WIP Report Mistakes to Avoid

While WIP Report Mistakes can have to do with inaccurate data input, there are numerous higher-level mistakes to avoid. Mistakes that can lead to WIP Report implosion. 

Avoid WIP Report Implosion

Don’t play Jenga with your WIP Report. While the block-removing game of Jenga is a fun and boisterous way to enjoy time with friends and family, it would be a bad mistake to try to remove any of the blocks on which your WIP Reports depend. You know, forces like loads, tension, compression, and torsion come into play. Removing the following blocks (WIP Report mistakes) will cause the tower to tumble.

Don’t play Jenga with your WIP Report – it won’t go well!

WIP Report Mistake #1

Neglecting to create detailed and accurate cost budgets upfront on every job.

Without detailed and accurate cost budgets prepared for each project, the ability to assess progress, profitability, and potential cost overruns is lacking. Including this information enables construction companies to make adjustments and ensure the project remains on track to completion within budget.

In our last post, WIP Reports are Like Car Engines, we included an important note. We feel so strongly about this concept that we are repeating it here.

Important Note: Sometimes, contractors are advised to ‘guesstimate’ for the sake of speed – especially when a WIP report is needed quickly for a third party. But it’s detailed budgeting at the start of every project that truly powers accurate WIP reporting and deeper financial insight. Don’t skip this crucial step in your project planning!  

WIP Report Mistake #2

Failing to consistently and accurately record all project-related costs.

Omitting or disregarding these project-related costs (including both estimated and actual) means the true financial stance of a project can’t be discerned. Whether as simple as making quick adjustments or as difficult as making critical decisions, choices should NOT be based on inaccurate information. For example, inaccurate tracking of labor costs distorts the project’s cost picture, leading to time-consuming and profit-fading adjustments.

WIP Report Mistake #3

Disregarding the importance of updating estimates.

The project’s financial status is unknown when estimates are not updated regularly and consistently. Changes in scope, costs, or schedules must be reflected accurately in the WIP Report. Otherwise, a distorted view of the project progress is created, leading to less informed decision-making regarding project priorities, resource allocations, and further strategic planning.

A WIP Report can only provide essential information when it accurately reflects the evolving nature of each project. One of the easiest ways to spot a need for updating is when change orders occur.

WIP Report Mistake #4

Not Addressing Overbilling or Underbilling.

Underbilling can lead to cash flow problems, which have the potential to compromise the project’s quality. Overbilling can negatively impact relationships with customers and lead to disputes. It can also impact project quality and timeliness, potentially making it difficult to obtain financing or bonding.

Therefore, overbilling and underbilling issues must be quickly identified, thoroughly investigated, and rectified. These steps lead to billings that align accurately with earned revenue, leading to a clearer and more realistic understanding of the project’s financial health.

WIP Report Mistake #5

Ignoring the need for consistent reporting periods.

It is difficult to track progress or trends accurately when the WIP reporting periods are inconsistent. Using consistent and regular reporting intervals is crucial for analyzing the project data effectively and deriving actionable insights.

When reporting periods are consistent, it makes it easier to spot anomalies, notice patterns, and watch for potential issues early on.

WIP Report Mistake #6

Declining to include detailed notes.

When a WIP report lacks detailed notes, it isn’t likely to provide a fair understanding of the financial trajectory of the project. Not capturing project scope adjustments can reduce the WIP Report’s reliability, leading to misunderstandings about the project’s status and skewing expected outcomes.

Construction contractors gain a better understanding by recording the assumptions used for cost and revenue projections and the methods used for progress measurement.

WIP Report Mistakes Overcome

Growing in WIP Report understanding or developing WIP Report savvy is one of the ways our firm steps up to help our clients remain informed, avoid hassles, reduce risks, and be future-ready. We want our clients to be able to Run With the Big Dogs! In other words, we want our clients to be winners.

By the way, the irony of playing Jenga is that the players aren’t trying to win but rather not to be THE loser.

If you’re interested in implementing WIP reporting or making it easier, let’s connect! It’s time to add this powerful tool to your financial toolkit.

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