Indeed, effort is put into creating Work in Progress (WIP) reports. There is the further effort put into maintaining them. And even more effort is needed when evaluating the information provided. So, is it worth it?
What are the benefits associated with maintaining a WIP report? Let’s put the puzzle together.
Bonding Agents Want WIP Reports
Your bonding agent believes your WIP report is vital. Along with other financial documents, he or she will scrutinize your WIP to determine how likely you are to complete underway projects satisfactorily.
You know that one benefit of maintaining a well-executed WIP report is the ability to ask for and receive a needed bond.
But did you know that detailed and up-to-date financial reports (including a WIP schedule) will aid in securing the lowest possible bond rate?
Tax Preparers Summon WIP Reports
Your tax-preparation professional uses your WIP reports to help calculate your final tax report for the proper governmental agencies. Some construction companies must have it as part of their GAAP-reviewed financials because of IRS requirements.
Banks or Other Lenders Ask for WIP Reports
Lenders want to know how disciplined a borrower is with his projects and the necessary financing. When they control the purse strings, they look for your construction company’s current financial health. In the same way that tax officials summon GAAP-reviewed financials, a WIP schedule will be a part of that request if a bank asks for your GAAP financials.
Essentially, being better able to prove your favorable financial situation means lenders are more likely to want your business. That translates to them being more willing to deal to get it.
Your Construction Business Needs WIP Reports
The bottom line, down and dirty truth is that if your construction business is not making money, everything else becomes pointless. And yes, WIP reports help you get information concerning the profitability of your projects.
Using WIP reports moves you from being reactive to being proactive. They allow you to make more intelligent day-to-day decisions.
They play a part in the following:
Risk mitigation
Evaluation of billing practices
Better budgeting standards
Remedying scheduling issues
Evaluating estimating skills
Reducing problems with under or over billing
Managing cash flow better
Providing feedback to project managers
Maximizing Profitability
Determining the status of a construction project, from budget adherence to over or under-billing to timeline objectives, can all be seen in a well-prepared WIP report.
Complete the Puzzle
The puzzle is almost complete now that you’ve seen that a WIP report is worth it.
But how do you put in the final piece?
Your bonding agent, tax preparer, and lending institution place value on your WIP report – but the truth is, your WIP report is a valuable tool you can use to enhance the bottom line of your construction company. No other financial report provides more useful and instant feedback on your projects.
The professional accounting team at The Profit Constructors can help you determine the proper structure of the WIP report needed for your construction business, and we can help you choose the right data points. After that, we can help you interpret the data that leads to greater profitability.
Reflection: Is there something you need to do to begin using WIP reports to their full advantage? What piece of the puzzle do you need for your construction business?
Ambitious Construction Contractors look to The Profit Constructors to provide advocacy in dealing with:
Clients and customers
Employees and subcontractors
Vendors and service providers
Governmental entities
Working with The Profit Constructors gives Construction Contractors the means to organize their operations in ways that help them:
Remain informed
Avoid hassles
Reduce risks
Be future-ready
Ready for action? Or want to know more? Get in touch today to schedule a complimentary discovery call. 866-629-7735