Why WIP Reporting Matters for Contractors

How does a construction company know which jobs are profitable? It takes more than knowing how much has been billed or how much cash has been collected. Each project has labor, materials, subcontractor costs, and overhead moving through it at different times. Jobs are often bid months before work begins, and input costs can move in the meantime. Work-in-progress (WIP) reporting helps contractors put those pieces together. It shows what each active job has cost so far, what it is expected to cost to finish, and how much profit the company currently expects to earn. To assist clients, prospects, and other interested parties, Dermody, Burke & Brown, CPAs, has prepared the following summary of key information below.

What Is WIP Reporting?

A WIP report is a financial snapshot of each active project and a risk management tool. It typically includes the contract amount, costs incurred to date, estimated costs to complete, percentage complete, billings, revenue recognized, and expected gross profit. When the report is updated regularly, it lets management compare current results against what was expected when the job was bid. Bonding companies or banks may ask to see a current WIP report before extending credit.

How WIP Reporting Tracks Job Profitability

A job is priced at a bid based on the best information available at the time. Once the work is underway, actual conditions can look different from what was assumed. Costs may run higher than planned, or the estimate of the cost to finish may need to be revised. A WIP report captures that change by comparing the original bid to actual costs throughout the life of the project.

Consider a contractor who starts with a bid of $250,000. The job is expected to cost $200,000, so the company expects to make $50,000 in profit. But that estimate was made at an earlier point in time. Several months later, when the job is at the halfway mark, labor and material prices may be up. Is the $50,000 profit estimate still accurate?

To answer that, the contractor needs two figures. One is actual costs incurred to date. The other is an updated estimate of the costs needed to complete the remaining work.

The WIP report may reveal that labor and material costs are running higher than expected. If those updated figures put the total expected cost of the job at $225,000, the contractor is now expecting to make $25,000 in profit on the $250,000 contract. The project is still profitable, but the expected profit has been cut in half.

That kind of gap between bid and actual cost is common for construction companies. The Associated Builders and Contractors (ABC) Construction Backlog Indicator fell to 8.0 months in July 2026, meaning even smaller contractors typically face a gap between bidding a job and starting it. Construction input prices are listed at 7.4% higher than a year earlier, and labor costs are rising as well. A job priced without considering those increases can have a very different profit profile.

A WIP report is what shows that difference while the job is still underway rather than after it closes. Management can then determine what is driving the change and whether action is needed.

Why WIP Reporting Matters Across the Company

First, it tells management something changed on the project. Maybe labor is taking longer. Maybe materials cost more. Maybe there’s an issue with a subcontractor, or there’s work being performed under a change order that has not been approved yet. The new profit estimate is a signal to go figure out what is happening.

Second, it changes the company’s overall profit expectations. A lower-than-expected profit on a single project may not mean much on its own. But when the same kind of shortfall shows up across several projects, there is a pattern to address. Without project-level WIP reporting, that may not become obvious until there’s an immediate cash flow issue.

Third, it tells the contractor something about future work. If jobs are repeatedly coming in below the margin they were bid on, then there may be a problem with estimating, pricing, labor assumptions, material allowances, or the types of jobs the company is accepting.

Getting Started

A contractor doesn’t need a sophisticated system to begin tracking work-in-progress. A simple spreadsheet updated monthly, covering contract amounts, costs incurred, estimated costs to completion, and billings to date, is enough to calculate the current expected profit on every active job.

From there, the accounting team and the project manager need to share and update information regularly. Accounting can provide costs incurred and billing data. Project managers can contribute information based on current field conditions.

Then leadership needs to review the information at least monthly and compare expected profit against the original bid. A material difference is worth investigating, both for what it says about the project and for what it means for how similar jobs are priced going forward. Construction accounting and project management systems can automate much of the job-cost and billing data that feeds a WIP report.

Contact Us

WIP reporting gives contractors a current view of what each active project is expected to earn. Reviewed consistently, it helps management catch changes early, understand profitability across the business, and use verified project results to inform future work. If you have questions about the information outlined above or need assistance with WIP reporting, Dermody, Burke & Brown, CPAs, can help. For additional information call 315-471-9171 or click here to contact us. We look forward to speaking with you soon.