Glossary
Work in progress
Also called: WIP · work in process · WIP schedule
Work in progress is the value of jobs you have started and not finished — work performed that has not yet been billed, or billed that has not yet been performed.
On any job that spans more than a few days, what you have billed and what you have earned drift apart. Bill ahead of the work and you are overbilled — the customer has paid for something not yet delivered, and that cash is an obligation rather than profit. Bill behind the work and you are underbilled, financing the customer out of your own account.
A WIP schedule lays that out job by job: contract value, costs to date, estimated cost to complete, percentage complete, billed to date, and the over- or underbilling that falls out. It is standard on commercial and new-construction work and almost unheard of on residential service, though anything running over a month benefits from it.
Overbilling is the one that flatters a bank balance. A business can look comfortably cash-positive while being substantially overbilled, which means the money in the account is owed in work rather than earned.
Why it matters to a contractor
Lenders and sureties on larger work will ask for a WIP schedule directly, and its absence tells them something. More immediately, overbilling makes cash look better than the business is, which is how a healthy-looking quarter turns into a squeeze the moment the backlog has to be delivered.
Work it out on your numbers
See also