Construction Work in Progress and Percentage of Completion Calculator
Build a defensible WIP schedule for the bank, the bonding company and the T2. Work out percentage complete, revenue to recognise, over and under billings, and any loss you must accrue in full today.
revenue to recognise
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WIP Schedule by Job
| Job | Contract | % Complete | Revenue Earned | Billed | Over / (Under) | Gross Profit |
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Balance Sheet Presentation
| Item | Where It Goes | Amount |
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Jobs Needing Attention
| Job | Issue | Action |
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Points That Decide This
What to Do Next
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Disclaimer: This calculator applies the cost-to-cost method of measuring progress, under which percentage complete is costs incurred to date divided by total estimated costs at completion, and revenue earned to date is that percentage applied to the contract value including approved change orders. Other measures of progress may be more appropriate for particular contracts. Under Canadian accounting standards for private enterprises, revenue from a contract may be recognised using the percentage of completion method where the outcome can be reasonably estimated and performance consists of the execution of more than one act, and the completed contract method may be appropriate in defined circumstances; the choice of policy and its application should be determined with reference to the applicable standard and the entity’s circumstances. Where total estimated costs exceed the contract value, the entire expected loss is generally recognised immediately rather than spread across the remaining term. Amounts billed in excess of revenue earned are presented as a liability and amounts earned in excess of billings as an asset, and holdback receivable is generally presented separately. Unapproved change orders and claims are subject to specific recognition criteria and have been excluded here; only approved change orders should be included in contract value. For income tax purposes, a professional or other election and specific provisions may affect the timing of income inclusion, and the accounting treatment does not automatically determine the tax treatment. Holdback amounts under the Construction Act (Ontario) have their own statutory rules regarding retention and release which are addressed separately. Figures produced here are indicative planning estimates and are not a substitute for prepared financial statements or a filed return. This page is general information, not accounting or tax advice.
The Cost Estimate Is the Whole Schedule
Cost to cost is arithmetic. Costs incurred divided by total estimated costs gives percentage complete, and that percentage applied to the contract value gives revenue earned.
Everything therefore rests on one number that nobody can verify from outside: the total estimated cost at completion. Get that wrong and every figure below it is wrong, in the same direction, on every job.
Understating estimated costs overstates both percentage complete and profit. It is the single most common problem in construction financial statements, and it is rarely deliberate. It is usually a project manager being optimistic about a job that is quietly going sideways.
Loss Jobs Are Recognised in Full, Immediately
This is the rule that catches contractors out at year end. Where total estimated costs exceed the contract value, the entire expected loss goes into the accounts now. Not spread over the remaining months. All of it, today.
A job forty percent complete with a hundred thousand dollar projected loss takes the full hundred thousand this year. There is no matching it to future progress.
That rule is also why the estimate matters so much. A job that is marginally profitable on paper and genuinely loss-making in reality is hiding a full loss accrual that will surface eventually, usually at the worst moment for the bank covenant.
Overbillings and Underbillings Tell Two Different Stories
These are the numbers a lender reads first, and they mean opposite things.
| What It Is | What It Signals | |
|---|---|---|
| Overbillings | Billed more than earned | Good cash flow, or a job billed ahead |
| Underbillings | Earned more than billed | Work done and not invoiced |
Overbillings are a liability. You are holding customer money for work not yet done, which funds the business but is not profit. Underbillings are an asset and usually a problem, because unbilled work is work you have paid for and not been paid for.
Large underbillings are the classic warning sign. Either the billing process has fallen behind, or there is a dispute nobody has mentioned, or costs are running over and the schedule has not caught up. All three are worth knowing before the bank asks.
Only Approved Change Orders Belong in Contract Value
Contract value should include approved change orders and nothing else. Unapproved change orders and claims have their own recognition criteria and are frequently the difference between a job that looks profitable and one that is.
A contractor who has done a hundred thousand dollars of extra work on a verbal instruction has real exposure. Putting it in the contract value because everyone agrees it will be approved is exactly how a WIP schedule stops being defensible.
Holdback Sits on Both Sides
You have holdback billed to customers and not yet received, and holdback you are retaining from your own subcontractors. Both need to be visible.
The customer holdback is a receivable and generally presented separately, because a lender wants to see how much of your receivables cannot be collected yet by law. The subcontractor holdback is a payable, and it is real money going out when the lien periods expire.
What the Bank and the Bonding Company Look For
- A job-by-job schedule, not a single aggregated number
- Consistent estimating, with a track record of estimates that held
- Underbillings explained, since they are always the first question
- Loss jobs disclosed, accrued in full, with an explanation
- Holdback separated on both sides of the balance sheet
- Change orders that are approved rather than expected
Bonding capacity turns on the reliability of your numbers as much as their size. A contractor whose estimates have been accurate for three years gets more capacity than one with better margins and a history of revisions.
Accounting and Tax Are Not the Same Question
How revenue is recognised for financial statement purposes and how income is included for tax are related but distinct. The accounting treatment does not automatically settle the tax treatment.
Where the two diverge, the difference belongs in the T2 reconciliation rather than in the WIP schedule. Worth having someone who does both look at it, because a contractor optimising one in isolation usually creates a problem in the other.
What This Calculator Does Not Cover
- Whether percentage of completion is the right policy for your contracts
- Unapproved change orders and claims, which have their own criteria
- The full T2 reconciliation between accounting and tax
- Holdback release timing under the Construction Act
- Joint ventures and partnership interests
- More than three jobs, which needs a proper schedule
Build the schedule before the year end, not after. Our construction accounting service covers the WIP schedule, the statements and the T2.
Frequently Asked Questions
Common questions on construction WIP.
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Get the Schedule Right Before Year End
Send us your job list with costs, estimates and billings. We will build the WIP schedule, flag the loss jobs and the underbillings, and prepare statements the bank and the bonding company will accept.