What is a WIP report and why does it matter in construction?

A WIP (Work-in-Progress) report is a formal financial document standardized under ASC 606 that tracks the percentage of completion on construction projects. It is used to manage progress billing, revenue recognition, and job-cost accuracy month by month. Large construction projects bill as work is completed rather than when contracts are signed, so the WIP report is the primary tool for knowing what revenue can be recognized and what costs have been incurred relative to the estimate. What most operators miss is that the WIP report’s accuracy depends entirely on field inputs — making it as operational as it is financial.

How does the WIP report connect to field operations?

The WIP report compares estimated costs to actual costs by job. When those two numbers diverge in unexpected ways — for example, a material that was purchased and shows up in the bank account but not in job costs — the WIP report surfaces an operational question: was it a costing failure, a site condition issue, or a change order opportunity? Answering that question requires information from the field. The WIP is only as good as what flows into it from project managers, superintendents, and field staff. That is why a seasoned financial leader reviews it with the eyes of an operator.

What is ASC 606 and why does it matter for construction billing?

ASC 606 is the accounting standards codification that governs revenue recognition across industries. In construction, it requires that revenue be recognized as performance obligations are satisfied — meaning as work is completed, not when a contract is signed or a final payment is received. For contractors doing progress billing, this means the WIP report is a required financial artifact for determining how much revenue can be recognized in any given month. Mismanaging the WIP under ASC 606 creates either overbilling (recognizing revenue before work justifies it) or underbilling (leaving earned revenue on the table), both of which have material cash-flow consequences.

How do you identify a job-costing failure using the WIP report?

A job-costing failure shows up on the WIP report as a discrepancy between what was purchased and what was costed to the job. The diagnostic is straightforward: the estimate confirms the material was budgeted; the bank account confirms it was purchased; but actual job costs do not show it. That triangulation tells you one of three things happened — the material was purchased prematurely, a site condition prevented its use, or someone failed to cost it to the job. Implementing a photo-documentation policy for every delivery ticket, bill of lading, and invoice — tied directly to the job record — closes the most common costing gap.

The WIP Report Is the Operator’s Document

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Although the WIP report is a standard operating and financial document construction companies must deal with, the landscape operator serious about growing their top line will end up dealing with it too. The WIP report is a formal financial document, standardized and outlined by ASC 606 (accounting standardization code) that influences many aspects of a successful business — or, if mishandled, can cause major strain on a business. Large construction projects require progress billing month to month, which means a report that shows the percentage of the job completed must be carefully managed each month.

What makes the WIP report as much operational as it is financial is the emphasis it places on projects managed well. Costs flow into the construction company in terms of, typically, five major categories: labor, materials, subcontractors, equipment, and other job costs. These costs flow in as operating costs, with field staff buying, managing, and transporting the items needed for the job. This operational behavior — getting what’s needed for jobs — impacts working capital, accounts payable, and DSO (days of sales outstanding) or AR (accounts receivable) aging. The men and women going about the work represent payroll: a weekly accrued cost, depending on how your company handles paycheck cadence.

WIP report framework: cost inputs flowing into the WIP report, which triggers three operational controls

Cost inputs flow into the WIP report. Mismatches between estimate, actual cost, and billing trigger operational review — not just accounting adjustment.

The Estimate as a Diagnostic Tool

We need the estimates of the projects that make it onto the WIP report. This comparison of where projects stand relative to the estimate will generate important questions. To provide an example: if a sizable material purchase occurred out of the working capital account in the first week of the month, but the costs on that project do not reflect this material, we must ask questions and mitigate risk.

Why did we buy something we didn’t use or begin using already?

Impact: Cash Flow · Investing/Financing Activity · Job-Site Risk · Revenue

Assume for the moment that the material is not something typically treated as stored materials — that it only makes sense to the client that a material be bought if it will be used quickly after buying it.

If we didn’t use it or begin using it this month, were there other contractors or site conditions that prevented us from doing so? Can we get a Change Order for stored materials beyond plan, and are our records extensive enough to justify it? Will the client push back, expecting us to absorb that cost?

Impact: Revenue · Cash Flow · Reputation · Record-Keeping · Billings

Or is this a job-costing failure? Did the material get used but operational staff failed to cost it to the job?

Impact: Revenue · Cash Flow · Billings · Job-Execution Disruption

The triangulation is straightforward: the estimate confirmed the material was needed. The bank account confirmed it was bought. Actual job costs do not show it. The questions that follow are both operational and financial. The recommendations that result require no complex accounting knowledge to understand or execute.

Three Recommendations

Recommendation 1

Daily Field Verification

Consider a daily field-verification recording and reporting system that project managers and superintendents review with the Director of Construction. Photos daily are required. This builds a record in real time, and a review of site conditions will inform whether the material should have been bought when it was.

Record-Keeping · Change Order Justification · Revenue

Recommendation 2

Weekly Change Order Review

As part of the weekly operational meeting, build a dedicated agenda item: “Complications and Change Orders.” Keep it tight — a few minutes per project. Ask three questions: Do the parties involved on the project know about the complication? What is the rough financial impact? Are our records sufficient to justify a CO request?

Revenue · Cash Flow · Billings

Recommendation 3

Invoice and Documentation Policy

Implement a photo policy for every bill, delivery ticket, bill of lading, and invoice — with a dedicated submission location as a backup to project managers. This solves the costing gap, though it doesn’t solve whether we can bill for it this month. That second question impacts revenue this month and cash flow in the next 30 to 60 days. Both matter.

Job-Costing · Billings · Cash Flow

“The WIP report is only as good as the inputs feeding it, and those come from the field and those overseeing operations.”

These three recommendations will deliver different financial outcomes in time. We should not overlook change fatigue — ownership must understand that too much change too quickly will hurt both operations and the financials. All three of these recommendations grew out of looking at the WIP report, and they are decidedly operational. Finance professionals must be cautious about recommending policies that consume too much time of staff responsible for field execution. Getting costs in is imperative for billing, and billing is the lifeblood of a construction operation: without cash flow, everything the company does becomes more expensive.

The operators will produce what the WIP report visualizes and records. Operators drive the revenue engine. A seasoned financial leader will view it with the eyes of an operator.

Groundworks Consulting Group

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GCG works with landscape and construction operators on WIP management, job costing, change order capture, and the financial disciplines that protect margin from estimate to close. Start with the free assessment.

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The WIP Report Isthe Operator’s Document