Most contractors who run a work-in-progress schedule treat it as something the accountant produces after the month closes. It gets reviewed the way a bank statement gets reviewed, which is to say it gets glanced at and filed. That is a waste of the only report in construction accounting that tells you about a job while you can still do something about it.
A WIP schedule compares what you have billed against what you have earned based on cost incurred to date. The gap between those two numbers has a name depending on which way it runs. Over-billing means you have invoiced ahead of the work, which feels like good cash flow and is actually borrowed from your own future revenue. Under-billing means the opposite: you have done work you have not invoiced, and you are financing your customer.
Neither is automatically a problem. Over-billing early in a job is normal and often deliberate. What matters is the direction of travel between months, and that only shows up if somebody is looking monthly rather than at year-end.
The two things to check every month
The first is whether estimated costs at completion are being updated honestly. A job that is 70 percent complete on cost but where the estimate has not moved since the bid is not a job you have information about. It is a job where the overrun is being deferred into a single unpleasant number at closeout. Updating the estimate is uncomfortable, and it is the entire value of the schedule.
The second is whether approved change orders have made it into both the contract value and the cost estimate. Field-approved work that never reached the schedule shows up as a cost overrun on a job that was actually profitable. We see this more than any other WIP error, and it tends to make a good project manager look careless.
If your schedule only gets built once a year for the bonding agent or the bank, it is a compliance document. Run it monthly with honest estimates and it becomes the earliest warning you get that a job is slipping, usually two to three months before the same problem reaches your bank balance.
NEXT STEP
Highpoint sets up job costing and WIP reporting for Chicagoland contractors as part of the Foundation phase of the Highpoint Financial Blueprint. If your WIP schedule only exists at year-end, schedule a free 30-minute consultation and we will show you what a monthly version would have told you.