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A Work In Progress (WIP) report consists of an accounting schedule that’s a portion of a company’s entire balance sheet. In best practices, each accounting period has a calculated work in progress report that complies with GAAP principles. These reports are required on projects where the Percentage of Completion (POC) accounting method is used. The WIP report typically consists of current period and project-to-date financial metrics that explain each contract the company is working on, however, the format does change from company to company.
The WIP schedule is used as a financial reporting tool to show whether or not you are “over-or-under-billed and cash positive or negative” for all projects and the company as a whole when the individual projects WIPs are taken together. A WIP report is supposed to be an early indicator or warning of projects going over budget if they are done in an accurate and timely manner.
Why Work in Progress Schedules Are Important
Understanding what is cash flow forecasting and the importance of a work in progress schedule can help businesses make better decisions about their operations. A work in progress schedule (WIP schedule) details what steps have been completed, what materials have been used, what labor has gone into a project, and what its expected delivery date will be. This information helps businesses plan their operations more effectively, as they can better anticipate what materials and labor costs will be incurred. Additionally, a WIP schedule can provide vital insight into what progress has been made on certain projects and what areas need further work or improvement. With accurate and timely data from a WIP schedule, businesses can make more informed decisions about when to invest resources, what projects are most important, and what areas need improvement. Ultimately, having a work in progress schedule can help businesses improve their cash flow forecasting and operations planning.
Work In Progress for construction companies
A well-run construction company will have accurate, up-to-date WIP schedules for each of the projects that they have in-house, from the very beginning of a project when the contract is signed, until the very end when the last item on the punch list is done, the final invoice has been sent to the customer, and the final payment (which should hopefully include any withheld retainage) is received. The owners and managers rely on these WIP schedules to get an accurate measure of exactly where they stand financially concerning each project and taking each project’s WIP schedule together for the company as a whole.
Using Work In Progress (WIP) to forecast cash flow
Relying on traditional spreadsheets and tracking costs after the fact is a poor business practice known in professional project management circles as “management from the rearview mirror.” Making present and future cash flow decisions based on past project history is like closing the proverbial barn door after the horse has run away.
The WIP schedule tracks project data such as contract value, costs incurred to date, total estimated costs, and project billing. The WIP schedule is a strategic tool that offers a snapshot showing exactly where your profitability stands on a job-by-job basis. This data allows the company to get an overall view of all jobs in progress to make informed management decisions.
The WIP report also gives red flags in cases of under-billing and excessive percentages of incurred costs as a job progresses, providing time to investigate, adjust, and make changes. Running a weekly WIP report can keep a company “ahead of the contract,” increase profitability, and enhance a contractor’s business reputation to expand business opportunities in the future.
Using a WIP to improve your timeliness
Lastly, one of the best ways for construction companies to improve their businesses is to perform their accounting functions quickly while ensuring to record all costs and revenues in the proper accounting period.
The WIP schedule can be a powerful tool to reveal inefficiencies in construction operations and better understand company performance and factors affecting profitability.
Strategically-designed WIP schedules include both standard and various descriptive columns that highlight the important details of all contracts in process and better enable meaningful analysis.
How to Successfully Complete a WIP Report
Successfully completing WIP reporting requires accurate and timely data regarding the progress of certain projects. It is important that businesses keep an up-to-date work in progress schedule, as it will provide them with valuable insight into what areas need further work or improvement. Businesses should track the costs associated with each stage of their project development, including labor, materials, and overhead. This information can help businesses better anticipate their annual business planning and budgeting. Businesses should also regularly assess the progress of each project to ensure they are on track with the initial timeline established in the WIP schedule. With accurate and up-to-date data from a WIP report, businesses can make informed decisions about their annual business planning and cash flow forecasting.
TGG’s WIP report services can help businesses better understand the importance of a work in progress schedule and how to successfully complete a WIP report. Our team of experienced professionals has extensive knowledge of industry best practices and can provide valuable insight into what materials are needed, what labor costs will be incurred, and what progress has been made on certain projects. Contact us today to learn more about how TGG can help your business improve its annual business planning and budgeting.
How to Analyze a WIP Schedule
To analyze a work in progress schedule, businesses must first understand the importance of accurate and timely data. This information is used to anticipate what materials and labor costs will be incurred as well as what projects may need further work or improvement as part of WIP construction. A work in progress construction schedule can provide insight into how long certain projects are taking and when they may be expected to be completed.
To analyze a WIP, businesses should look at all of the data collected in the schedule and compare it against the goals originally established. This can help them identify any discrepancies or delays that may have occurred since project inception. Businesses should also assess how long each stage is taking to complete and whether there are any issues preventing the project from progressing. This can help them make better decisions about when and how to allocate resources for the most efficient completion of their projects. Businesses should regularly review their WIP schedule to ensure that it is up-to-date and accurate.
Common WIP Report Mistakes to Avoid
When creating and analyzing a work in progress report, there are certain common mistakes that businesses should be aware of. One of the most common mistakes is not properly tracking costs associated with each stage of project development such as labor, materials, and overhead. Many businesses fail to review their WIP schedule on a regular basis to ensure it is up-to-date and accurate. Not analyzing progress can lead to delays in project completion or unexpected issues along the way.
TGG Accounting provides WIP report services that can help businesses better understand the importance of work in progress accounting and how to successfully complete a WIP schedule. Our experienced professionals have extensive knowledge of industry best practices and can provide valuable insight into what materials are needed, what labor costs will be incurred, and what progress has been made on certain projects. Contact us today to learn more about how TGG can help your business improve its WIP reports.
WIP Schedule: How TGG Can Help
Work In Progress Schedules can be one of the most valuable tools that a business owner can use to control his/her business on a weekly/monthly basis. Understanding these items makes the Work In Progress Schedule a lot easier to create, read, and understand.
TGG builds and maintains these items on a weekly and monthly basis for our clients. We can help you implement these tools into your business.
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Janine Smith is a Consulting CFO with TGG. She has a wealth of experience in accounting process development and management, supervising both TGG staff and client’s internal staff (banking, AR, AP, inventory management, payroll), and working with many different types of accounting software. She has worked with clients to develop KPIs that fit their current needs and coached them to support the goals of the business. One of her favorite tasks is budget development and using that as a tool to help organizations meet their goals.
