WIP Construction Accounting: How to Read and Use a Work-in-Progress Report

1/23/2026 - By Suzanne Bach, CPA

Contractors often say they know how their projects are going. But when pressed for specifics, many rely on gut feel rather than hard numbers. That approach works until it doesn't, and by then, a profitable job may have already slipped into the red.

The Work-in-Progress schedule (WIP) exists to replace guesswork with clarity. This report, unique to construction, connects the dots between what you've spent, what you've billed, and what you've earned on every active project. For contractors serious about financial management, learning to read and act on a WIP schedule is not optional.

How WIP Construction Accounting Works

In most businesses, revenue recognition is simple: you deliver a product or service, you record the sale. Construction does not work that way. Projects stretch across months or years, and waiting until completion to recognize revenue would make financial statements meaningless in the interim.

WIP construction accounting solves this by tying revenue to the percentage of completion. Generally, if you have incurred 40% of a project's expected costs, you recognize 40% of the contract value as revenue. The WIP schedule is where this calculation lives, updated regularly to reflect current project status.

This percentage-based approach means your WIP schedule is not just a report. It is the engine driving your revenue recognition, your billing decisions, and your understanding of job profitability.

What a WIP Schedule Should Include

Formats vary, but every useful WIP schedule captures the same core information. You need visibility into both the financial picture and the completion status of each job.

Contract and profit data:

  • Total contract value (including approved change orders)
  • Estimated total cost to complete
  • Projected gross profit
  • Gross profit recognized to date

Progress and billing data:

  • Costs incurred to date
  • Percentage complete
  • Billings to date
  • Contract assets or liabilities (previously referred to as underbillings or overbillings) 

Contract assets appear when earned revenue exceeds what you have billed, meaning you have done work you have not yet invoiced. Contract liabilities are the opposite: you have billed ahead of the work performed. Both situations require attention, as they directly impact cash flow and can signal billing process issues or inaccurate gross margins.

If you are new to WIP reporting, a construction CPA can help you design a format that fits your operations and meets the expectations of sureties and lenders.

Putting Your WIP Schedule to Work

Generating a WIP schedule is one thing. Using it effectively is another. The following practices help contractors move from passive reporting to active financial management.

Treat It as an Early Warning System

The WIP schedule can surface problems weeks or months before they show up in your bank account. A job showing shrinking margins, rising costs to complete, or growing contract assets deserves immediate attention.

Get in the habit of scanning for red flags each month: Which projects have seen their estimated gross profit decline? Where are costs outpacing the completion percentage? Which jobs have significant unbilled revenue sitting idle? Answering these questions early gives you time to course-correct.

Close the Loop Between Field and Office

Your accounting team produces the WIP, but your project managers own the reality it attempts to capture. These two groups need to talk regularly.

Monthly WIP review meetings should be standard practice. Walk through each active job with the responsible PM. Are the cost estimates still accurate? Has anything changed on site that affects the timeline or budget? If a project has encountered delays or scope creep, the WIP needs to reflect updated estimates to complete. Without this feedback loop, your schedule becomes a work of fiction.

Use It to Improve Future Bidding

Once a project closes out, compare your original estimate to actual results. Where did you miss? Were labor hours higher than projected? Did material costs spike? Did you underestimate the complexity or overhead? 

This post-project analysis, informed by WIP data, makes your next bid more accurate. Over time, you build a library of real cost data that strengthens your estimating process and protects your margins.

Keep Your Surety in the Loop

If you are pursuing bonded work, your surety will want to see WIP data. How often depends on your relationship and the size of the projects you accept. New relationships or unusually large jobs typically require monthly reporting. Established relationships with a solid track record may shift to quarterly.

Proactive communication builds trust. Do not wait for your surety to ask, especially if a project hits a rough patch. Sharing challenges early, along with your plan to address them, demonstrates the kind of financial management sureties want to see.

Confirm the Numbers Tie Out

Your WIP schedule feeds directly into your financial statements. Before you close the books each month, verify that revenue and cost of goods sold on the WIP match your income statement, and that contract assets and liabilities reconcile to the balance sheet. Discrepancies indicate errors that need to be traced and corrected.

Embrace Better Construction Accounting with Saltmarsh

A WIP schedule you use is one of the most powerful tools in construction financial management. It tells you where you stand, warns you when something is off, and gives your financial partners confidence in your operations.

At Saltmarsh, our construction accounting team helps contractors build WIP processes that deliver real insight. From setting up tracking systems to conducting monthly reviews, we work alongside your team to make sure this report does what it should: help you run a more profitable business.

Ready to get more from your financial reporting? Contact Saltmarsh today.

About the Author | Suzanne Bach, CPA

Suzanne is a partner with experience across tax and advisory services. She began her career in public accounting in 2003, focusing on tax and consulting. Her primary areas of experience include providing auditing, accounting, tax, and advisory services to clients in the construction, manufacturing, and technology industries.

 

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