Staying on top of your billing is one of the most important things you can do for your company’s bottom line and your own peace of mind. Work-in-progress reports for construction firms are designed to provide the financial information you need to monitor your billing and maximize your profits.
Keep Your Finances on Track
A work-in-progress report clearly shows you whether you’re over-billed or under-billed on the jobs your firm is currently working on. Over-billing is the more common problem. Contractors often bill aggressively to compensate for payment delays that can run up to 75 days. This strategy may seem logical, but by billing too aggressively, you can end up over-billing. Over-bill too often and you’ll run out of billable money before you cover your project costs.
By under-billing, you’re liable to overlook potential losses and overestimate profits, which can lead you to plan for purchases using money you don’t actually have.
With a more accurate, up-to-date view of your finances, you’ll be able to resolve problems and take advantage of trends as they happen, rather than waiting until the year’s end after the books are closed.
WIP reports also protect your company’s future. Uncontrolled over- and under-billings not only wreak havoc with your finances, but also reduce the trust sureties and lenders have in your company’s management. That, in turn, can hinder your company’s growth.
Get the Most from Your WIP Report
Work-in-progress reports for construction firms are most beneficial when prepared monthly. You’ll need to track variables such as costs to date and billed to date amounts. Many accounting software programs include a WIP report feature. Update the percent-complete field weekly and the system performs the calculations for you. Alternatively, you can use Excel, but you won’t get the same level of detail as you would with accounting software. Once you know whether you’re over- or under-billed for the month, you can make a WIP adjustment to correct the situation.
To learn more about work-in-progress reports for construction firms, contact us at Construction Monitor.