Definition
Work in progress (WIP) is the status of uncompleted contracts: costs incurred, revenue earned (e.g., under POC), and amounts billed. A WIP report compares these so you see overbillings (billed > earned) or underbillings (earned > billed) and the balance sheet impact. It is central to construction accounting and bonding.
Why It Matters
WIP keeps revenue recognition, billing, and cost in sync. Overbillings (billings in excess of earnings) are a liability; underbillings (earnings in excess of billings) are an asset. Sureties and lenders look at WIP for financial health. Tracking WIP by job and in total prevents surprises at year-end and supports accurate financial statements.
Field Example
Job: contract $100,000, cost to date $40,000, estimated total cost $80,000. POC = 50%; revenue earned = $50,000. Billed to date = $48,000. Underbilling = $50,000 − $48,000 = $2,000 (asset: you’ve earned more than you’ve billed). Next month you might bill the $2,000 or more.
Calculation / Formula (if applicable)
Revenue earned = POC % × Contract value (or per your method). Overbilling = Billed to date − Revenue earned (if positive). Underbilling = Revenue earned − Billed to date (if positive). Cost in excess of billings (asset) or Billings in excess of cost (liability) are the balance sheet presentations.
Software Application
For each job, track contract value, cost incurred, estimated total cost, revenue earned (POC), and cumulative billing. Calculate over/underbillings. Report WIP schedule by job and in total. Support period-end close and adjustments. Export for CPA and surety.
Tooltip Version
WIP (work in progress) compares what you’ve earned on a job to what you’ve billed so you see overbillings or underbillings and keep revenue and billing in line.
Related Objects
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