Most construction companies with long-term contracts track their projects with a Work-in-Progress (WIP) schedule. It pulls together how much a project was expected to cost, how much it has cost so far, how much has been billed, and whether the company is sitting on earned-but-unbilled revenue or has been overbilling to fund cash flow. Hand that same schedule to your finance team and your operations team, though, and you’ll often get two very different readings of it.
How Operations Sees the WIP Schedule
For a project manager or operations lead, the WIP schedule is mostly about the job. Their instincts are tied to the physical reality of the work:
- Percent complete reflects what’s built. Operations tends to think in terms of progress on the ground, like the foundation being poured, the framing going up, the drywall hung, rather than in terms of cost ratios.
- Cost-to-complete is a forecast. PMs are often optimistic about recovering from early overruns. “We’ll make it up on the next phase,” is a recurring theme.
- Change orders are a negotiation in progress. Operations might treat verbally approved or pending change orders as effectively real, because the work is happening, regardless.
- Underbilling can feel invisible. If the job is moving and the client is happy, an operations lead may not register that the company has financed a chunk of the project out of its own pocket.
The operations view is grounded and intuitive, but it can drift from financial reality, especially when optimism creeps into the cost-to-complete number.
How Finance Sees the WIP Schedule
For a controller or CFO, that same schedule is the basis for the numbers that end up on the financial statements. Their concerns run in a different direction:
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- Percent complete is a cost ratio. Most often that means costs incurred divided by total estimated costs, though some contractors measure it by units completed or labor hours instead. Either way, the number is only as honest as the cost-to-complete estimate behind it.
- Cost-to-complete drives reported profit. A lowball estimate inflates percent complete and pulls profit forward, profit that might have to be given back in a later period. Finance tends to be wary of it.
- Change orders aren’t real until they’re approved. Recognizing revenue on unapproved change orders is a classic audit flag and a fast way to overstate earnings.
- Over/underbillings are cash and risk signals. Heavy overbilling can mask a job that’s actually losing money. Persistent underbilling signals that the company is funding clients, interest-free.
Finance is looking past the individual job toward the company’s balance sheet, its bonding capacity, its lender covenants, and what the auditors will say at year-end.
Where the Friction Lies and Why It Matters
The friction between the two teams tends to cluster around a handful of recurring issues: the cost-to-complete estimate, profit fade as jobs near completion, the timing of change orders, and how aggressively to bill. Any one of these can make the same job look very different depending on whose view wins out. And the stakes reach well beyond internal accounting. A credible WIP schedule underpins bonding capacity, lender covenants, tax and distribution decisions, and even which jobs the company decides to chase. When finance and operations don’t reconcile their views, all of those decisions end up resting on a document nobody fully trusts.
The more that operations and finance treat the WIP schedule as a shared product, the more aligned their efforts will be, on the ground and in the books. That means holding regular reviews where PMs and finance reconcile estimates, billing positions, and change-order rules, and making sure that each side understands the why behind the other’s numbers.
The Bottom Line
The finance team and the operations team aren’t really adversaries. They’re looking at the same WIP schedule through different lenses, each shaped by what they’re on the hook for. One side is focused on the job, the other on the financials, and neither view tells the whole story by itself.
The companies that do this well are the ones where those two perspectives actually talk to each other on a regular basis. That’s usually what keeps the WIP schedule from turning into a point of friction and lets it do its real job: giving everyone a reliable picture of where each project, and the business as a whole, actually stands.
The Schneider Downs Construction industry group brings big thinking and personal focus to contractors of every size, from single-project builders to the region’s largest firms. Our specialists pair deep construction accounting, tax and advisory experience with a genuine understanding of how the business actually runs — margins, backlog, bonding and all. To put that experience to work for your company, visit our Construction Industry Group page or contact us at [email protected] or schneiderdowns.com/sd-contact-us.
