A WIP schedule is the page where poc accounting becomes something an owner can use. It lines up contract value, costs so far, the cost still expected, the share of the job treated as complete, revenue earned, and what has already been billed. The gap between earned revenue and billings is the number that tells you whether cash is ahead of the work or the work is ahead of the invoice.
The formula behind that share of completion already has a home. LedgerWay’s percentage of completion accounting guide covers the definition, the cost-to-cost math, and when the method applies. This article starts one step later. You have the schedule. Here is how to read it before a lender, a surety, or a year-end review asks the same questions.
What Does a PoC Accounting WIP Schedule Show?
Think of the schedule as one row per open contract. Each row answers a practical question: how far along is this job, in money terms, compared with what you have already asked the owner to pay?
A useful row carries the same fields every month, in the same order, so a trend is readable without a legend. Skip a field and the rest of the row loses its meaning.
- Contract value. The signed amount, plus approved changes.
- Costs to date. Labor, materials, subcontractors, and other job costs already recorded.
- Estimated cost to complete. What the project manager still expects to spend.
- Percent complete. Costs to date divided by total estimated cost. That ratio is the poc accounting result the rest of the row depends on.
- Earned revenue. Percent complete multiplied by contract value.
- Billings to date. Invoices already sent, including retainage if your books track it that way.
- Overbilling or underbilling. Billings minus earned revenue. Positive means billed ahead. Negative means the work is ahead of the invoice.
Read across one job before you read down the company total. A healthy total can hide one job that is badly behind its estimate. The IRS Publication 538 points long-term contract reporting to section 460 of the Internal Revenue Code. The tax rule tells you the method exists. It does not build the row. Your books still need a line an owner can explain without a translator.
Keep the column names stable from month to month. Renaming “cost to complete” as “budget left” in March and “forecast” in April makes a trend impossible to see. Same words, same order, same jobs, until a job is closed and drops off.
| Column | What it answers | Read it with |
|---|---|---|
| Contract value. | This is what the job is worth now. | Use signed changes only. |
| Costs to date. | This is what has already been spent. | Match it to the job-cost ledger. |
| Cost to complete. | This is what is still expected. | Use the project manager’s latest look. |
| Percent complete. | This is how far the costs say the job is. | Read it with the two cost columns above. |
| Earned revenue. | This is the revenue the method supports. | It uses percent complete and contract value. |
| Billings to date. | This is what the owner has been asked to pay. | Include open invoices and retainage. |
| Over or under. | This shows whether cash leads or trails the work. | Compare earned revenue with billings. |
If a column is blank, do not average around it. A missing cost-to-complete makes the percent complete a guess. Mark that row and get the number before you use the total in a bank package or a bid review.
Closed jobs do not belong on the open schedule. Once the last cost is in and the last billing is out, move that row to a completed-jobs file. Leaving it on the open list flatters the company total and hides the jobs that still need a decision. A backlog list can sit beside the schedule. It should not be mixed into the percent-complete math.
How Do You Read Overbilling and Underbilling?
Overbilling means invoices are ahead of earned revenue, so the owner has been asked to pay for work the cost records do not yet support. That pattern can be a planned cash cushion, especially early in a job when mobilization and deposits land before much cost is recorded. It can also mean the estimate is stale and the job is less complete than the billings imply.
Underbilling is the reverse. Earned revenue is ahead of invoices. The crew has done the work, and the bill has not caught up. Left alone, the company is financing the owner. Cash feels tight even when the job looks profitable on paper.
A short walk through one row makes the difference concrete. Say a contract is worth a set amount, costs so far are about a third of the latest total estimate, and invoices are closer to half the contract. Poc accounting treats the job as one-third complete, so earned revenue is about one-third of the contract. Billings are higher, so the row shows overbilling. Nothing in that pattern is automatically wrong. The question is whether the remaining cost estimate is still honest, and whether the cash from those early invoices is still in the business.
Flip the invoices. If billings sit near a quarter of the contract while costs say the job is one-third done, the row is underbilled. Ask who owns the next application, and whether retainage or a disputed change is sitting in the gap. A construction bookkeeping process that ties each application to the job will show that gap in the same month it opens.
Do not treat a large overbilling as free working capital. Collect it, and keep the cost-to-complete current. An overbilling that shrinks because costs jumped, not because you billed less, is a profit warning, not a cash win.
Retainage deserves its own glance. Many contractors bill it and then wait months to collect it. If your billings column includes retainage that is not due yet, the overbilling looks larger than the cash you can actually use. Note retainage beside the row so a lender does not treat held funds as money in the operating account.
Underbilling has a cousin that is easy to miss. A job can look fully billed for the work in place and still show underbilling when a large stored-material buy or a subcontract invoice jumps the cost. Ask whether that cost truly moved the job forward. If it did not, earned revenue is ahead of the field, and the gap is a timing ghost. Fix the cost view before you send another invoice just to make the columns match.
Why Does the Cost to Complete Move the Whole Row?
Percent complete is a ratio: the top is what you have spent, and the bottom is what you now think the job will cost in total. Change the bottom and every dollar of earned revenue on that row changes with it.
That is why a WIP meeting is really an estimate meeting. The accountant can total the costs, but only the person running the job can say whether the remaining labor, the open subcontracts, and the material still on order match the number in the cost-to-complete column. If those two views disagree, the schedule is a story rather than a report.
A few movements are worth naming out loud in the meeting, because each one points at a different fix. Glance at the row, then match what you see to this list.
- Costs to date jump, and the cost to complete does not fall by a similar amount. The job is running long, and percent complete should drop.
- The cost to complete falls while little new work is in place. Someone may be clearing contingency too early.
- Contract value rises and the cost budget stays flat. A change was added on the revenue side only. Profit on that row is overstated until the extra cost is in the estimate.
- Percent complete leaps in one month with no matching field progress. Look for a cost dump, a reclass, or a formula that picked up the wrong job.
Strong construction job costing is what makes those movements visible. Cost codes that match the way the job is built let a project manager point at a line and say the number is high, low, or simply posted to the wrong phase. Without that, the WIP row can only be accepted or argued in total.
Update the estimate when the facts change, not only at year-end. A quarterly schedule is a floor for a contractor with long jobs. A monthly pass, tied to the close, is what keeps a surprise from landing in December. The point of poc accounting here is not a prettier percent. It is time to correct the job while there is still job left.
Watch the profit fade in plain language, not only in the percent. If total estimated cost rises and contract value does not, the job will earn less than last month’s row promised. That fade should show up in the same meeting as the field reason. Weather, a missed buyout, a back-charge, or scope you gave away all look the same on a single percent. They do not call for the same response.
Bid day is where an old schedule pays you back. When the next similar job is priced, pull the final cost picture from jobs that drifted. A unit that ran long three times is not a one-off. Fold that pattern into the next estimate so poc accounting is not the first place the miss appears. The schedule is a record of how you bid, not only how you report.
How Should You Run the Monthly WIP Review?
Block the review on the close calendar. Bring the accountant and the project manager for each open job above a size you choose. One hour beats a year-end scramble.
- Tie costs to date and billings to the general ledger before anyone debates profit. If the row does not match the books, stop and fix the tie-out.
- Read contract value against the change log. Unapproved claims stay off the row. Signed or clearly recoverable changes go on, and their cost goes on with them.
- Ask the project manager for a fresh cost to complete, in their own words, before showing last month’s number.
- Compare that figure with last month. Explain every material move.
- Look at overbilling and underbilling next to open receivables and payables for that job. A fat overbilling with unpaid invoices is not cash yet.
- Note one action per problem job. Bill the underbilled work, reprice the drifting estimate, or flag a claim that does not belong on the schedule.
- Save the schedule with the close. Next month starts from this file, not from memory.
Keep the meeting on exceptions. Jobs that match last month and match the field get a glance. Jobs with a moving estimate, a new change, or a widening billing gap get the time. That habit is also how a construction contractor accounting file stays useful to a surety. The bonding conversation goes better when the schedule was built in ordinary months, not rebuilt for the application.
Write the reason for each estimate change in a note on the row. “Steel delivered” is a reason. “Updated” is not. Those notes are what let a new reviewer, or you in six months, trust the history.
Separate the prep from the meeting. The bookkeeper ties the ledger and prints the exceptions the day before. Project managers arrive having already looked at their own jobs. A meeting that starts with “let me pull the costs” wastes the hour and trains people to skip it. A short prep block is what makes the steps above fit in a normal close.
If you run more jobs than you can review one by one, sort by risk. Start with the widest billing gap, the largest estimate move, and any job a lender has on a borrowing base. Quiet jobs can ride on last month’s note. Loud ones get a name next to the action so someone owns the follow-up before the next close.
When Should You Call a Construction CPA?
Some rows you can clear in the meeting. Others need someone who lives in contractor reporting. Call earlier than year-end if any of these keep showing up.
- The schedule will not tie to the ledger two months in a row.
- Change orders hit contract value and never hit the cost estimate.
- Several jobs flipped from overbilled to underbilled without a billing plan behind the move.
- A lender or surety asked for the schedule and the internal version needed a rewrite first.
- You are not sure which contracts belong on the percentage-of-completion basis at all.
That last question belongs to the method guide and to a construction CPA, not to a hurried edit of one cell. LedgerWay’s construction work pairs job-cost records with reporting an owner can take into a forecast. The CFO advisory side is where a clean WIP schedule turns into a cash view, a backlog view, and a bid you can stand behind.
You do not need a perfect system to start. You need one row per open job, a current cost to complete, and a monthly habit of reading the gap between earned revenue and billings. Poc accounting does the measuring. The schedule is where you decide what to do about it.
Bring the same file to the people who already ask for it. A surety, a banker, and your own estimator should see one schedule, not three versions built the night before each meeting. When the internal row and the outside package match, the talk moves from “where did this number come from” to “what are we doing about this job.” That is the use of the report.
If the first pass feels rough, start with the five largest open jobs and a single month. Add the rest once the columns tie. A short, honest schedule beats a full one nobody will defend. The habit matters more than the software. The software can come after the meeting exists.
Frequently Asked Questions
What is a WIP schedule in poc accounting?
It is the job-by-job report that applies percentage of completion to open contracts. Each row shows contract value, costs, the remaining estimate, percent complete, earned revenue, billings, and whether the job is overbilled or underbilled.
How is overbilling different from profit?
Overbilling means you have invoiced more than the revenue the method supports so far. Profit is what is left after cost. A job can show overbilling and still be losing money if the cost to complete is too low.
How often should a contractor update the schedule?
Tie it to the monthly close when you can. Quarterly is a practical minimum for longer jobs, so year-end is not the first time an estimate moves. Update sooner when a large change order or a cost overrun lands.
Does a WIP schedule replace the percentage of completion calculation?
No. The schedule uses that calculation. It does not replace it. If you need the formula, the completed-contract comparison, or the tax threshold, start with the percentage of completion guide and then come back to the row.
What should I fix first if the numbers feel wrong?
Tie costs and billings to the ledger, then refresh the cost to complete with the project manager. Most bad rows come from a stale estimate or a change order that was added to the contract and not to the budget.