WIP reporting answers a question most contractors can’t answer about their open jobs: am I actually making money on this project right now? Without it, you don’t know until the job closes and final numbers come in. By then, it’s too late to fix anything.

WIP stands for Work in Progress. The report compares two things for each active job. First, how much you’ve billed the customer. Second, how much you’ve actually earned based on costs incurred and the expected margin. The gap between these numbers tells you whether you’re overbilled or underbilled on each project.

Overbilled means you’ve collected more than the work you’ve completed. That cash in your bank account isn’t profit. It’s unearned revenue that belongs to finishing the job. Underbilled means you’ve done more work than you’ve billed for. You’ve earned revenue sitting uncollected, which affects your cash position and can mask profitability problems.

For construction and contracting businesses running multiple jobs that span weeks or months, WIP is the only way to see true financial position. Your bank balance might look healthy because you collected a big draw last week, but if you’re overbilled across all jobs, that money is already spoken for. Or your balance looks tight but you’re sitting on $40,000 of underbillings you could invoice tomorrow.

You probably need WIP reporting if your projects last more than a few weeks, you bill based on milestones or progress rather than completion, retainage is involved, or you run multiple jobs at once. Bonding companies and lenders often require WIP reports because they reveal your actual financial position better than standard financial statements.

You probably don’t need formal WIP reporting if you finish jobs in a day or week, bill only upon completion, or run one simple project at a time where costs are easy to track mentally.

WIP reporting builds on accurate job costing. If costs aren’t tracked correctly by job, the WIP numbers won’t mean anything useful. The two go together. Job costing tells you where the money went. WIP tells you whether you’ve billed appropriately for the work completed.

Most contractors who try to run WIP reports find their first few attempts reveal problems. Maybe labor isn’t getting allocated to the right jobs. Maybe materials purchased for one project got charged to another. The process of building accurate WIP often exposes tracking issues that were costing you money without you knowing it.