How to calculate work in progress in construction

TLDR

Work in progress, or WIP, is the value of construction work completed but not yet billed. As projects grow longer and more complex, understanding how to calculate WIP helps contractors stay financially accurate and keep accountants happy.

Understanding work in progress in modern construction businesses

When you first start a construction business, most projects are small and completed quickly. Jobs often wrap up within days or weeks, which means there is rarely any work carrying over from one month to the next.

As your business grows, projects tend to become larger, more complex, and longer in duration. This is usually the point where your accountant starts asking for work in progress figures. Understanding what WIP is and how to calculate it becomes essential as your operation scales.

Accounting and construction do not always speak the same language

Construction and accounting operate very differently. Accounting relies on fixed rules, strict timelines, and reporting periods. Construction, on the other hand, is dynamic and often changes day to day based on site conditions, materials, and scheduling.

Even though construction work is flexible, your business still needs accurate financial reporting. Accountants must report income and expenses at specific times, even if a project is not finished or invoiced yet. That is where work in progress comes in.

What work in progress really means

Work in progress refers to the value of work that has been completed on a project but has not yet been billed at a specific reporting date.

Accountants use WIP to match revenue with expenses during a given period. This allows them to create an accurate snapshot of your business finances, even if the timing of invoices does not line up neatly with month end or year end.

How to calculate work in progress in construction

Most construction companies use progress billing, often on a monthly basis. If your accountant asks for WIP before an invoice has been issued, the calculation is straightforward.

You simply determine how much of the project has been completed up to that date and calculate what you would bill for that portion of work. From that amount, subtract any progress invoices that have already been sent.

In simple terms, work in progress is the value of completed work that has not yet been billed to the client.

Why better estimating software makes WIP easier to manage

If you are finding it difficult to calculate work in progress accurately, your estimating and quoting systems may be part of the problem.

Modern construction estimating software breaks projects down into clear line items and tracks progress more precisely. This makes it much easier to calculate progress billing and WIP figures when your accountant needs them.

Bolster was built to support this level of clarity. By organizing estimates into structured components, it helps contractors stay on top of their financial reporting as projects grow in size and complexity.

If construction accounting is starting to feel harder than it should, it may be time to upgrade your estimating systems and set your business up for smoother financial management.