Published April 23, 2024 . 3 mins read

The Significance of WIP Reports for Bankers

With over three decades in the banking sector, including nearly 20 years working closely with construction industry clients, I’ve witnessed the perpetual scrutiny of construction businesses within banking circles. When evaluating or establishing financing relationships with contractors, bankers typically focus on several key indicators:

  • Experience: Assessing the longevity of the business and its resilience through economic challenges.
  • Character of Leadership: Evaluating the integrity and competence of owners, CFOs, Controllers, and the accounting team.
  • Collateral: Considering assets beyond accounts receivable that can serve as security.
  • Quality of Financial Statements: Emphasizing the importance of accurate and comprehensive financial reporting.

Regrettably, many contractors falter in providing high-quality financial information, despite efforts to educate them on banking expectations. The quality of financial data remains paramount in shaping a bank’s decision-making process.

Establishing a productive partnership with a CPA for balanced and precise accounting, coupled with timely and accessible financial information, is crucial. Alongside a thorough examination of the Balance Sheet and Profit & Loss, bankers scrutinize the Work in Progress (WIP) Report meticulously.

Gerardo Perez
Senior Vice President Relationship Manager, First Bank

WIP report in ProNovos

Regular tracking, monitoring, and updating of the WIP Report, ideally on a monthly basis, are imperative for project success. It’s crucial for the CFO, Owner, or Controller responsible for WIP Report oversight to be well-informed about each project’s status, facilitated by tracking software. The WIP Report complements the Balance Sheet and Profit & Loss, and subpar, erroneous reports can promptly thwart a contractor’s financial backing.

Encountering CFOs or Controllers unaware of overbilling, underbilling, or profit margin fade is disheartening. Worse still, receiving financial data without proper review reflects poorly on the organization’s financial management.

Navigating financing for contractors hasn’t been without challenges. However, I’ve found satisfaction in collaborating with numerous reputable contractors who prioritize high-quality financial reporting. The WIP Report serves as the backbone of an organization, offering insights into project progress, efficiency, potential profits, and ultimately, cash flow—the cornerstone of banking decisions.

In essence, a subpar WIP report often indicates weak internal financials, diminishing the likelihood of securing necessary financial support from banks. Just as a poorly laid foundation compromises a building’s stability, inadequate financial reporting undermines a contractor’s financial health and stability.

Be sure to catch Gerardo at CFMA’s Annual Conference on Wednesday, May 22, at 8 am, when he presents “Real-World Construction Financial Insights” alongside Bruce Orr, CEO, ProNovos; Margie Morris, CCIFP, Partner, Guignard Company; and Bob Biehl, CPA, CCIFP, GBQ Partners.

In this interactive session, you’ll experience construction financial data insights from various perspectives. In the first half of this session, a panel of industry experts consisting of a data scientist, banker, CPA, and surety professional will use a real-world scenario to show you how they assess the WIP to make strategic decisions, identify areas of concern, and evaluate the health of construction companies. They will share strategies and tips. Then, it’s your turn to review a real-world scenario with your peers to review the data to identify issues and develop a solution.

Learning Objectives:

Interpreting Data Trends: Participants will learn to identify and interpret key data trends within construction financial datasets, enabling them to recognize potential financial challenges and opportunities within their organizations proactively.

Cross-Industry Insights: Attendees will gain a deeper understanding of how financial data is analyzed and leveraged across various sectors, such as data science, banking, accounting, and surety, to broaden their perspective on financial management strategies.

Through hands-on activities, participants will develop practical problem-solving skills by applying data analysis techniques to real-world construction financial scenarios. This will empower them to make data-driven decisions in their roles and address complex financial challenges effectively.