What is a WIP schedule?
The report that shows whether your billing is ahead of or behind the work on each house.
Short answer: A WIP (work in progress) schedule is a monthly report of every open contract with its contract price, estimated total cost, cost to date, percent complete, earned revenue and amount billed. Percent complete is usually cost to date divided by estimated total cost. Earned revenue is contract price times percent complete. If billed is more than earned, the job is over billed. If billed is less than earned, it is under billed.
The formula
- Percent complete = cost to date ÷ estimated total cost
- Earned revenue = contract price × percent complete
- Over or under billing = billed to date − earned revenue
Illustrative example (made-up numbers)
| Line | Amount |
|---|---|
| Contract price (with approved change orders) | $1,240,000 |
| Percent complete | 62% |
| Earned revenue | $768,800 |
| Billed to date | $810,000 |
| Over billed | $41,200 |
This house has collected $41,200 more than the work done so far. That cash is needed to finish the house. If it is spent elsewhere, the end of the job gets tight.
Why lenders and sureties ask for it
A WIP schedule shows whether a builder is relying on billing ahead of the work to fund operations, and whether margin estimates are slipping month to month.
Common mistakes
- Not updating the estimated total cost, so percent complete is wrong
- Leaving approved change orders out of the contract price
- Mixing spec homes (no contract price) into the schedule
- Building the WIP from numbers that do not tie to the books
Common questions
Is a WIP schedule required for home builders?
It depends on your lender, bonding company and reporting needs. Many small builders do not prepare one but benefit from it.
Does the WIP schedule decide my taxes?
No. Tax reporting methods for home construction have their own rules. Ask your CPA.
How often should it be updated?
Monthly, after the books are closed.
Related
By John Mos, Founder. Updated . We do not give tax or legal advice. Please ask your CPA or attorney.
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