WIP Reports for Bonding Companies and Lenders — What They Actually Need

Why bonding companies and lenders require WIP schedules

A WIP (Work in Progress) schedule tells a surety or lender two critical things about a contractor:

• Are they financially healthy right now? A contractor with large over-billings may look profitable on their P&L but be in financial trouble — they've collected money they haven't earned yet.
• Can they finish their current work? Under-billed jobs mean the contractor has done work they haven't invoiced for — which shows up as an asset and demonstrates work capacity.

A P&L and balance sheet alone don't show this. The WIP schedule is the only financial report that shows the true state of a contractor's current projects — which is why every construction surety and construction lender requires one.

The exact columns a WIP schedule needs

Every bonding company and lender has a slightly different form, but all of them require the same core data. If your WIP schedule contains all of these, it will satisfy virtually any request:

The cost-to-cost method — why it's the standard

The cost-to-cost method is the standard for calculating percent complete in the construction industry and is required by most bonding companies and lenders. The formula is simple:

For example: A $500,000 contract with $200,000 in estimated total cost. If $80,000 has been spent, the job is 40% complete. Earned revenue is $200,000 (40% × $500,000).

Some contractors try to use physical completion percentages instead — "we're 50% done with the framing." Bonding companies almost always reject this. They want cost-to-cost because it's objective and auditable from the accounting records.

What sureties look for — the red flags

When a surety underwriter reviews a WIP schedule, these are the things that will slow down or kill a bond application:

• 🚩 Large overbillings relative to contract size

  If a contractor has billed 80% of a contract but only completed 40% of the work, that's a major red flag. It suggests cash flow problems — they needed to bill ahead to pay current expenses. Sureties call this "front-loading."

• 🚩 Fade in estimated costs (costs going up after the fact)

  If the estimated total cost keeps increasing month after month, the contractor is losing money on the job and trying to hide it by adjusting estimates. Sureties track this closely.

• 🚩 Jobs where % complete has barely moved

  A job that was 30% complete last quarter and is still 30% complete this quarter raises questions about whether the job is active or has stalled.

• 🚩 Missing retainage

  If a contractor has been working for years and shows no retainage receivable, something is wrong — either retainage isn't being tracked, or contracts don't include it (unusual in commercial construction).

• 🚩 WIP doesn't reconcile to the balance sheet

  The total underbillings on the WIP schedule should match Costs in Excess of Billings on the balance sheet. The total overbillings should match Billings in Excess of Costs. If they don't match, the financials aren't reliable.

Timing: when do they need the WIP schedule?

Bonding companies and construction lenders typically request WIP schedules:

• At fiscal year-end — required with annual reviewed or audited financials
• At bond application — for a new bond or to increase bonding capacity
• Quarterly — for contractors with large or complex bonding programs
• Mid-year with interim financials — some lenders require quarterly updates

The WIP schedule date should match the financial statement date. A December 31 balance sheet should have a December 31 WIP schedule. If the dates don't match, the surety will notice.

What construction lenders need (vs. sureties)

Construction lenders (banks funding a construction loan) have slightly different priorities than sureties:

• They care most about current liquidity — can the contractor pay their subs and suppliers?
• They want to see underbillings as an asset — earned revenue not yet billed demonstrates work in the pipeline
• They often want a backlog schedule alongside the WIP — what new contracts are signed but not yet started
• They want the WIP to tie to the tax return — if the CPA adjusted WIP differently on the tax return, you need to be able to explain the difference

How to produce the WIP schedule your clients need

Historically, producing a WIP schedule meant exporting data from QBO into Excel and manually building the schedule — entering contract amounts, calculating percent complete, computing over/under billings for every active project. For a contractor with 10–20 active jobs, this takes 2–4 hours every time it's needed.

WIP schedule checklist for bonding and lending

• All active projects listed (nothing missing)
• Contract amounts include all approved change orders
• Estimated total costs are current and realistic
• Percent complete calculated using cost-to-cost method
• Over/under billings calculated correctly for each job
• Retainage tracked separately for each project
• WIP schedule date matches financial statement date
• Total underbillings ties to balance sheet (Costs in Excess of Billings)
• Total overbillings ties to balance sheet (Billings in Excess of Costs)
• Completed jobs removed or clearly marked as complete

Questions about WIP reporting? Email us or browse more guides.