Work in Progress Schedule – in this video I go over the WIP schedule or Work In Progress schedule. For contractors that are working on numerous projects at the same time, it’s always a good idea to do a WIP schedule because it gives you a better idea of how your construction company is doing on a per project basis as well as overall. In fact, you may be required to do it if you’re getting audited or you take in more than a certain amount of revenue and have to follow the Percentage of Completion Method.
The WIP schedule provides snap shots at a point in time of where your profitability stands on a job by job basis. It can provide assurance that your contract revenue, contract costs, under billings and over billings all reconcile to your profit and loss statement.
In the video, I show you an example of a simple spreadsheet you can use for the WIP schedule for your construction company. There are different spreadsheets that you can use. Yours doesn’t have to look exactly like the example, but it’s a basic one and should give you a good idea of what’s involved. You can set it up to track your total contract revenue, total estimated cost, estimated gross revenue, billings to date, revenue recognized and so forth.
The WIP schedule will tell you if your jobs are over or under billed, which over time will give you a better idea of what to do moving forward. So it’s a good not only for seeing where you are but also for making notes and figuring out what you can do to improve upon your projects. You can adjust it over time because if you’re in the middle of a project and you realize that the estimated costs are going to be more than what you originally anticipated, you don’t have to use that original estimate. You can always adjust it so that you can come up with a more accurate accounting of the over/under billing numbers.
You can’t make managerial decisions based on a cash-basis financial statement for a construction company because it’s so volatile– there are always bills being sent out before you actually invoice and receive the money. The WIP schedule is a way to figure out where you are at all times.
Watch the video to see how to easily set up a WIP schedule. It’s something you probably should be doing every month. Some contractors do it on a weekly basis. Most of the construction companies I work with do it on a monthly or quarterly basis.
The above applies to a WIP schedule for projects you as a contractor are building for a developer. It’s a bit different when you own the property you are building on, that is when you are developing your own property. See this my post about Recording Construction in Progress for Development Property to learn more about that. Feel free to contact me if you have questions.