WIP Schedules for Contractors: Are You Overbilled or Underbilled?

Last updated October 2026.

The short answer

A contractor WIP schedule lists every open job with its contract value, total estimated cost, cost to date, percent complete, revenue earned, and amount billed. You are overbilled when billings exceed earned revenue (a liability: the customer has been billed for work you still owe) and underbilled when earned revenue exceeds billings (an asset: you have done work you have not invoiced). Overbilling is usually healthy if the cash is still in the bank. Underbilling is a question until you can name its cause.

What is a WIP schedule and what goes on it?

A work in progress schedule is the one report that turns field activity into financial statements for a contractor, because on most construction contracts revenue is earned as the work is performed, not when the invoice goes out. Your pay applications follow the schedule of values. Your revenue follows the work. The two almost never match in a given month, and the WIP schedule measures the gap on every job.

Each row is one open contract. The columns that matter:

1. Contract value, including approved change orders.
2. Total estimated cost at completion, updated this month, not copied from the bid.
3. Cost to date, pulled from job cost in the accounting system.
4. Percent complete, usually cost to date divided by total estimated cost.
5. Earned revenue to date, percent complete multiplied by contract value.
6. Billed to date, every pay application sent, including retainage billed.
7. Overbilled or underbilled, billed to date minus earned revenue.

The totals have to tie. The sum of earned revenue across the schedule is the revenue on your income statement. The total overbilled and total underbilled are the contract liability and contract asset on your balance sheet. If those do not match the general ledger, a job was recorded one way in the field and another way in the books, and the difference has to be found before anyone reads the statements.

How do you calculate whether a job is overbilled or underbilled?

Three formulas decide the answer, and the second one is where contractors get it wrong:

1. Percent complete = cost to date divided by total estimated cost. This is the cost-to-cost method, an input method under ASC 606-10-55-20, which measures progress by "costs incurred" relative to total expected costs.
2. Earned revenue = percent complete multiplied by contract value. Earned revenue is a calculation, not an invoice.
3. Billed to date minus earned revenue. A positive number is an overbilling. A negative number is an underbilling.

The weak link is the total estimated cost. If the estimate to complete is stale, percent complete is wrong, earned revenue is wrong, gross profit is wrong, and the billing position is wrong, all from one number nobody updated. The built-in alarm: if cost to date is ever larger than total estimated cost, the schedule shows a job more than 100 percent complete. That is impossible, and it means the estimate was never revised.

One caution on cost-to-cost: costs that do not represent work performed can push percent complete ahead of the actual job. ASC 606-10-55-21 tells you to exclude inputs that do not depict progress, and gives uninstalled materials as the example. Large material deliveries sitting on site and big mobilization costs are the usual culprits, and many contractors carve them out so the percentage reflects work, not spending.

What does a WIP schedule look like with real positions on it?

Here is a three-job schedule with round, illustrative numbers rather than any real client. Each job shows a different position for a different reason.

Three things to read off this table.

Job A is overbilled by $50,000. Mobilization and a front-loaded schedule of values put billings ahead of the work. That $50,000 is the customer financing the job, which is good, as long as $50,000 is still in the bank to finish the work it was billed for.

Job B is underbilled by $30,000. The crew did $25,000 of change order work that has not been approved in writing, and the September pay application went out after month end. Both are real and both are explainable. Neither will stay explainable if they are still sitting there in December.

Job C hides the biggest story. The bid estimated $640,000 of cost and a $160,000 gross profit, 20 percent. By the time cost to date hit $675,000, the old estimate would have shown the job 105 percent complete, so the estimate was finally revised to $750,000. Gross profit is now $50,000, about 6 percent. That is a fade of roughly 14 points on one job, and the $20,000 underbilling is the shadow of a cost overrun, not a billing lag. For scale, CFMA's 2025 Construction Financial Benchmarker put the average gross margin for specialty trade contractors at 22.4 percent.

And the netting trap: the total line reads $0. Overbilled and underbilled are not supposed to offset each other. Under ASC 606 the contract asset and contract liability are presented by contract, so the balance sheet shows a $50,000 liability and a $50,000 asset, and a reader who nets them to zero has learned nothing about the three very different jobs underneath.

Is being overbilled good or bad?

Overbilling is good when it is cash, and dangerous when it is not. A surety reads overbillings favorably, because they mean the owner is financing the work instead of the contractor. Front-loaded schedules of values, billing for stored materials, and mobilization payments all create them early in a job.

The problem is what happens to the cash. An overbilling is money collected for work you still owe. If it has already been spent finishing a different job or covering payroll in a slow month, you have what sureties call job borrow. The job that was overbilled still has to be completed, and the funds that were supposed to complete it are gone. Guidance published by the Construction Management Association of America puts the test in one line: any overbilling should be represented by cash in the bank.

The portfolio pattern matters as much as the total. Several new jobs will naturally show large overbillings that unwind as the work catches up. Overbillings that stay elevated quarter after quarter while the jobs wind down mean the cash advantage is being consumed faster than new work replaces it.

Why are you underbilled, and does the reason matter?

The reason is the whole answer, because the same $30,000 underbilling can be a timing blip or an unrecognized loss. Sort every underbilled job into one of three causes before the schedule goes to anyone.

Thryve's working rule for the review meeting: an underbilling that cannot be converted into an approved, billable invoice within 60 days gets treated as a cost overrun until someone proves otherwise, and the estimate to complete on that job gets revised that month. Sixty days is a management rule, not an accounting standard, and your surety or lender may hold you to something tighter.

Late-stage underbillings are the ones that end careers with a surety. Old Republic Surety published an example where a job that was 97 percent complete at year end carried $296,000 in underbillings; six months later, at 99 percent complete, the underbillings had grown to $419,000 while the job was losing money. The surety disallowed those amounts from working capital, found ten more jobs like it on the same schedule, and removed nearly $3 million from the contractor's working capital calculation.

What do sureties and lenders read on your WIP schedule?

Sureties and lenders read the WIP schedule before the income statement, because the income statement is a product of it. A March 2026 surety underwriting guide in Construction magazine lays out the tests in numbers:

• Underbilling concentration. One job with underbillings above 25 percent of total equity gets its own page in the underwriting file, and the underwriter assumes that job is in trouble until shown otherwise. The guide's working target is to keep any single job's underbilling under 20 percent of equity and be able to explain the larger ones in detail.
• Adjusted working capital. Underwriters remove underbillings on problem jobs, haircut stale receivables, and subtract related-party receivables. Reported working capital can lose 30 to 40 percent in that one meeting, and adjusted working capital is what sets the single job limit, often 8 to 12 times that number.
• Gross profit fade. Every completed job from the last 24 to 36 months gets its original margin compared to its final margin. Aggregate fade of more than one to two points triggers questions about estimating and change order practice.
• Timeliness. Monthly financials and an updated WIP schedule within 20 days of month end.

Our post on the WIP schedule a buyer actually trusts covers the same document through a buyer's eyes during a sale, including a fade test you can run yourself.

How often should you update the WIP schedule, and who owns it?

Monthly, as part of the close, and the project managers own the estimates while accounting owns the math. A WIP schedule the CPA assembles once a year is a compliance document. A WIP schedule reviewed every month is the earliest warning you will get on a job going wrong. The same CMAA guidance calls for gain and fade analysis monthly at a minimum.

A monthly WIP process that works:

1. Close job cost first. Every invoice, timesheet, and credit card charge coded to a job before the schedule is run. Committed costs (signed subcontracts and open purchase orders) are listed alongside, so a job does not look healthy only because the bills have not arrived.
2. Project managers update estimates to complete for every open job, in writing, with the reason for any change. This is the step most contractors skip, and the one that makes everything downstream true or false.
3. Accounting recalculates percent complete, earned revenue, and the billing position, then checks that totals tie to the general ledger.
4. Review meeting. Walk every job with a fade of more than two points, every underbilling, and every overbilling without matching cash. Sort each underbilling into timing, change order, or overrun, and apply the 60-day rule.
5. Act. Send the pay application that is late, chase the change order signature, revise the estimate that is stale, and write down the job that needs it this month rather than at year end.

A close that finishes on time is what makes this possible; our monthly close checklist covers the sequence, and our post on cash flow mistakes that kill construction companies covers what happens to contractors who never run it.

Where Thryve fits

Thryve Accounting & Advisory in McKinney, Texas builds and runs the monthly WIP schedule for contractors and trades as part of our contractor accounting work: job cost that closes on time, the schedule itself, the tie-out to the balance sheet, and a review meeting where the project managers' estimates meet the accounting. Fractional controller support covers contractors who need someone to own the close, and bookkeeping and monthly accounting keeps the job cost data clean enough to trust.

We fit contractors doing roughly $1M to $50M in revenue who want to know their billing position every month, not once a year. We are probably not the right pick if you need audited statements for a large bonding program, since we are not an audit firm, or if you want someone to manage the field side of the change order process. We also do not answer tax questions; those go to your CPA, and we are glad to coordinate.

Know which jobs actually make money. Talk to us.

FAQ

Is it better to be overbilled or underbilled on a construction job?

Overbilled is generally the better position, because the customer is financing the work and the cash is in your account before the costs arrive. It only stays better if that cash is still available to finish the job it was billed for. Underbilled is not automatically bad, but it means you are financing the customer, and the position has to be explained by timing or a pending change order rather than a cost overrun. Which one you should see depends on the stage of the job and your contract's billing terms.

How do overbillings and underbillings show up on a contractor's balance sheet?

An overbilling appears as a current liability and an underbilling as a current asset, and both come straight off the WIP schedule. Contractors have long labeled them "billings in excess of costs and estimated earnings" and "costs and estimated earnings in excess of billings." Under ASC 606 the same balances are described as contract liabilities and contract assets, and they are determined contract by contract rather than netted across all jobs. How they are labeled and presented on your statements is a decision for your accountant.

What is a reasonable amount of underbilling for a contractor?

There is no single safe number, because a reasonable underbilling depends on your contract terms, how much change order work you carry, and where each job sits in its life. The surety guidance we cite treats a single job with underbillings above 25 percent of equity as a problem job and suggests keeping any one job under 20 percent of equity. The more useful test is whether every underbilled dollar can be tied to a specific pay application or a specific change order you expect to bill within about 60 days. If it cannot, treat it as a cost overrun until the estimate is revised.

Related reading: Job Costing for Contractors: Why Your Profitable Jobs Are Not Making Money and How to Price Jobs Using Your Own Job Costing Data.