Here’s what you’ll find inside:
• Expert Insights: Get guidance from top industry experts who understand what makes a WIP report truly impactful.
• Must-Have Metrics: Uncover the essential KPIs that every contractor needs for a clear and accurate view of project performance.
• Best Practices: Discover how to implement these KPIs effectively to maximize profit margins, strengthen cash flow, and anticipate potential risks—ensuring your projects stay on track and profitable.
A well-crafted and timely Work in Progress (WIP) report is essential for effective project management and financial oversight in the construction industry. Knowing which Key Performance Indicators (KPIs) to include can transform your WIP report from a simple progress tracker into a powerful tool for informed decision-making.
This checklist will guide you through the crucial financial KPIs that should be included in every construction business’s WIP report. These KPIs will enhance your internal project management while providing your external stakeholders with the necessary insights.
To develop this checklist, we consulted with a network of CPA firms that serve construction clients, business advisors, and construction executives to pinpoint the most critical KPIs for your WIP report. We’ve distilled their expertise into a list of essential KPIs, ensuring that your report offers the financial clarity and project insights necessary for your team and the financial professionals who rely on it.
This list is in alphabetical order
Billed-to-Date (AKA Billed Amount)
= the total amount invoiced to the customer on the project
Bob Biehl, CPA, CCIFP with GBQ, explains that the Billed-to-Date metric represents the total amount billed on a project up to a specific date. It is one of four key components used to determine over/under billings on the contracts in the process schedule, alongside the total contract value, estimated cost at completion, and project cost-to-date. The billed-to-date figure includes retainage and is subtracted from earned revenue to calculate whether a project is over or under-billed. The billed-to-date amount should align with the company’s most recent AIA billing or its equivalent.
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[Billed to date] represents the cumulative amount billed to the project along with unbilled retainage. It is important to bill as aggressively as possible on the jobs to help improve the cash inflows to the company, to try to stay ahead of cash outflows.
Paul Atkinson, CPA
Smith + Howard
Earned Revenue (AKA Recognized Revenue)
= (Job Costs-to-Date ÷ Projected Final Cost) × Projected Final Contract OR (Job Cost-to-Date ÷ Estimated Job Cost at Completion) × Total Contract
Earned Revenue (also known as Recognized Revenue) on a WIP report represents the amount of revenue recognized for the work completed on a project based on the percentage of completion method. It is calculated by multiplying the percentage of the project completed (job costs-to-date divided by estimated job cost at completion) by the total contract value. This reflects the revenue a company has earned, independent of actual billings to the client.
Bob Biehl emphasizes that earned revenue is not the same as billings—it’s purely based on the percentage of completion calculation. He notes that “earned revenue from open and closed jobs should reconcile into total contract income on a company’s financial statement.”
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There’re several reasons why a job may be underbilled. Poor billing practices can cause delays or inaccuracies in invoicing, leading to an underbilled project. Additionally, cost overruns that can’t be billed—such as future losses—or unapproved change orders can result in billings lagging behind actual project costs. Another reason is if estimated costs are too low, creating hidden losses that aren’t immediately reflected in the billing cycle, further contributing to underbilling.
Bob Biehl, CPA, CCIFP
Director, Construction Industry Services, GBQ Partners
