1. Inaccurate cost to complete (Critical)

This calculation sets up the over and under billing journal entry that flows into your profit and loss and balance sheet. If this number is wrong, the journal entry is wrong, and so are your financial statements.

• Do a line-by-line review of all larger jobs at 40%, 60%, and 80% complete. Before 40% you do not really know how the job will land. After 80% there is little you can do to change the outcome.
• Bring the job lead and the job cost accountant together so both agree on the costs through month-end against the percent complete from a site visit.
• Enter internal change orders when you know you will save or spend more on a line item but cannot bill the client.

2. Actual labor rate not used in the estimate (High)

If your labor rate carries hidden gross margin, the estimated rate runs higher than actual, the percent complete is off, and your earned revenue is wrong.

• Run the labor burden calculator on the RA website for each field employee and compare it to that employee’s actual cost.
• Update payroll calculations to bring costs within about 2% on the job.
• Review estimated against actual labor hours, not just dollars.

3. WIP not tied to your accounting data (High)

Because the WIP journal entry changes your accounting reports, the data behind the WIP spreadsheet has to match your accounting one to one.

• Set up a memorized report in your accounting for the jobs on WIP, and enter the actual costs and invoiced-to-date on the spreadsheet in exactly those amounts.
• Proof the totals from the report against the spreadsheet. They should be identical.

4. Incorrect prior year-end WIP (High)

If WIP is wrong at the end of the prior year, the reversal into the new year gives you a wrong starting line for every month that follows.

• Make sure your year-end WIP is correct. If it is not, the whole new year is off by the amount of that year-end reversal. This is one more reason to be deliberate about closing out your year-end financials.

5. Costs or invoices entered after WIP is complete (Medium)

If you follow the rule in error 3, you can always go back to any month and confirm the spreadsheet still matches accounting.

• Do not enter, or let anyone else enter, job costs or income backward into a month whose WIP is already done.
• Set a closing-date password on the memorized report so no one posts backward without your knowledge.

6. Change orders not entered correctly (Medium)

The original contract and budget on the WIP spreadsheet come straight from the signed contract and never change. The revised contract and budget change only through change orders.

• Enter every change order to both the contract price and the budget.
• Proof the gross margin on each change order to be sure it makes sense.

7. Changed formula cells (Medium)

People reuse the same WIP worksheet for years, and eventually someone types a zero into a formula cell or overwrites a formula, which can throw the whole calculation off.

• Start each year with a fresh WIP workbook from the RA website.
• Enter December’s WIP from the prior year, then update each tab month by month.
• Check the totals formulas every month to be sure they are still correct.

8. Keeping 100% complete jobs on the WIP (Low)

Many members leave completed jobs on the WIP, which makes it hard to see final gross profit on active work separately from completed work.

• A job is 100% complete when income is billed in full and expenses are entered in full, regardless of when either is paid, and there is no over or under billing.
• Leave it on for one more month to be sure you have captured all costs.
• Then move it to the Completed Jobs tab and post any later expenses to Warranty.

Smooth out the line

Get these eight right and you will smooth out your gross profit line month to month. Your budget-to-actual reports will finally be useful, and you will trust your own numbers again. That is the whole point: a WIP you can rely on is the foundation for nearly every other financial decision you make, right down to what you are able to pay yourself.

Free download: Test your own numbers with the Margin Variability Checker, which compares your gross profit margin month to month so you can spot a systemic WIP problem fast.

Frequently asked questions

What is a work in progress report? 

A work in progress report, or WIP, is a schedule that calculates earned revenue and over and under billings on each active job. It shows how much of a job you have actually earned based on percent complete, and whether you have billed ahead of that work or behind it. Those figures flow straight into your profit and loss and balance sheet, which is why an accurate WIP matters so much.

Why is my WIP wrong? 

Most WIP problems trace back to data entry, not the formulas. The most common and most damaging is an inaccurate cost to complete, because it drives the over and under billing entry. Close behind are estimated labor rates that do not match actual cost, a WIP spreadsheet that is not reconciled to your accounting, and an incorrect prior year-end number that throws off every month after it. The eight errors above are the ones that recur most often.

How often should I run a work in progress report? 

At least monthly, as part of your month-end close, so your budget-to-actual reports stay reliable and you catch problems while you can still act on them. Larger or busier companies often run it more frequently. 

The key is consistency: run it the same way every period so the numbers stay comparable month to month.