If your projects take more than a month to complete, yes. Work-in-progress reporting is one of the most important things a contractor can do to understand their real financial position. Without it, your profit and loss statement is essentially guessing.

WIP tracking compares two things on every active job: how much work you’ve actually completed versus how much you’ve billed. That comparison reveals whether you’re overbilled or underbilled. Being overbilled means you’ve collected more than the work you’ve done so far. That feels good in the moment, but it represents work you still owe. Being underbilled means you’ve done more work than you’ve invoiced for. That’s money you’ve earned but haven’t collected yet.

Both situations create a distorted picture of your finances if you’re not tracking them. A contractor who bills heavy at the front end of every project can look extremely profitable on paper while actually carrying significant obligations to finish work they’ve already been paid for. Flip that around and a contractor who doesn’t bill until milestones are hit might look like they’re barely breaking even when they actually have solid margins.

From a tax perspective, the IRS pays attention to how contractors recognize revenue. Contractors with average annual gross receipts above $29 million (as of 2024) generally must use the percentage-of-completion method for long-term contracts. Smaller contractors have more flexibility, but regardless of which method you use, your books need to reflect reality. WIP tracking is what keeps your revenue recognition honest.

Bonding companies care about WIP too. If you’re pursuing bonded work, the surety will want to see a WIP schedule as part of your financial package. A clean WIP report with consistent margins tells them you know your numbers. A messy one or no WIP at all raises red flags and can limit your bonding capacity.

The mechanics of WIP tracking aren’t complicated, but they require discipline. For each active project, you need the contract amount, estimated total cost, costs incurred to date, and billings to date. From those numbers you can calculate the percentage complete and determine the over or underbilling position. Update it monthly and review it alongside your construction job costing reports.

Where contractors get tripped up is estimating costs to complete. If your original estimate was $80,000 for a job and you’ve spent $60,000 but you’re only 60% done, your real estimated cost just jumped to $100,000. WIP forces you to confront those realities in real time instead of at the end of the project when it’s too late to adjust.

Even smaller contractors running jobs that wrap up in two or three months benefit from WIP awareness. You don’t necessarily need a formal WIP schedule for every $15,000 bathroom remodel, but once you’re regularly managing multiple jobs with staggered billing milestones, tracking WIP becomes essential to knowing where your money actually stands.

If you’re not sure how to set this up or your current books don’t support WIP reporting, an outsourced bookkeeping team in Jacksonville that understands construction accounting can build the structure for you. The goal is a system where WIP updates monthly with minimal effort so you always know the true health of your business, not just what the bank account says.