The work in progress report, or WIP report, is an essential part of construction project management. It helps stakeholders better understand the project’s current status, particularly from a financial standpoint. Keep reading to learn more about work-in-progress schedules in construction, including their purpose and the benefits of using them.
What is a work in progress construction report?
The fundamental purpose of a WIP report in construction is to keep stakeholders informed regarding a given project’s progress. It’s one of the documents professionals use to monitor things such as:
- the impact of change orders and other factors that commonly cause delays
- dollar amounts billed to date and whether they’re in line with the percentage of work completed
- estimated funds required to complete the project
- estimated profits based on the project’s current trajectory
About over-billings and under-billings
One popular use case for work in progress schedules in construction is determining whether a given project is over-billed or under-billed.
What over-billing means
An over-billed project is one in which the contractor has completed a lesser percentage of the work than they’ve billed for to date.
For example, consider a contract worth $10 million. If the contractor has billed $5 million yet only completed 30% of the work, the project is over-billed. This isn’t necessarily a bad thing. In fact, it’s often helpful since it ensures the contractor has the cash flow they need to continue working on the project.
Many companies also deliberately front-load their billing at the start of a project to cover necessary startup costs (i.e. hiring new workers, buying materials and equipment, etc).
What under-billing means
Conversely, an under-billed project is one in which the contractor has completed a greater percentage of the work than they’ve billed for to date.
For example, consider a contract worth $10 million. If the contractor has billed $5 million yet completed 80% of the work, the project is under-billed. This can have negative impacts since it likely means the contractor is pulling funds from other projects to foot the bill. It can lead to cash flow issues if not planned for and handled properly.
Construction work in progress schedule example
While there’s no universal format for WIP construction schedules, here’s an example of what one might look like. Each row would be associated with a particular project.
The columns in this example work in progress schedule include:
- Income: The amount the client has been billed for to date
- Costs: The total expenses incurred by the contractor to date
- Profits: The amount of profit the contractor has reaped to date
- Remaining costs: An estimate of the capital required to complete the project
- Under/over-billed: The dollar amount by which the project is over or under-billed
Remaining costs is an essential figure to get right since it’s what ultimately helps professionals determine whether the project is over or under-billed. In our example above, for instance, the contractor has billed $300,000 and expects to bill an additional $200,000 (for a total contract value of $500,000). They’ve only completed 30% of the project yet have already billed for 60% of it ($180,000).
A reliable remaining cost figure is a byproduct of good construction estimating.
Why work in progress schedules are important
Better financial planning
Knowing whether a given project is over or under-billed offers valuable insights for any construction professional.
In the case of over-billings, professionals know not to treat that additional cash flow as additional profits since receiving it today inevitably means there will be less money coming in tomorrow.
In the case of under-billings, professionals know they’re essentially financing the project themselves and can communicate this with the client (in addition to paying close attention to their cash flow).
More informed stakeholders
It’s not always obvious where projects are in the pipeline. WIP construction schedules are among the most valuable tools professionals have to determine a given project’s progress and communicate it with stakeholders, including not only the client and other contractors but also financiers and insurance companies, particularly on larger-scale projects.
Better continuity between workers
Without work in progress reporting, it can be tough for new construction management personnel (or those unfamiliar with a particular project) to understand project finances. This is a dangerous situation since knowing whether a project is over or under-billed (and how much the expected additional cost to complete the project is) is essential for good decision-making.
Good work in progress schedules limit the amount of insider knowledge required to manage a project. This, in turn, reduces the disruption caused by employees leaving or moving within the organization.
Better financial record-keeping
Even if most of a construction company’s projects aren’t financed, lenders often want to see work in progress schedules for all of them – and understandably so. After all, any mismanaged project has the potential to throw a construction company into financial jeopardy and put the lender’s investment at risk.
The key takeaway here is that work in progress schedules give companies more flexibility to secure financing as needed.
Increased understanding of how various factors are impacting the project
Work in progress reporting in construction offers valuable insights into how various factors (i.e. frequent change orders, weather, delays in receiving payment, etc) are impacting the project. This information can’t always be gleaned from other sources.
Better resource management decisions
The construction work in progress schedule creation process can help construction management professionals determine how to allocate resources more effectively. A project with high projected remaining costs, for example, clearly requires more resources. Smart professionals plan accordingly.
Construction work in progress schedules: Conclusion
We hope this article has helped you understand construction work in progress schedules and their benefits. For more articles about construction project management topics, visit our blog here.
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