How Often Should Contractors Update Their WIP Schedule?
For many active construction contractors, the WIP schedule should be updated and reviewed monthly.
Monthly WIP reporting gives leadership an opportunity to identify changing margins, billing issues, inaccurate cost estimates, and project risks while there is still time to respond.
Waiting until year-end may produce the information needed for financial statements, taxes, bonding, or banking—but it can be far too late to use WIP as a management tool.
For larger contractors, high-volume businesses, or projects experiencing significant change, parts of the WIP process may need to be reviewed even more frequently.
Why Monthly WIP Is a Good Starting Point
Most contractors already operate on a monthly financial reporting cycle.
That makes WIP a natural part of the monthly close.
A monthly review allows management to connect:
job costs;
contract values;
change orders;
committed costs;
billings;
collections;
estimated costs to complete;
gross margins; and
backlog
to the company's financial statements.
The result is more useful than reviewing the income statement alone.
The question becomes not just:
“How did the company perform last month?”
but:
“What is changing inside the jobs that will affect future results?”
Why Annual WIP Is Usually Too Late
Some contractors update their WIP schedule primarily because an outside party requests it.
That might happen for:
year-end financial statements;
tax preparation;
bonding;
banking;
or an annual CPA engagement.
That approach can satisfy a reporting requirement.
It does much less for management.
Suppose a job's expected gross margin declines from 20% to 12% in June.
If management updates the WIP in July, leadership can investigate:
labor productivity;
material overruns;
subcontractor costs;
change orders;
remaining scope; and
project-management issues.
If the contractor discovers the same deterioration during year-end reporting six months later, most of the opportunity to change the outcome may be gone.
WIP Should Follow the Monthly Close
A practical contractor close sequence might look like:
Record and reconcile the month's accounting activity.
Update job costs.
Review committed costs.
Update contract values and approved change orders.
Obtain project-manager cost-to-complete estimates.
Update the WIP schedule.
Review margin gains and fades.
Review overbillings and underbillings.
Reconcile WIP to the general ledger.
Finalize financial statements and management reporting.
This makes WIP part of the financial operating rhythm rather than a separate annual exercise.
The Most Important Number May Be the Estimate to Complete
Historical costs can generally be pulled from the accounting system.
The harder question is:
What will it actually cost to finish the job?
That estimate should be refreshed regularly.
Project conditions change.
For example:
Original estimated total cost: $2,000,000
Costs incurred to date: $1,200,000
Original estimated cost remaining: $800,000
After project review, management determines another $1,050,000 will actually be required.
Updated estimated total cost: $2,250,000
That adjustment changes:
projected gross profit;
projected gross margin;
percentage complete;
earned revenue; and
potentially the company's overall financial results.
Monthly review allows those changes to enter the financial information sooner.
Project Managers Should Be Part of the Process
WIP should not be prepared by accounting in isolation.
Accounting knows what has already been recorded.
Project managers and operations leaders often know what is about to happen.
They may have better visibility into:
remaining labor;
material requirements;
subcontractor commitments;
project delays;
rework;
claims;
pending change orders;
schedule changes; and
operational risks.
A useful monthly WIP process connects both perspectives.
Accounting: What has been recorded?
Project management: What has changed?
Finance: What does that mean financially?
Leadership: What action should we take?
Review Contract Values Monthly
The contract amount should not remain static when project scope changes.
Each month, review:
original contract value;
approved change orders;
pending change orders;
disputed changes;
allowances;
claims; and
other contract modifications.
Approved change orders may affect both expected revenue and expected cost.
Pending or disputed changes may require additional analysis before they are reflected in financial reporting.
A WIP schedule built on an outdated contract value can produce misleading results.
Review Committed Costs
Costs incurred to date are only part of the story.
Management should also understand costs already committed but not yet recorded.
Examples include:
subcontract agreements;
purchase orders;
major material commitments;
equipment commitments; and
other known project obligations.
A project can appear profitable when looking only at recorded costs while significant future obligations are already known.
Committed-cost visibility can strengthen the cost-to-complete process.
Look for Margin Fade Every Month
One of the most valuable uses of WIP is identifying margin fade.
For each project, compare:
original estimated margin;
prior-month estimated margin; and
current estimated margin.
For example:
Original margin: 24%
June forecast: 22%
July forecast: 19%
August forecast: 16%
That trend deserves management attention.
The issue is not simply that the project now expects a 16% margin.
The issue is that the expected margin has fallen eight percentage points over time.
Monthly reporting makes the trend visible.
Investigate Margin Gains Too
Unexpected margin improvement also deserves review.
Suppose a project moves from an expected 18% margin to 25%.
Leadership should understand whether that improvement reflects:
genuine labor efficiency;
favorable purchasing;
scope improvement;
conservative estimates;
missing committed costs; or
an overly optimistic cost-to-complete update.
A large unexplained gain may be just as worthy of investigation as a large decline.
Review Overbillings and Underbillings
Monthly WIP should also identify billing position.
A project may be:
overbilled — billings exceed earned revenue
or
underbilled — earned revenue exceeds billings.
Neither position tells the whole story by itself.
Management should investigate significant or unusual balances.
For underbillings, ask:
Has work been performed but not billed?
Are change orders holding up invoicing?
Is supporting documentation incomplete?
Are contractual billing milestones delaying billing?
Is collectability becoming a concern?
For overbillings, ask:
How much future cost still needs to be funded?
Is the cash being preserved appropriately?
Does the project have sufficient remaining margin?
Are future billing opportunities becoming limited?
Related Resource: What Is Overbilling vs. Underbilling in Construction? →
Reconcile WIP to the Accounting Records
The WIP schedule should not exist independently from the general ledger.
Each month, the accounting team should reconcile relevant WIP balances to the financial statements.
This can help identify:
missing jobs;
incorrect job coding;
duplicate costs;
incomplete billing information;
unexplained contract-asset or liability balances; and
other reporting problems.
Management should have confidence that the project-level schedule and company-level financial statements are telling the same financial story.
Which Jobs Need the Most Attention?
Not every project needs the same amount of discussion.
A monthly WIP meeting should focus disproportionately on exceptions.
Examples include:
significant margin fade;
large margin gains;
substantial underbillings;
substantial overbillings;
negative-margin projects;
large pending change orders;
projects behind schedule;
major collection issues;
jobs nearing completion with unresolved costs; and
projects representing significant company concentration.
This keeps the WIP meeting focused on decision-making rather than reading every line of the report aloud.
When Should WIP Be Reviewed More Frequently Than Monthly?
Monthly reporting is a useful baseline, but certain situations may justify weekly or project-specific monitoring.
Examples include:
very large contracts;
distressed projects;
rapid cost escalation;
significant change-order activity;
tight liquidity;
large underbillings;
major schedule delays;
high-risk projects;
fast-moving short-duration jobs; or
periods of rapid company growth.
The formal accounting WIP schedule may still close monthly while operations and finance monitor key assumptions more frequently.
Use Thresholds to Focus Management Attention
Contractors can make WIP reviews more efficient by establishing exception thresholds.
For example, management might automatically review any job with:
margin movement greater than 2%;
underbilling above $100,000;
overbilling above a defined percentage of remaining cost;
negative projected gross profit;
pending change orders above a certain threshold;
receivables older than 60 days; or
material variance between estimated and actual labor.
The exact thresholds should reflect the contractor's size and project portfolio.
The objective is to focus leadership attention where it matters most.
Connect WIP to Cash Flow
WIP and cash-flow forecasting should not operate separately.
A project that is significantly underbilled may create upcoming liquidity pressure.
A heavily overbilled project may generate cash today while carrying substantial future costs.
A project experiencing margin fade may produce less future cash than previously expected.
The monthly finance process should connect:
WIP → billing → collections → project costs → cash forecast
That provides a much more complete picture of financial performance.
Connect WIP to Bonding and Banking
Sureties and lenders may rely on WIP reporting to understand a contractor's:
project performance;
backlog;
margin consistency;
billing position;
liquidity;
concentration; and
management discipline.
Consistent monthly WIP reporting can also make external financial reporting easier because management is not attempting to reconstruct project information at year-end.
A Practical Monthly WIP Meeting
A contractor's monthly WIP meeting might follow a simple agenda:
1. Review major contract changes
New contracts, approved change orders, pending changes, and closed jobs.
2. Review estimated costs
Focus on cost-to-complete changes and new commitments.
3. Review margins
Identify significant gains and fades.
4. Review billing position
Investigate material overbillings and underbillings.
5. Review collections
Discuss aging receivables and project-specific collection risks.
6. Review backlog
Understand remaining revenue, margin, and capacity.
7. Identify actions
Assign responsibility for project, billing, collection, or forecasting issues.
The meeting should end with decisions—not just an updated spreadsheet.
Common WIP Review Mistakes
Common problems include:
updating WIP only at year-end;
carrying forward cost estimates without project-manager review;
ignoring committed costs;
failing to update change orders;
allowing large underbillings to remain unexplained;
focusing on contract value instead of profitability;
failing to investigate margin gains;
treating overbilling as available profit;
not reconciling the WIP to the general ledger; and
reviewing the report without assigning follow-up actions.
The usefulness of WIP depends on the quality of the process behind it.
The Bottom Line
For many active construction companies, monthly WIP reporting should be the standard cadence.
Monthly review helps contractors identify:
margin fade
margin gains
cost-to-complete changes
overbillings
underbillings
change-order issues
cash-flow pressure
and
projects requiring management attention.
Larger, faster-moving, or troubled projects may need more frequent operational monitoring.
The objective is not simply to produce a mathematically accurate schedule.
It is to create a recurring process where project information becomes financial insight—and financial insight drives action.
How Bilotta & Company Can Help
Bilotta & Company, CPAs, LLC works with construction contractors on WIP reporting, job-cost analysis, accounting, financial statement assurance, tax, cash-flow planning, forecasting, and financial leadership.
Through our Contractor Compass® Financial Stewardship program, we help contractors build a monthly financial operating rhythm that connects project performance with company-level financial results.
That rhythm follows:
Close → Analyze → Forecast → Decide.
Monthly WIP sits directly in the middle of that process.
Close the books.
Analyze what changed inside the jobs.
Forecast the impact on margin and cash.
Decide what management needs to do next.
Related Resource: What Is a Construction WIP Schedule? →
Related Resource: What Is Overbilling vs. Underbilling in Construction? →
Visit the Construction Contractor Financial Resource Center →
This article is provided for general educational purposes and should not be considered accounting, tax, legal, bonding, lending, or financial advice for a specific contractor or construction contract.