A WIP report lists every open job with five numbers: contract price, estimated total cost, cost to date, billed to date, and percent complete, which is cost to date divided by estimated cost. Multiply percent complete by the contract price and you have what you have earned. Billed more than earned is overbilling, and that cash is not yours yet. Billed less than earned is underbilling, and that is money you have spent that nobody has invoiced. Your bank balance is the sum of both. In construction, a WIP report is how a contractor, a bank and a surety tell profit from timing.
The five columns and the two formulas
A work-in-progress report, usually called a WIP schedule, is a table with one row per open job and a column for each of the five numbers above, plus the two that fall out of them: revenue earned to date and the over or under billing.
Percent complete is cost to date divided by estimated total cost. It measures cost, not progress on site. A job at 50 percent on the WIP has consumed half its budget, which may or may not mean half the building is up. Foundation Software's guide to WIP reporting, updated in February 2026, gives the formulas the way most CPAs use them: percent complete equals costs to date over estimated costs, earned revenue equals contract price times percent complete, and over or under billing equals billed to date minus earned revenue.
Earned revenue is what the job has produced so far under the percentage-of-completion method. It is the number a CPA uses for year-end statements and a bank reads, rather than the invoices you happened to send.
Overbilling is the amount by which billed to date exceeds earned revenue. It sits on the balance sheet as a liability, usually called billings in excess of costs and estimated earnings, because you have been paid for work you still owe.
Underbilling is the amount by which earned revenue exceeds billed to date. It sits on the balance sheet as an asset, costs and estimated earnings in excess of billings, because you have done work that has not yet been invoiced.
Three jobs, and why the total lies
The bottom line of this WIP says a commercial contractor with three open jobs is overbilled by $4,600 at the end of May. It is the least useful number on the page.
| Job | Contract | Estimated cost | Cost to date | Percent complete | Earned | Billed | Over (under) |
|---|---|---|---|---|---|---|---|
| Office build-out | $1,000,000 | $820,000 | $410,000 | 50% | $500,000 | $560,000 | $60,000 |
| School HVAC | $340,000 | $272,000 | $190,400 | 70% | $238,000 | $178,000 | ($60,000) |
| Tenant fit-out | $92,000 | $78,200 | $74,290 | 95% | $87,400 | $92,000 | $4,600 |
| Total | $1,432,000 | $1,170,200 | $674,690 | $825,400 | $830,000 | $4,600 |
Overbilled by $4,600 on $1.43 million of contracts looks like nothing. The two big rows cancel, and the canceling is the problem, because they are not the same kind of $60,000: the office job's $60,000 is customer cash that has been spent on payroll for the school job, and the school job's $60,000 is work the crew has done for which no pay application has gone out. The P&L, which only knows about invoices, shows revenue of $830,000 against an earned figure of $825,400. Close enough this month. Not close enough on the day the office job ends.
Why overbilling feels like profit
The office build-out has $410,000 of cost left to go and $440,000 of billing left to send. Of the $180,000 of gross profit in the job, $150,000 has already arrived in the bank as the difference between $560,000 billed and $410,000 spent, and that money paid the school HVAC crew in April and May. When the office job finishes, the last $440,000 of billing covers $410,000 of cost with $30,000 to spare, and by then the $150,000 that felt like profit in the spring has been spent.
That is the cash wall. It arrives when an overbilled job ends and the next one has not started billing, and it is one of the most common ways a profitable contractor runs out of money. The gap between a contractor's profit and cash is worked through in construction company cash flow problems; the WIP is how you see the wall three months before you hit it, and the 13-week cash flow forecast is where its date goes.
The wider payment picture makes the wall higher. Rabbet's 2024 construction payments report, published in October 2024, found 82 percent of contractors waited more than 30 days to be paid, up from 49 percent two years earlier, and that 95 percent of general contractors and 75 percent of subcontractors had floated payments to cover the gap; it put the cost of slow payment at $280 billion for the year. Set that beside the JPMorgan Chase Institute's 2016 finding that the median construction firm held 20 days of cash, and the temptation to treat an overbilling as a cushion is obvious.
Why underbilling is usually a process failure
An underbilled job is one where the work is ahead of the paperwork. The reasons are dull: the pay application went out late because the project manager was on site, a change order approved by text never made it into the schedule of values, stored materials were bought and not billed, or finished work is waiting on an inspector's signature. Each is fixable with a calendar and a rule that no change order is worked until it is in the billing.
Underbilling can also hide a cost problem. On the school HVAC job, the WIP says 70 percent complete because $190,400 of a $272,000 estimate has been spent, and the superintendent says the job is about 60 percent done. If the superintendent is right, the real total cost is closer to $190,400 divided by 0.60, or $317,300, and the margin has fallen from $68,000 at bid to about $22,700. The job is not 70 percent done and underbilled by $60,000. It is 60 percent done, underbilled by $26,000, and two thirds of its margin is gone. The WIP cannot tell you which is true; someone who walks the job has to say.
Profit fade is the drop in a job's estimated gross margin between bid and completion, measured job by job and in aggregate. A company that bids at 20 points and finishes at 14 has six points of fade, and the WIP is the only place it shows before the job closes.
What the bank and the surety read
A March 2026 article from a surety agency on what underwriters look for in financial statements put the rules plainly: sureties "live by 1.5:1 or better" on the current ratio, any single job with underbillings greater than 25 percent of the company's equity "gets its own page", and aggregate fade of "more than one to two points" is a flag. Single-job bonding limits run about 8 to 12 times adjusted working capital and aggregate limits 12 to 20 times tangible net worth.
Apply that to the contractor above with $210,000 of equity. The school job's $60,000 underbilling is 28.6 percent of equity. It gets its own page. With $160,000 of adjusted working capital, single-job capacity is roughly $1.3 million to $1.9 million; take the $60,000 underbilling out because the surety does not trust it, and the top of that range drops to $1.2 million, which may be the difference between bidding the next job and not. The same arithmetic runs through the bank's annual review and the coverage ratio it tests, because spent overbillings are a liability the bank counts and the owner did not.
Most guides say to produce the WIP quarterly for the CPA, and we would do it monthly, by the tenth, with the estimator in the room, because a quarter is long enough for a job to fade from 18 points to 9 without anyone having said so out loud.
Building it in QuickBooks Online, and where it stops
QuickBooks Online gives you four of the five columns. Set each job up as a project, put the estimated cost in the estimate against it, code every labor hour, material delivery and subcontractor bill to it, and cost to date comes off the profit and loss by customer; billed to date is the sum of invoices on the project. What QuickBooks will not do is the fifth column or the adjusting entry. It does not compute percent complete or move revenue from billed to earned, which takes a spreadsheet and a monthly journal entry to the over and under billing accounts on the balance sheet, illustrated in Foundation's guide with a job underbilled by $76,841.91. What the job-level P&L does and does not tell you is covered in job costing in QuickBooks Online.
The rhythm is the report on the tenth, the estimator's revised cost to complete on each job, the adjusting entry posted, and a fifteen-minute review of any job whose margin moved more than two points. Retainage, commonly 5 to 10 percent, comes off the billing but not off the earned figure, so a WIP that ignores it understates the cash still to come.
Three entities add one more step. A common set-up is a construction company that holds the contracts, a service company that employs the crews and charges them out, and an equipment company that rents the machines across. Cost to date on each job is only right when the intercompany labor charge and the equipment rental are in it. If the service company bills the construction company once a quarter, every job on the WIP is missing a quarter of labor and looks underbilled, so the charges have to be booked monthly, on both sides, or the report is a guess.
Navigator reads each of the three QuickBooks Online files read-only and shows margin by job and by entity, refreshed daily, which is the base plan. On the Pro plan the intercompany labor and equipment charges are canceled in the consolidated view. On any plan you can ask in the app or in a Slack or Teams thread which job is underbilled and get an answer that cites the invoices and costs it came from. Plans are listed at navigatorhq.ai.
What none of this can do is make the estimate right. A report built on a stale cost to complete is precise and wrong, and the only cure is the estimator updating every open job each month and an owner who asks why when the number moves.
Questions owners ask
What is a WIP report in construction?
A work-in-progress report is a schedule of every open job showing the contract price, the estimated total cost, cost to date, billed to date and percent complete. From those it works out revenue earned so far and whether each job is billed ahead of or behind that figure. It is the report that turns a contractor's P&L from a record of invoices into a record of work done.
How do you calculate percent complete?
Divide cost to date by the estimated total cost of the job. A job with $190,400 of cost against a $272,000 estimate is 70 percent complete. Multiply that by the contract price to get revenue earned. The method depends entirely on the estimate: if the estimate to complete is wrong, the percentage is wrong, so the estimator has to update it every month, not just at bid.
What is the difference between overbilling and underbilling?
Overbilling is billing more than you have earned by percent complete; the excess is a liability, because you owe the customer that work. Underbilling is having earned more than you have billed; the shortfall is an asset, money you have spent on work nobody has invoiced yet. The first flatters cash and understates what you owe. The second understates revenue and starves cash.
Is overbilling bad?
Not by itself. Billing ahead of cost is how a well-run contractor finances a job, and banks expect some. It becomes dangerous when the overbilled cash pays for other jobs or for overhead, because the work still has to be done at the end with no billing left to cover it. A company overbilled across every job is living on its customers' deposits, and the bill comes due when work slows.
What do banks and sureties look for in a WIP schedule?
A current ratio of 1.5 to 1 or better, underbillings that are small relative to equity, and estimated margins that hold from bid to completion. One surety agency's guidance flags any single job underbilled by more than 25 percent of equity and any aggregate fade of more than one to two points. Bonding capacity is often set at 8 to 12 times adjusted working capital for a single job and 12 to 20 times tangible net worth in total.
Related
The cash side of the same problem is worked through in construction company cash flow problems, and the job-level numbers the WIP is built from are explained in job costing in QuickBooks Online. To see the cash wall on a calendar before it arrives, the 13-week cash flow forecast is the next read.
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Published . Last updated . Reviewed by a CFO on the Navigator team.