Reporting & WIP

What is percentage-of-completion method?

Definition

A revenue recognition method that books contract revenue in proportion to the work completed, usually measured by costs incurred against total estimated costs.

How it works

Instead of recognizing revenue when an invoice goes out or when the job closes, the percentage-of-completion method ties revenue to progress. Most contractors use the cost-to-cost approach: the share of estimated costs you've spent is the share of the contract you've earned.

Cost-to-cost

Percent complete = Costs to date ÷ Total estimated costs

Earned revenue

Earned revenue = Percent complete × Contract value

Why it matters

Long-duration jobs make cash-basis income look lumpy and misleading. Percentage-of-completion smooths revenue to match the work, which is why sureties, lenders, and CPAs reviewing contractor financials expect to see it, and why it drives the WIP schedule.

WIP schedule

A work-in-progress schedule lists every open job with its contract value, costs to date, estimated cost to complete, billings, and the resulting over- or underbilling.

Cost to complete

The estimated remaining cost to finish a job. Together with costs to date, it sets total estimated cost and drives percent complete.

Overbilling

Billings in excess of costs and estimated earnings: you've invoiced more than you've earned on a job. It's recorded as a liability on the balance sheet.

Underbilling

Costs and estimated earnings in excess of billings: you've earned more than you've invoiced on a job. It's recorded as an asset on the balance sheet.

Guides that cover this

Reporting & WIPOct 14, 2026

What Is a WIP Report? A Contractor's Guide

The WIP report tells you which jobs are making money, which are fading, and how much of your cash is really yours. Here's how to read one and build it every month.

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