How-to

How to calculate a construction WIP schedule

A work-in-process (WIP) schedule reconciles, for every open job, what it will cost, how far along it is, how much revenue is earned versus billed, and whether you're over- or under-billed. Banks and bonding companies ask for it monthly or quarterly, and it's built on the standard GAAP cost-to-cost percentage-of-completion method — three formulas, applied to every open job.

The three base formulas

Percent complete is cost to date divided by estimated total cost. Earned revenue is contract value times percent complete, capped at 100%. Over/(under) billed is billed to date minus earned revenue: a positive number means you've billed ahead of the work (a balance-sheet liability); a negative number, usually shown in parentheses, means you've done work you haven't billed for yet (an asset — collectable cash).

Worked example

Contract $500,000 · Est. cost $400,000 · Cost to date $300,000 · Billed $360,000 → 75.0% complete, $375,000 earned, $15,000 underbilled

Two more numbers round out the picture: cost to complete (estimated total cost minus cost to date) and backlog (contract value minus earned revenue) — the work still ahead of you on that job.

Where the base formulas break down

The three formulas above are correct for a healthy job, but two situations need special handling, and a naive spreadsheet often gets both wrong.

Loss jobs. If a job's estimated total cost ever exceeds its contract value, accounting rules (GAAP/ASC 606) require you to recognize the entire estimated loss immediately — not spread it out proportionally by percent complete. Applying the plain contract × percent complete formula to a loss job understates the loss and overstates earned revenue for as long as the job runs.

Stale estimates. The percent-complete formula assumes your estimated total cost is still a reasonable target. If cost to date ever exceeds that estimate, the ratio passes 100% and the estimate itself has stopped being useful — every figure downstream of it, not just percent complete, becomes untrustworthy. The estimate needs updating before you trust the schedule again.

Want to see these three formulas and both special cases applied to your own numbers? Try the free WIP calculator — it runs entirely on your device and never sends your figures anywhere.