Why Your WIP Report Is Lying About Job Profitability

Episode 155 of the Construction Accounting Podcast with George Ghazarian, CPA · 9 min 9 sec · Published 8 June 2026

A job can be 90 percent billed, 70 percent spent, and look profitable on every report you run — and still lose money. That gap between what your WIP says and what is actually built in place is where contractor profit quietly disappears.

Here is how to separate percentage complete from percentage billed, read underbillings and overbillings correctly, and close the payment gap that drains your cash.

What Your WIP Report Is Actually For

WIP stands for work in progress, the report that tracks every open job — what you’ve billed, what you’ve spent, and how far along you actually are. Done right, it is the most powerful financial tool in your business. Done wrong, it is a slow leak you never see until one project wipes out a quarter of your profit.

The catch is that your accountant cannot produce it alone. WIP needs accurate data from the field, and project managers, estimators and supervisors are busy running jobs. So they skip it, guess, or enter it late, and by the time the numbers reach your books the picture is already wrong.

Clean Data Beats Clever Accounting

Accurate data entry is not optional. Employee time, materials costs and subcontractor invoices all need to hit the right job every week, and your project managers and estimators should track their own time against cost codes too. Keep the codes simple. I have seen companies with forty codes tracking the same thing under four different names, then wondering why they cannot get a straight answer on job profitability. And if the crew does not know the software, they will work around it.

Percentage Complete Is a Field Assessment

Most contractors confuse percentage complete with percentage billed. Percentage complete is physical: someone walks the job, looks at the work in place, and estimates how far along you are, updated every single week. Percentage billed is only what you have invoiced, and it tells you nothing about whether the work got done.

Here is the trap. Contractors use cost-to-date as a proxy for completion: we spent 50 percent of the budget, so we must be 50 percent done. Spend 50 percent but put only 40 percent of the work in place and you are already over budget without knowing it.

What a Healthy Job Looks Like on Paper

Take a ten million dollar project assessed at 50 percent complete. You have billed five million, exactly 50 percent, and spent three point five million against a total budget of eight million — 43.75 percent of budget. Billing matches progress, costs are under pace, and the job is on track.

Now two jobs off a WIP table. Project A is a one million dollar contract with 750k in estimated cost. Cost to date is 650k, or 87 percent of budget spent, and billings to date are 900k, or 90 percent billed — a 3 percent overbilled variance, which is a win if you really are 90 percent complete. Project B is a two million dollar contract with 1.4 million in estimated cost, one million spent at 71 percent and 1.42 million billed at 71 percent. Zero variance. The key word in both cases is if. If the physical percentage complete matches the numbers, you are fine.

Reading Underbillings and Overbillings

Billing less than the work you have put in place makes you underbilled. Accountants technically call underbillings an asset, because you are theoretically owed that money, but chronic underbilling is a cash flow emergency waiting to happen. With weekly site walks it is manageable and you simply catch billing up. More often it happens because nobody walked the job, cost-to-date says you are behind, and the real problem is a budget you already blew. Overbillings are the flip side. Billing ahead of the work in place often means costs are under pace, which is healthy, but if your percentage complete assessment is off, overbillings can mask a disaster.

Four Fixes for Delayed Payment

The second biggest financial roadblock is delayed payment. You did the work, you billed the client, and then nothing. Or 60 days. Or 90.

• Confirm approval within days, not weeks. I have seen payment held 120 days over a problem that existed on day one — a missing document, a wrong billing period, a wrong format. The fix takes five minutes if somebody calls.
• Follow up from day one past due. Email and a phone call every 15 to 30 days, official letters at 60 days, your attorney at 90. Call the decision-maker who can release the payment, not only the accounting contact.
• Make change order documentation bulletproof. Pictures, written detail, and references to industry standards. Set expectations about required backup, format and timeline at the start of every project.
• Front-load your schedule of values. Self-performing contractors carry labor and materials from day one. Front-loading ethically, so it reflects real early-phase costs, keeps you from spending the rest of the job chasing cash.

Give It One Quarter

Require a weekly physical percentage complete assessment from someone who walked the job, never use cost-to-date as a proxy, and hold people accountable for accurate entry. Do the same on collections and within a quarter you will know where every dollar is.

The short version

• Percentage complete must come from a physical site assessment, never from cost-to-date alone
• Spending 50 percent of budget on 40 percent of the work means you are already over
• Chronic underbillings usually signal a blown budget, not good project management
• Overbillings only look healthy when your percentage complete assessment is accurate
• Escalate past-due invoices: calls at 15 to 30 days, letters at 60, attorney at 90
• Fewer well-defined cost codes give clearer job profitability than forty overlapping ones

Related episodes

• How Your WIP Schedule Drives Taxes and Bonding Capacity
• How Underbilling Quietly Drains Contractor Cash Flow

Browse the full Construction Accounting Podcast archive

This episode is general information about how these rules work, not advice for your situation. Tax law changes and the right answer depends on your entity, your income and your circumstances. Talk to a CPA before acting on it.