The short answer
A management WIP schedule should show each active job's current contract value, approved and pending changes, costs to date, estimated remaining cost, estimated total cost, progress measure, earned revenue, billings, retainage, billing position, estimated gross profit, and expected completion date. Review it on a consistent cutoff, reconcile it to job-cost records and the general ledger, assign ownership for estimates, and investigate material changes in margin, billing, and completion timing.
Key takeaways
- Keep executed and approved changes separate from pending changes, claims, and disputed amounts.
- Give the project team ownership of the operational cost-to-complete estimate and accounting ownership of recorded costs, billings, and reconciliation.
- Use the same cutoff and cost population throughout the schedule.
- Read overbillings and underbillings from their causes, remaining obligations, collectibility, and cash implications.
- An estimate revision can change progress, earned revenue, gross profit, and billing position while costs and billings remain unchanged.
A WIP schedule depends on current inputs and clear accountability. Even perfect formulas give management a weak answer when contract status is stale, job costs miss the cutoff, or the estimate to complete no longer reflects field conditions.
Accounting and project operations bring their information to the same reporting date. Accounting supplies recorded costs, billings, retainage, and ledger tie-outs. Project managers and project executives supply remaining quantities, labor and productivity expectations, subcontractor commitments, change status, completion timing, and operational risks. Senior management challenges the changes and decides what requires action.
Know what each WIP field means and who owns it
Each active job needs a controlled row, a defined cutoff, and an owner for every important input. The exact fields should follow the contractor’s contracts, systems, accounting policy, and management needs.
| Field | What it should show | Primary owner and support | Review question |
|---|---|---|---|
| Current contract value | Original contract value plus approved changes reflected under the company's policy | Contract administrator or project executive; executed contract and approved-change log | Does the amount tie to executed documents and the approved-change register? |
| Pending changes and claims | Submitted, negotiated, disputed, or otherwise unresolved amounts, shown separately by status | Project manager or project executive; change log, correspondence, pricing, and contract support | What is the current status, expected timing, supporting basis, and treatment in the schedule? |
| Costs to date | Job costs recorded through the WIP cutoff using the defined cost population | Accounting or job-cost owner; payroll, payables, equipment, subcontractor, and ledger records | Do costs tie to the job-cost system and general ledger, and are cutoff or coding issues unresolved? |
| Estimated cost to complete | Expected cost of remaining labor, material, equipment, subcontractor, rework, and closeout activity | Project manager with superintendent, estimator, or project-executive input | Which remaining quantities, commitments, productivity assumptions, and known risks support the estimate? |
| Estimated total cost | Costs to date plus estimated cost to complete | Accounting calculates; project management supports the operating inputs | Does the total recalculate, and is every material change from the prior estimate explained? |
| Progress measure | The company's defined measure of progress for the reporting purpose | Controller or accounting-policy owner with project input | Does the measure still reflect the work performed, and are the numerator, denominator, and excluded costs consistent? |
| Earned revenue | Revenue calculated under the company's applicable reporting method | Accounting or controller | Does the calculation use the supported contract amount, progress measure, cutoff, and approved adjustments? |
| Billings and retainage | Billings through the cutoff, with retainage visible under a stated convention | Billing and accounts-receivable owner | Do the amounts agree with invoices, receivables, retainage records, and the contract billing schedule? |
| Billing position | Billings compared with calculated earned revenue under the schedule's sign convention | Accounting or controller | What caused the position, how did it change, and what does it imply for future billing and cash needs? |
| Estimated gross profit and margin | Current contract value less estimated total cost, together with the resulting margin | Accounting calculates; project executive and management review | What changed since the prior forecast, and which operating action or contract issue explains it? |
| Expected completion date | The project team's current expected completion or substantial-completion timing | Project manager or project executive; current project schedule | Does the date reflect remaining work, commitments, access, change orders, and known schedule pressure? |
The schedule should preserve prior values alongside the current ones. A total estimated cost of $1 million has limited meaning by itself. Management needs to know whether it was $900,000 at the prior review, what changed, who updated it, and which evidence supports the revision.
Pending changes deserve their own status. Separate visibility helps management see work performed and exposure incurred while preserving the distinction between an approved contract modification and an unresolved amount. The contract facts and the company’s accounting policy govern the eventual financial-reporting treatment.
Connect contract, cost, progress, earnings, and billings
The worked example uses a cost-to-cost input method and the following formulas:
- Estimated total cost = costs to date + estimated cost to complete.
- Estimated total gross profit = current contract value − estimated total cost.
- Estimated gross margin = estimated total gross profit ÷ current contract value.
- Cost-to-cost progress = included costs to date ÷ included estimated total cost.
- Calculated earned revenue = current contract value × cost-to-cost progress.
- Calculated gross profit to date = earned revenue − included costs to date.
- Billing position = billings to date − earned revenue.
Under this sign convention, a positive billing position is overbilled and a negative position is underbilled.
The cost population matters. For a performance obligation satisfied over time, Topic 606 calls for a consistent measure of progress. An input method can use costs relative to expected inputs, with adjustments when particular costs do not depict the work performed. The contract facts and the company’s accounting policy determine whether cost-to-cost is appropriate and which costs belong in the calculation.
How a revised cost estimate changes the job
Consider a job with a current contract value of $1,200,000. At the month-end cutoff, costs to date are $540,000 and billings to date are $780,000. The original WIP view expected $360,000 of remaining cost. During the project review, updated field quantities and subcontractor commitments add $120,000 to the remaining estimate. Contract value, recorded costs, and billings remain unchanged between the two views.
For this calculation, cost-to-cost is the selected progress measure and all $540,000 of costs to date is included. Dollar amounts are rounded to the nearest dollar; percentages are shown to one decimal place.
| Measure | Original WIP view | Revised WIP view | Change |
|---|---|---|---|
| Current contract value | $1,200,000 | $1,200,000 | No change |
| Costs to date | $540,000 | $540,000 | No change |
| Estimated cost to complete | $360,000 | $480,000 | +$120,000 |
| Estimated total cost | $900,000 | $1,020,000 | +$120,000 |
| Cost-to-cost progress | 60.0% | 52.9% | −7.1 points |
| Calculated earned revenue | $720,000 | $635,294 | −$84,706 |
| Billings to date | $780,000 | $780,000 | No change |
| Billing position | $60,000 overbilled | $144,706 overbilled | $84,706 further overbilled |
| Estimated total gross profit | $300,000 | $180,000 | −$120,000 |
| Estimated gross margin | 25.0% | 15.0% | −10.0 points |
| Calculated gross profit to date | $180,000 | $95,294 | −$84,706 |
Arithmetic tie-out
Original view. Estimated total cost is $540,000 + $360,000 = $900,000. Progress is $540,000 ÷ $900,000 = 60.0%. Earned revenue is $1,200,000 × 60.0% = $720,000. The billing position is $780,000 − $720,000 = $60,000 overbilled. Total gross profit is $300,000, and gross profit to date is $720,000 − $540,000 = $180,000.
Revised view. Estimated total cost is $540,000 + $480,000 = $1,020,000. Progress is $540,000 ÷ $1,020,000 = 52.9412%. Using that unrounded percentage, earned revenue is $635,294. The billing position is $780,000 − $635,294 = $144,706 overbilled. Total gross profit is $180,000, and gross profit to date is $635,294 − $540,000 = $95,294.
What management should conclude
The $120,000 increase in remaining cost reduces estimated total gross profit by $120,000 and margin by ten percentage points. Because costs to date stay at $540,000, the higher total-cost estimate also lowers calculated progress. Earned revenue and gross profit to date each decline by $84,706.
Billings stay at $780,000. The billing position moves from $60,000 to $144,706 overbilled without a new invoice because calculated earned revenue is lower. Cash collected, receivables, remaining commitments, and the cost still required to finish the job need their own review.
Management should identify the operating facts behind the additional $120,000, confirm that remaining labor, material, equipment, subcontractor, rework, and closeout costs are included, and determine whether any approved or pending change addresses the added cost. The review should also capture the completion-date effect, resulting cash requirements, action owner, and next review date.
Require a bridge for every material estimate change
A prior-to-current bridge makes the estimate review concrete. For each material revision, record:
- Prior and current estimated cost to complete, together with the dollar change.
- Operational cause and supporting evidence.
- Effect on total gross profit, margin, progress, and billing position.
- Effect on the expected completion date and remaining cash commitments.
- Required action, owner, and next review date.
Useful cause categories include scope or change-order activity, labor productivity, material price or quantity, subcontractor commitments, equipment, schedule pressure, rework, cutoff or coding errors, and correction of an earlier estimate. Review thresholds should reflect job size, remaining duration, contract risk, and the effect on company-level results.
Read overbillings and underbillings by cause
An overbilling means billings exceed calculated earned revenue under the schedule’s definitions. Contract billing terms, mobilization, billing ahead of progress, or a downward revision in calculated progress may create the position. The balance describes billing timing. Management should review cash separately and compare available liquidity with the costs and commitments required to complete the work.
An underbilling means calculated earned revenue exceeds billings. Possible causes include billing cutoff, contractual billing restrictions, pending changes, delayed billing, unsupported change work, or an estimate that deserves further challenge. Management should examine the contractual basis, documentation, billing path, timing, and collectibility.
State whether billings to date include retainage and use the same convention each period. Show retainage separately so management can see the amount and expected collection timing. Add any material billing-position issue to the same change log used for estimate revisions.
Reconcile the schedule to the books at the same cutoff
The completed WIP review should tie original contract amounts to executed contracts, approved changes to the controlled change-order register, costs to the job-cost system and general ledger, and billings and retainage to invoices, receivables, and supporting reports. Pending changes should remain visible by status. Opening balances and prior estimates should roll forward to the current schedule.
Cutoff errors deserve attention. Late invoices, incorrect job coding, costs in suspense, unrecorded commitments, and transfers between jobs can change both progress and projected margin. Each reconciling item needs an amount, cause, owner, target date, and disposition. Connecting this review to the contractor’s month-end close process reduces the year-end reconstruction burden.
Run the WIP review around changes and decisions
A monthly WIP review aligned with the close is a practical management rhythm for many active contractors. Fast-moving, unusually large, or higher-risk jobs may need an interim update. Project managers or project executives own contract status, pending changes, remaining cost, operational risks, and completion timing. Accounting owns recorded costs, billings, retainage, cutoff, and source-system tie-outs. The controller or financial reviewer checks formulas, definitions, reconciliation, and portfolio exceptions. Senior management challenges material changes and assigns follow-up.
Escalation signals include a material margin movement, a remaining-cost estimate that stays unchanged despite meaningful field developments, unresolved changes while work advances, a sharp billing-position movement without new invoices, unreconciled records, a slipped completion date, or a nearly completed job with substantial underbilling, retainage, or unresolved cost. Portfolio review should also identify when a small group of jobs drives a disproportionate share of expected profit, remaining cash requirements, or billing exposure.
Start with the same underlying records
Use one controlled set of contract, change-order, job-cost, estimate, billing, and retainage records as the common source. The company’s accounting policy governs financial reporting; current tax rules govern the return; lenders and sureties specify their requested package; and a separate CPA firm controls any external audit.
Before adapting the management schedule for an outside purpose, confirm the required basis, fields, and cutoff. See lender-ready financial reporting and Audit Readiness for the surrounding preparation process.
Connect job review to company-level reporting
Within a monthly management reporting package, the WIP schedule should identify which jobs changed, what caused the change, how billing and cash may be affected, and who owns the follow-up. Portfolio reporting can then show margin movement, billing concentration, remaining commitments, and the jobs affecting the cash outlook. The cash-flow forecasting and budgeting guide provides the broader planning context.
Client Accounting Services can connect job-cost reconciliation, the monthly close, WIP review, and recurring management reporting. The Construction industry page explains how those capabilities can fit within the contractor’s broader accounting and tax relationship.
Frequently asked questions
What fields belong on a construction WIP schedule?
A management schedule commonly includes current contract value, approved and pending changes, costs to date, estimated cost to complete, estimated total cost, the applicable progress measure, earned revenue, billings, retainage, billing position, estimated gross profit and margin, and expected completion date. The company should define each field and its source.
Who owns the estimated cost to complete?
The project manager or project executive should own the operating estimate, using current quantities, productivity, commitments, subcontractor information, schedule, and field risks. Accounting should confirm that the estimate works with the schedule's definitions, and senior management should challenge material changes.
Why can billing position change when no new invoice was issued?
A revised cost-to-complete estimate can change total estimated cost and calculated progress. That changes earned revenue and the comparison with existing billings. In the worked example, billings remain $780,000 while the estimate revision increases overbilling from $60,000 to $144,706.
What should management investigate when a job is overbilled or underbilled?
Review the contract billing terms, progress calculation, estimate changes, pending change orders, billing cutoff, retainage, collectibility, remaining commitments, and cash needed to finish the job. The cause and future obligations determine the management response.
How should WIP reconcile to the accounting records?
Costs should tie to the job-cost system and general ledger at the same cutoff. Billings and retainage should tie to invoices, receivables, and supporting reports. Contract values should tie to executed contracts and approved changes. Each reconciling item should have an amount, cause, owner, and resolution date.