Work-in-Progress Schedules are a must-have for any Construction Company.

In today’s surety environment, bonding companies want to make sure that every aspect of their clients’ finances are in robust condition. Often, these companies rely on construction companies’ work-in-progress schedule to determine the project-by-project profitability of the company’s activities.

Why Can’t Underwriters Simply Rate Completed Contracts?

While sureties can get a general overview of a construction company’s finances by reading completed contract reports, they can’t discern details. One of the most important details that sureties are looking for when considering bonding contracts is mid-project cash flow – something that any completed contract report would not accurately describe.

The work-in-progress schedule, however, identifies cash flow in real-time. This lets sureties determine whether construction companies are underbilling or overbilling for work performed.

• Underbilling is an indicator of potential cash flow issues. It tells sureties that you are not sufficiently prepared to encounter obstacles or unforeseen worksite complications.
• Overbilling to a small degree is attractive to sureties. A wide overbilling gap, however, indicates that you are not fully aware of the actual prices of worksite supplies and activities.

What Data Should a Work-in-Progress Schedule Include?

There are four key data items that your report needs to include. Sage Construction Accounting Softwarecan help you identify and itemize these costs:

• Contract Value: How has the value of each project’s contract changed over time?
• Costs Incurred to Date: Including direct costs like construction supplies and indirect costs like liability insurance.
• Total Estimated Cost: In particular, sureties will look at how often you update the total estimated cost of each project over time.
• Project Billings: Each individual project billing item should be included in the report.

Manipulating these four items of data results in the information sureties are really looking for:

• Revenues earned to date per project
• Costs incurred to date per project
• Profit or loss per project
• Your tendency towards underbilling or overbilling
• Any backlogged revenues, costs, or profits

Setting this up in your accounting software system takes work, but it pays off. If sureties look at your construction company in a more favorable light, you will be able to negotiate far more advantageous bonding contracts for construction projects in the future.