WIP view with project managers and crew leads so they see how their jobs are tracking against budget and hours.
Final Thoughts
A WIP report is the clearest picture a contractor has of where every job really stands. List open jobs, update contract amounts and estimates, post costs accurately, calculate percent complete and earned revenue and compare it with billing. Watch for profit fade and large over- or underbillings, and review the report every month, not just at year-end. Most of all, get labor and material costs onto the right jobs, because the report is only as good as the costs behind it.
Track Job Costs for WIP With Updoot
Updoot's employee time clock records labor hours by job and cost code, project management tracks each job's budget, tasks and progress and purchasing ties material orders to the job, giving you accurate costs to date for every WIP report.