Why WIP Schedules Are the Key to Accurate Estimates in Sage 300 CRE

How accurate are your financial statements? If you’re like most construction contractors, you do your best to be as accurate as possible, but don’t always hit the mark. If you err gravely enough, you may find your bond agent unwilling to let you take on certain projects. To avoid that, you need to make sure your estimates are as accurate as possible.

Generally, you can only give accurate financial statements if your Work-In-Progress (WIP) schedule is accurate. Furthermore, you can only deliver an accurate WIP report if the estimated cost to complete a project is realistic.

So how does the WIP schedule affect your ability to project a realistic prediction of profitability? It offers a transparent look into your ability to financially manage construction projects.

Use the WIP Schedule to Adjust to Changing Conditions

You may have an excellent, accurate method for producing project cost estimates, but you are not clairvoyant. From the moment laborers and equipment start arriving to the worksite, anything can happen, and these unforeseen events need to be covered in the WIP schedule.

You may find your team undergoing unexpected rushes or delays. You may undergo scheduling and coordination complications – or simplifications – any number of things can happen that will either increase or decrease the cost of completing the project, the gross profit it produces and your company’s bottom line.

Carefully maintaining a detailed WIP schedule lets you stay ahead of these changes as they occur on the worksite. If you neglect to use this tool, you run the risk of letting your surety underwriter come to conclusions about your bond worthiness on his or her own.

Estimates are Not Static

Profitable contractors know that initial estimates can be off-the-mark for any number of reasons. However, they carefully update their WIP schedules to match financial conditions as they are and conservatively report profits as they see them.

This at a stark contrast with contractors who underestimate costs in order to obtain bonding or financing. This method assumes that the estimate is unchanging, and deliberately misrepresents the actual work taking place, which should never be done. The slightest thing could go wrong and cause everyone relying on the contractor to be ruined financially.

Successful contractors instead seek to slightly overbill for the work they perform, and experience profit gain throughout the course of a project. This gives them the cash flow necessary to meet unexpected obstacles and still perform.

These contractors also leverage the information in the WIP schedule to develop an earnings-from-contracts schedule that reconciles the profits from all jobs in a simple format. They know exactly why and how they are (or are not) producing revenue.