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.
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.