Why WIP exists
Construction revenue does not follow billing. Under ASC 606, contractors on fixed-price contracts recognize revenue as they perform the work.
Most use the cost-to-cost method: costs incurred to date divided by total estimated costs gives the percent complete. That percentage is applied to the contract price to calculate earned revenue. Billing is a cash-flow mechanism, not a revenue event.
Where WIP breaks down
The estimate to complete drives every other number in the WIP. If it’s wrong, the percent complete, earned revenue, over/underbillings, and taxable income are all wrong. Stored materials and mobilization costs can also inflate percent complete early in a job.
Only project managers know the true cost to complete, so accounting and the field have to collaborate. In regular, non-punitive WIP meetings, PMs should review change orders, compare accounting’s percent complete to their own, and challenge estimates.
How Sage Intacct Construction helps the finance team
Construction companies run into three common WIP pain points. Do any of these sound familiar?
- Inaccurate estimates to complete
- Disconnected field and accounting data
- Slow, manual month-end work
If you answered yes, take a closer look at Sage Intacct Construction.
WIP reporting comes from live data
Costs to date and billings to date flow straight from the general ledger, AP, payroll, and billing modules, so nobody rebuilds the schedule in a spreadsheet each month. The system calculates percent complete, earned revenue, and over/underbillings on a consistent basis across every job.
Estimates and change orders live in the system of record
Original estimates, revised estimates, and approved and pending change orders live on the project itself, with full history. When a PM updates the estimate to complete, the WIP recalculates. Finance can also see how estimates have moved over time, which is how you spot profit fade early instead of at closeout.
Committed costs make cost-to-complete verifiable
Subcontracts and purchase orders post as commitments, so the finance team sees what is owed but not yet invoiced. Finance can check the PM’s cost-to-complete against actual contractual obligations instead of relying on “budget minus costs to date.”
Billing aligns with earned revenue
AIA-style progress billing (G702/G703), schedule of values, and retainage tracking run in the same system as job cost. Finance can quickly see which jobs are underbilled and bill for them right away, reducing the cash-flow risk of contractors financing their own projects.
WIP ties to the financial statements
Job cost, the GL, and the WIP schedule share one data source and the same dimensions, with project, cost code, and cost type tagged to every transaction. Total earned revenue ties to the income statement, and over/underbilling totals tie to the contract asset and contract liability accounts.
PMs get real-time visibility
Role-based dashboards and project reports give PMs real-time cost and budget data. These tools support collaborative WIP meetings because accounting and the field work from the same numbers instead of debating whose spreadsheet is right.
Make good WIP practice sustainable
Sage Intacct Construction makes good WIP practice practical and sustainable every month. Want more support? Add SmartCare, our technical support subscription, to help your accounting team every step of the way. For a capped monthly investment, you get unlimited Sage Intacct Construction support.
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