The Construction WIP Report: Reading Overbillings and Underbillings Before the Bank Does

A construction WIP report is a job-by-job schedule of contract value, cost to date, estimated cost to complete, and amounts billed, used to show whether each job is billed ahead of or behind the work actually performed.

Sureties read it. Lenders read it. Your CPA builds a year-end adjustment from it. And in most contracting businesses it is a spreadsheet that one person maintains, assembled in the week after close from numbers that were still moving when the period ended. The schedule sits downstream of everything in construction payment management, which is why a WIP conversation so often turns into a cost-capture conversation about ten minutes in.

Key Takeaways

• The WIP schedule converts cost progress into earned revenue, which is why a wrong cost figure moves reported profit, not just a report.

• Overbilled means you have billed more than you have earned, and the excess is a liability, not cash you own.

• Underbilled jobs are the ones that strand cash, because the work is done and the profit is real while the invoice has not gone out.

• Percent complete is a ratio of cost to date over total estimated cost, so an understated cost column understates progress and defers revenue you have already earned.

• The largest practical source of WIP distortion is period cutoff, the invoice that arrives after close and the field purchase nobody coded.

What is a WIP report in construction, and who actually reads it?

A WIP report is the schedule that reconciles what you have spent and earned on every open job against what you have billed for it. Contractors using percentage-of-completion accounting need it to close the books; everyone downstream of the contractor needs it to judge risk.

The audience shapes the document more than most controllers expect. A surety reads the schedule looking for a pattern of underbilling and for jobs with fade, meaning gross margin that keeps shrinking as the estimate to complete grows. A lender reads it for covenant inputs and for the overbilling balance, which tells them how much of your current cash position is really deferred obligation. The owner's accountant reads it to see whether the year-end adjustment is going to be a surprise.

What does WIP stand for, and what period does it cover?

WIP stands for work in progress, and the schedule covers every contract that was open at any point during the reporting period, including jobs that started and closed inside it. Jobs closed in a prior period drop off; jobs awarded but not started usually appear with zero cost and zero billing so the backlog is visible.

Monthly is the right cadence for anyone above a few million in revenue. Quarterly WIP tends to produce quarterly surprises, because the errors that matter compound quietly and only get caught when someone looks.

Why do sureties and lenders ask for it?

Because a construction income statement on its own tells them almost nothing. Revenue under percentage-of-completion is a derived number, and the WIP schedule is the derivation. Without it, a surety cannot tell whether a profitable year came from delivering work or from an optimistic estimate to complete.

Backlog context matters to the same readers. The Construction Backlog Indicator rebounded to 8.5 months in August 2026 from 8.0 months in July, unchanged from August 2025, according to Associated Builders and Contractors' Construction Backlog Indicator for that month. A surety reading a steady backlog alongside a worsening underbilling trend is reading a billing discipline problem, not a demand problem.

What columns does a WIP schedule need?

Nine columns do the work, and every one of them is either contracted, actual, estimated, or derived. Mixing those categories up in one column is how schedules go wrong.

Illustrative figures for one job, constructed to be internally consistent. Not client data.

Read across that row and the story is legible in about four seconds. The job is three quarters built, it has earned $1.94M of revenue, it has billed $1.85M, and the shortfall in the final column is money the contractor has already spent and not yet asked for.

How do contract value, change orders and cost to date fit together?

Contract value sets the ceiling on revenue, change orders move that ceiling, and cost to date drives how much of it you have earned. The discipline that keeps this honest is only putting approved change orders in the revised contract column.

Pending change orders are the perennial argument. Work proceeds and the cost lands in cost to date while the contract value has not moved, so percent complete jumps and margin appears to collapse. Some contractors carry pending COs in a separate memo column, which is the honest version. Whatever you choose, apply it the same way every month, and make sure the workflow behind a signed CO is fast enough that the memo column stays small. The mechanics of that are covered in the walkthrough of construction change orders.

How is percent complete calculated?

Cost to date divided by estimated total cost at completion. Using the figures in the table above, cost to date over estimated total cost gives three quarters, and that percentage applied to the revised contract value produces earned revenue.

The cost-to-cost method dominates because it uses numbers you already have. It has one structural weakness worth naming. Front-loaded cost, a big material buy or an expensive mobilization, makes a job look further along than it is, which overstates earned revenue early and produces fade later. Contractors with heavy material purchases sometimes exclude uninstalled materials from cost to date until they are installed, and if you do that, say so in the schedule footnote so your surety does not have to guess.

How do you calculate overbillings and underbillings?

Subtract earned revenue from billed to date. A positive result is overbilled, formally billings in excess of costs and estimated earnings, and it sits on the balance sheet as a current liability. A negative result is underbilled, costs and estimated earnings in excess of billings, and it sits as a current asset.

What are billings in excess of costs telling you?

That you have collected, or will collect, money for work you have not yet performed. Modest overbilling is normal and healthy on most commercial jobs, because front-loaded schedules of values and mobilization payments are standard practice, and a well-built schedule of values produces it by design.

Large or growing overbilling is a different signal. It means your current cash includes money that belongs to future costs, so a contractor who reads the bank balance as profit is spending the next quarter's labor. The classic failure is a company that stays liquid while every job is overbilled and then hits a cash wall the month the last of those jobs finishes.

What does an underbilled job mean for cash?

It means you financed the owner. The work is in place, the cost has been paid out in payroll and supplier invoices, and the billing has not gone out or has not been approved. Underbilling is where the "the job made money and we still could not make payroll" complaint comes from, and it is almost always a process failure rather than a pricing one.

Three causes account for most of it:

• Pay applications that go out late or get rejected on documentation and resubmitted the following cycle

• Work performed outside the current schedule of values line items, usually unapproved changes

• Cost recorded in the period while the corresponding billing waits on a certification or lien waiver

Retainage sits alongside this and is often confused with it. Retainage is earned, billed, and withheld; underbilling is earned and never billed. Both strand cash, and the withheld-money side is worked through in construction retainage. If cash timing is the live problem, the broader curve is covered in construction cash flow.

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Why is the cost column usually wrong?

Because cost to date is the only column on the schedule that depends on other people's paperwork arriving on time. Contract value comes from a signed document you hold. Estimated cost comes from your own PM. Cost to date depends on suppliers invoicing promptly, on field staff coding purchases, and on your AP team posting everything that belongs to the period before the period closes.

Input prices make the error bigger in absolute terms. The producer price index for final demand rose 0.4% in August 2026 and 5.4% over the twelve months ended August 2026, with final demand goods up 1.1% against final demand services up 0.1%, per the Bureau of Labor Statistics' Producer Price Index news release for the month. A cost base moving at that rate punishes a stale estimate to complete twice, once in the cost column and again through percent complete.

What happens when invoices arrive after the period closes?

Cost to date is understated, percent complete falls, earned revenue falls with it, and the job looks less complete and more profitable than it is. Then the invoices post in the following month and the job appears to lose money in a period when nothing went wrong.

That sawtooth pattern is the single most common thing I see in a contractor's WIP history, and it is diagnostic rather than mysterious. If job margins oscillate month to month by more than a couple of points with no operational explanation, the cause is almost always accrual discipline rather than execution. The fix is a real cutoff process with three standing parts:

• A defined accrual for received-not-invoiced material

• A list of open POs checked against delivery tickets before close

• Subcontractor progress confirmed by the PM rather than waiting on the sub's invoice

Paper rails make the lag worse. Check payments fell to 9.2 billion by number and $24.45 trillion by value in 2024, according to the Federal Reserve's 2025 Federal Reserve Payments Study, and the checks still moving through construction AP carry mail float on both ends of the cycle.

How do uncoded field purchases distort percent complete?

They move cost between jobs, which is worse than losing it. A purchase coded to the wrong job overstates one job's percent complete and understates another's, so two rows on the schedule are wrong in opposite directions and the totals still foot. Nothing in the reconciliation catches it.

Small dollar amounts do real damage here because of where they land. A $900 material run coded to the wrong job on a $2.4M contract barely registers, but the same $900 on a $60,000 service job moves percent complete by more than a point. Job-level card issuance and required coding at the point of sale close most of this, and the cost-code structure underneath it is worth building deliberately rather than inheriting from your software.

How do you tighten the WIP without hiring another accountant?

Shorten the distance between a cost being incurred and a cost being recorded. Nearly every improvement available to a contracting business is some version of that, and none of them require more staff.

Which cost capture steps close the period lag?

Four changes, in rough order of payback:

• Require a job and cost code on every card transaction at the point of purchase, so field spend posts coded rather than queued

• Move recurring supplier spend onto electronic rails with remittance detail attached, so cash application does not lag delivery

• Run a standing received-not-invoiced accrual off open POs and delivery tickets rather than waiting on supplier invoices

• Have PMs confirm subcontractor progress on a fixed date each month instead of accepting whatever the sub bills

Electronic rails help more than they look like they should. ACH carried 39.7 billion transactions worth $104.06 trillion in 2024, lifting its share of noncash payment value from 72% to 74%, per the same Federal Reserve study, and B2B ACH volume grew 9.4% year over year to nearly 2.1 billion transactions in the first quarter of 2026, according to Nacha's Q1 2026 ACH Network volume statistics. The relevant property for WIP is data rather than speed, since an electronic payment carries structured remittance information a check cannot.

What does a monthly WIP review meeting look like?

Ninety minutes, controller and PMs in the room, one page per job, and a hard rule that the estimate to complete is the PM's number and the cost to date is the controller's. Confusing those two authorities is how optimistic ETCs get laundered through the accounting department.

Work the exceptions rather than the whole schedule. Four filters surface nearly everything worth a conversation:

• Jobs whose gross margin moved more than two points since last month

• Jobs underbilled by more than a defined dollar threshold

• Jobs over 90% complete with material cost still landing

• Any cost sitting against a code that carries no budget

That keeps the meeting short enough that people keep coming.

Make the cost column trustworthy with Corpay

An underbilled job discovered at the surety's office is a process failure that started weeks earlier, at a supply counter or in an unopened envelope. Corpay works on that upstream half. AP automation captures supplier invoices as structured data, routes them for approval against the right job, and pays by virtual card, ACH, or check with remittance detail attached, so the cost lands in the period it belongs to rather than three weeks later.

We do not produce your WIP schedule, and no payments platform should claim to. What we change is the input, which is the column that makes the schedule wrong.

What does fully managed AP change about period cutoff?

It removes the supplier-chasing work that pushes coding and posting past the close date. Fully managed AP means Corpay enrolls your suppliers, delivers the payments, handles the follow-up when something goes wrong, and simplifies reconciliation, which typically returns about 40% time saved on payables work and goes live in weeks rather than quarters.

The benchmark behind that is worth knowing. Companies with a touchless invoice-processing rate of 30% or higher average 3.5 times higher AP productivity, the evaluated platforms' customers averaged a 60% touchless rate, and AP cycle times improved 59% after implementation, according to The Hackett Group's Digital World Class Matrix for accounts payable. Cycle time is the variable that decides whether a cost makes the period.

Payment mix moves in the same direction. Checks accounted for 26% of B2B payments in 2025, down from 33% in 2022, per the Association for Financial Professionals' 2025 AFP Digital Payments Survey, and every point of that shift is a point of float and manual matching leaving the close.

Which construction ERPs does it connect to?

Corpay maintains 100+ ERP integrations, including NetSuite, Sage Intacct, Microsoft Dynamics 365 Business Central, and Acumatica, over API, SFTP, or file-based transfer. Contractors on Acumatica can see the connection pattern worked through in the piece on Acumatica Construction Edition.

One question to ask any vendor during evaluation, and to ask a reference customer rather than a demo environment. How many days after a supplier invoice arrives does the cost appear in the job-cost ledger? That number, not a feature list, is what your WIP schedule actually depends on. If you are still shortlisting, the criteria in how to choose construction payment software cover the rest.

Frequently Asked Questions

How do you build a WIP report?

Pull every open contract, list revised contract value, cost to date, and estimated cost to complete for each, divide cost to date by estimated total cost for percent complete, multiply that by revised contract value for earned revenue, then subtract earned revenue from billed to date to get the over or under billing.

What does WIP stand for in construction?

WIP stands for work in progress. In construction accounting it refers to the schedule of open contracts showing cost, earned revenue, and billings, which supports percentage-of-completion revenue recognition and is the document sureties and lenders request first.

How do you calculate WIP for a construction company?

Calculate percent complete as cost to date divided by total estimated cost, apply that percentage to the revised contract value to get earned revenue, and compare earned revenue to billed to date. The difference is billings in excess of costs, or costs in excess of billings.

What does a WIP report look like?

One row per open job and roughly nine columns, running from original contract value and approved change orders through cost to date, percent complete, earned revenue, billed to date, and the over or under billing. Most contractors add gross margin and prior-period margin so fade is visible on the page.

What is the difference between overbilling and underbilling?

Overbilling means you have billed more than you have earned, which creates a liability and temporarily flatters cash. Underbilling means you have earned more than you have billed, which creates an asset and drains cash. Both are timing differences, and persistent underbilling is the one that hurts.

David Luther

Product Marketing Program Manager

David Luther, MBA is a product marketing program manager with years of experience in commercial banking, finance, and technology sectors, with research and writing appearing in financial publications.

AP Automation

Payments Automation