What Is a WIP Schedule and Why Does Your Contractor Business Need One?

If you're a contractor — electrical, plumbing, HVAC, general contracting, or any trade — and you've never heard of a WIP schedule, you're not alone. Most small contractors haven't. But if you want a bank line of credit, contractor bonding, or accurate financial statements, your CPA is eventually going to ask for one. Here's everything you need to know.

What Does WIP Stand For?

WIP stands for Work in Progress. A WIP schedule is a financial report that shows the current status of every active job — how much has been earned, how much has been billed, and whether you're ahead of or behind where you should be financially on each project.

It sounds simple. But it's one of the most important financial documents a contractor can have — and one of the least understood.

Cash Basis vs Accrual Basis — Why It Matters

Most small contractors run their books on a cash basis. That means you record revenue when you get paid and expenses when you pay them. Simple, easy, and completely misleading for a contracting business.

Here's why. Imagine you have a $500,000 job. You bill $400,000 in month one and collect it. Your P&L looks incredible. But you've only completed 30% of the work — meaning you've only truly earned $150,000. You're holding $250,000 of someone else's money that you still owe in labor and materials.

That's overbilling — and it's a liability on your balance sheet, not income. A WIP schedule fixes this by using the Percentage of Completion method, which recognizes revenue in proportion to how much work you've actually done.

How the Percentage of Completion Method Works

The math is straightforward:

• % Complete = Costs to Date ÷ Total Estimated Cost

• Earned Revenue = Contract Value × % Complete

If your $500,000 job has $150,000 in costs so far and you estimated $400,000 total cost, you're 37.5% complete. Your earned revenue is $187,500 — regardless of what you've billed.

Overbillings and Underbillings

This is where it gets important for your balance sheet:

• Underbilling — happens when you've earned more than you've billed. This is an asset — money you're owed but haven't invoiced yet. It shows on your balance sheet as 'Costs and Estimated Earnings in Excess of Billings.'

• Overbilling — happens when you've billed more than you've earned. This is a liability — you owe work to your customer. It shows as 'Billings in Excess of Costs and Estimated Earnings.'

Most contractors are surprised to learn they have significant overbillings on their balance sheet. It feels like cash in the bank — but it's actually a debt you owe in future labor and materials.

Why Banks and Bonding Companies Require It

When you apply for a contractor line of credit or a surety bond, the underwriter will ask for your WIP schedule. They want to know your backlog, your overbilling/underbilling position, and your estimated gross profit on each job. Without a WIP schedule you can't answer these questions accurately. With one you can walk into any bank or bonding meeting with confidence.

What Goes on a WIP Schedule

A complete WIP schedule includes for each active job: contract value, total estimated cost, costs to date, percentage complete, earned revenue, amount billed to date, overbilling or underbilling, estimated cost to complete, and estimated final gross profit. Updated monthly, this becomes your single most powerful financial management tool as a contractor.

How to Get Started

Building a WIP schedule from scratch in Excel takes time and accounting knowledge to get right. The formulas need to be exact, the logic needs to follow ASC 606 revenue recognition standards, and it needs to tie into your balance sheet correctly.

At Hilkey Financial Group we've built a complete WIP Schedule template — along with 15 other financial tools — specifically for contractors. It's pre-built, formula-tested, and ready to use the day you download it.

You can find it in our Financial Templates shop at HilkeyFinancial.com — available for electrical, plumbing, HVAC, general contracting, roofing, painting, landscaping, masonry, concrete, and civil site work contractors.

Ready to get your contractor financials in order? Browse our contractor financial templates or schedule a free consultation at HilkeyFinancial.com.