The WIP Schedule as a Strategic Tracking Tool

Strategic WIP Tracking with Cabbage for Sage 300 Construction

tracking sage 300 construction

The benefits of using a WIP schedule go far beyond complying with requirements from surety underwriters, bonding agents, and bankers.

However, those financial entities will make bonding capacity decisions based on your company’s ability to run a job profitably, and they rely on your WIP reports as the foundation for those decisions. Knowing how to positively apply a WIP speaks volumes about the competence of your construction management abilities and can open the door to larger, more lucrative jobs.

The WIP tracks contract value, total estimated costs, costs incurred to date, and project billing status, which allows you to successfully track project management key performance indicators (KPIs). KPIs enable project managers to make decisions to keep jobs profitable.

Understanding KPIs can uncover inefficiencies that, if not corrected, will knock a job off target – and the best WIP schedules track them for you. According to an AAFCPA article, those KPIs are:

Key Performance Indicators

  • Under billing – This will show up on the report as “costs in excess of billings” and may be listed as an asset, although it’s a red flag for billing issues or unapproved change orders. Project managers need to stay ahead of under billing scenarios or they could find their companies financing the job, which places a severe strain on cash flow.
  • Overbilling – Billings in excess of cost is known as “overbilling.” Profitable contractors use overbilling to maintain healthy cash flow without constantly relying on credit, and surety companies respect contractors who overbill responsibly. Accurately tracking this KPI allows you to overbill without crossing the line into “job borrowing,” a situation where overbilling is in excess of the total gross profit you’ll earn on the project. Surety providers may see this as borrowing from one job to pay for another.
  • Profit fade or spike – Profit fade is frequently a sign of poor estimates, mismanagement, or the result of misreported information earlier in the job. Profit spike can be a sign that estimates were too conservative.
  • Over/under applied burden – The indirect costs associated with jobs (e.g., vehicles, tools, fuel, and insurance) fall under the term “burden.” Failure to apply burden can skew gross profits and make your WIP lose credibility in the eyes of your surety.
  • Backlog on hand – Tracking the backlog job-by-job allows decision-makers to make informed strategic moves on a monthly or quarterly basis. You’ll see peaks and valleys in the workload and can focus on finding projects to fill the gaps.

A good WIP schedule is mandatory as the tool that lets owners, CPAs, and CFOs make the best-informed decisions that drive profitability.

WIP Reports with Cabbage

The KPIs listed above are best tracked with a reliable a WIP report. Luckily, Cabbage can streamline the WIP schedule process, enhancing your Sage 300 software in a way that makes it easy to stay ahead of the contract for all of your construction jobs.