Wilburn CPA

Construction Accounting Basics

If you’ve ever handed your bank a financial statement and gotten a follow-up question you couldn’t quite answer, there’s a good chance the missing piece was a WIP schedule.

A work-in-progress (WIP) schedule is the single report that tells you — and anyone else looking at your business — whether your open jobs are actually on track, or quietly bleeding cash you haven’t noticed yet.

Most custom builders and remodelers don’t have one. Not because it’s optional, but because nobody handed them a reason to build it until a bank or bonding company asked for one.

What a WIP Schedule Actually Shows

At its core, a WIP schedule compares three numbers for every open job:

• Costs incurred to date — what you’ve actually spent
• Billings to date — what you’ve invoiced the client
• Percentage complete — based on cost, and used to calculate how much revenue you’ve earned, regardless of what you’ve billed

The gap between what you’ve billed and what you’ve earned is either overbilling (you’ve billed more than you’ve earned — a red flag for future cash flow) or underbilling (you’ve earned more than you’ve billed — meaning you’re financing the job out of pocket without realizing it).

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Why It Matters More Than Your P&L

Your profit and loss statement tells you how the business did last month. A WIP schedule tells you what’s happening on jobs right now, while there’s still time to do something about it.

This is also the report banks, bonding agents, and sureties actually want to see before extending credit or a bond. Showing up with a clean WIP schedule signals you run a business that knows its own numbers — showing up without one raises the exact opposite impression, even if your work is excellent.

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A Simple Example

Say you’re 60% done with a $400,000 remodel. At 60% complete, you’ve earned $240,000 in revenue — regardless of what you’ve actually invoiced. If you’ve only billed $180,000 so far, you’re underbilled by $60,000, meaning you’ve effectively loaned the client $60,000 of your own cash to keep the job moving. Multiply that across three or four open jobs, and it’s easy to see how a profitable business can still run out of cash.

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Common Mistakes Builders Make

• Tracking job costs in JobTread (or similar software) but never reconciling them against the accounting system
• Billing on a schedule that has nothing to do with actual job progress
• Only looking at WIP once a year, at tax time — instead of monthly, when it can still change a decision
• Assuming “we’re busy” is the same thing as “we’re profitable”

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How to Get Started

Building a real WIP schedule takes three things: accurate job costs, a consistent method for calculating percentage complete, and someone reconciling it against your books every month — not just at year-end.

If you’re already tracking jobs in JobTread, most of the raw data you need already exists. The gap is usually in how — or whether — it’s being pulled into a real accounting system and turned into a report you can actually act on.

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