The WIP schedule lists every open job with its contract value (including approved change orders), the estimated cost at completion, cost to date, percent complete, the revenue earned to date and the amount billed to date. The difference between earned and billed revenue is the over or under billing on each job. Overbilled jobs add up to a liability on the balance sheet, billings in excess of costs and estimated earnings, and underbilled jobs to an asset, costs and estimated earnings in excess of billings. It is how construction companies recognize revenue on the percentage-of-completion method, which under ASC 606 is revenue recognized over time on a cost-to-cost basis.
Sureties and banks read the WIP schedule closely, because it shows whether the company is making money on its work and whether its billings are ahead of or behind the work it has earned. It is also a report that often ends up in a spreadsheet at quarter end: the ERP works out percent complete from cost to date, but each job’s estimated cost to complete has to be updated by someone who knows the job, and the figures have to be pulled together from job cost, billing and the ledger.
Job cost works each job’s percent complete and earned revenue from cost to date and the estimate at completion, and shows over or under billing against what has been billed. It reads the same job cost as everything else, since every transaction carries job, phase and cost code when it posts, so there is no second ledger to reconcile and no spreadsheet to rebuild at quarter end.
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