Method

The percentage-of-completion method

Construction jobs run for months or years, so revenue can't wait for the final invoice — the percentage-of-completion method recognizes revenue as work happens, tied to actual progress rather than billing dates. The cost-to-cost variant is the standard implementation: progress is measured by costs incurred so far, as a share of the total cost you expect the job to take.

The formula

Percent complete equals cost to date divided by estimated total cost. Earned revenue equals contract value times percent complete, capped at 100%. Over or (under) billed is billed to date minus earned revenue.

Worked example

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

The one real gap: loss jobs

Every formula above checks out against the standard — with one exception. Under GAAP/ASC 606, when a job's estimated total cost exceeds its contract revenue, you must recognize the entire estimated loss immediately, not pro-rate it by percent complete. A calculator or spreadsheet built from the base formulas alone will understate that loss for as long as the job runs — the engine has to special-case it.

A government-published standard to build to

You don't have to invent your own WIP column layout. The SBA Form 994F, "Schedule of Work in Process," is a US government-published template that lays out exactly which columns a lender or bonding company expects: contract price, estimated cost, cost to date, percent complete, earned revenue, billed to date, and over/(under) billing, per job. It's a useful checklist even if you never file the form itself — it's the standard bonding companies and banks already recognize.

Why it matters beyond the math

The percentage-of-completion method exists because it's the only honest way to answer "how is this job actually doing" mid-stream. A contractor who only tracks cash in and cash out can look profitable while quietly running a loss job, because the losing job simply hasn't been billed yet. The method surfaces that problem the moment costs are entered — which is exactly why banks and sureties ask for it before extending credit or a bond.

Want to apply this method to your own job's numbers? Try the free WIP calculator — it runs the cost-to-cost method, including the loss-job rule, entirely on your device.