If you are a financial controller at a main contracting firm, you already know the drill. You spend half a day stitching together a WIP schedule in Excel, pulling cost data from one system, billing data from another, and variation totals from a third. By the time the spreadsheet is done, the numbers are already stale.
A WIP report is not merely an accounting deliverable. It tells you whether each job is making or losing money, whether your billing is ahead of or behind earned revenue, and whether your cash flow forecast is grounded in reality.
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What Is a WIP Report in Construction?
A WIP (Work in Progress) report in construction accounting is a financial document that shows the status of every active job: how much revenue has been earned, how much has been billed, and whether each project is overbilled or underbilled. It is the primary tool contractors use to recognise revenue accurately and spot cash flow risks early.
Most industries recognise revenue when a product ships or a service is delivered. Construction does not work that way. Projects span months or years. Costs accumulate unevenly. Clients are billed on negotiated schedules that rarely align with actual progress. Without a mechanism to compare earned revenue against billed revenue at a point in time, the financial statements are fiction.
That mechanism is the WIP report. It applies the percent complete method (recognised under IFRS 15 and the legacy percentage-of-completion guidance) to calculate how much revenue a contractor has earned based on costs incurred relative to total estimated costs.
Why WIP Reports Matter
Without current WIP data, margin erosion hides inside jobs until it is too late. The earlier you catch a cost overrun, the more options you have: renegotiate scope, tighten site spending, or submit a variation. A stale WIP schedule eliminates those options.
Overbilling means you have invoiced the client for more than the work you have completed justifies. On paper, it looks like positive cash flow. In reality, it is a liability: you owe the client work you have been paid for but have not yet delivered. Underbilling is the opposite problem: you have completed work but have not invoiced for it. Companies that chronically underbill are financing the client’s project out of their own pocket.
Banks and construction lenders require WIP schedules as part of their underwriting process. Contractors with inconsistent or manually assembled WIP data often face reduced guarantee limits or higher premiums.
McKinsey research estimates that 98% of megaprojects experience cost overruns of more than 30%, with an average increase of 80% over the original estimate. WIP reports are the early warning system that catches these overruns at the individual job level before they cascade into a company-wide problem.
How to Calculate WIP: The Percent Complete Method
Every WIP schedule is built from the same seven columns: contract value, estimated total cost, costs to date, percent complete, earned revenue, billed to date, and over/under billing. The percent complete method (also called the cost-to-cost method) is the most widely used WIP calculation approach for main contractors.
Percent Complete = Costs to Date ÷ Estimated Total Cost
Earned Revenue = Contract Value × Percent Complete
Consider a commercial fit-out project with a contract value of $2,000,000, an estimated total cost of $1,600,000 and costs to date of $800,000. The project is 50% complete, so earned revenue is $1,000,000. With $900,000 billed to date, the project is underbilled by $100,000, meaning the contractor has performed $100,000 worth of work that has not yet been invoiced.
How to Read a WIP Report (Red Flags to Watch)
A job that is consistently and significantly overbilled over multiple periods signals a disconnect. A growing underbilling balance on a project is a cash flow risk. An upward-trending EAC is the earliest financial indicator that a project is in trouble. A flat percent-complete line on a job with active cost flow deserves immediate investigation. And a WIP report that lumps retention in with billed-to-date overstates the contractor’s collectible position.
Common WIP Reporting Mistakes
Five errors account for the majority of WIP schedule inaccuracies. Every one of them is preventable.
- Using budget spent percentage instead of actual percent complete. A job can be 60% through its budget and only 40% complete if costs have run over.
- Not including approved variations in contract value. Variations should be reflected in the WIP schedule for the month they are approved.
- Running WIP once a month instead of continuously. High-performing contractors run WIP weekly or in real time.
- Letting project managers and accounting work off different numbers. Percent complete and EAC must be driven by a single agreed-upon data set.
- Not tracking committed costs. A job that looks healthy based on costs to date can be significantly over budget once committed costs are factored in.
WIP Automation: How Construction ERP Replaces Excel
Spreadsheets served their purpose when the tools did not exist. Now they are the bottleneck.
In a construction ERP, costs are posted directly from accounts payable, payroll, and subcontract billing workflows. Percent complete recalculates automatically. Earned revenue adjusts. The WIP report does not need to be built, it already exists, current to the last posted transaction.
Premier Construction Software automates the entire WIP process: costs are posted directly from AP, payroll, and subcontract workflows, and the WIP report updates in real time. Financial controllers at Premier Construction Software customers report pulling a full WIP schedule in under two minutes. Named the #1 Construction Cloud ERP by Forbes Advisor for 2026, Premier Construction Software serves 800+ customers and 15,000+ users with a 60-day implementation.
Ready to Pull WIP in Two Clicks?
You know what a WIP report is. You know how to calculate it, what to look for, and what mistakes to avoid. The only question left is whether you are building it manually every month or whether it is there when you need it.
See how Premier Construction Software automates your WIP schedule → Book a Demo
