1. The Work In Process Schedule

2. The WIP Schedule The POC Calculation Underbillings Overbillings
How to use our system reports
Reconciling the WIP and P/L
Constructing a P/L from just a WIP
Cash Flow in WIP Analysis

3. The POC Calculation Need the 4 basic WIP Figures
Contract Price, Total Estimated Cost, Cost to Date, Billed to Date
Can use Estimated Gross Profit or Cost to Complete
Three step Process
Calculate percent complete
Calculate Total Earned on Project and Earned Gross Profit
Calculate Under/Over Billing

4. The POC Calculation Calculate the Percent Complete
Need Total Estimated Cost and Cost to Date
Divide Cost to Date by Total Estimated Cost
Cost to Date/Total Estimated Cost = Percent Complete

5. The POC Calculation Calculate the Total Earned on Project
Contract Price x Percent Complete = Total Earned on Project
Calculate Earned Gross Profit
Not needed here, but useful in determining current period earnings
2 ways to do it
Total Earned on Project – Cost to Date = Earned Gross Profit or
Total Estimated Gross Profit x Percent Complete = Earned Gross Profit

6. The POC Calculation Calculate Over/Under Billing
Total Earned to Date – Billed to Date = Over/Under Billing
If number is >0, it is an Underbilling
If number is <0, it is an Overbilling

7. Underbillings “Underbillings never come from something good!”
Contractor has not billed for the amount of cost and profit they have put in place
Early stage Underbillings are sometimes explainable
Late Stage Underbillings are nearly always an issue
Unapproved Change Orders
Profit Fade not yet recognized
Always a negative cash flow effect

8. Overbillings Can be an indication of deferred profit increases
Can be a cash flow tool if used correctly
Becomes an issue if overbilled and heavily into the bank line
Also can indicate job cost system issues
Can create Pure Job Borrow

9. Pure Job Borrow
Occurs when you have billed your entire profit before it is earned
Looks at total billings and cost to date only, excluding earned profit
If Billed to Date – Cost to Date > Total Estimated Gross Profit, then there is pure job borrow
If cash balances are low, then this is a much larger issue, as they will need the cash in the future

10. P/L Reconciliation
Should use to check CPA’s work if the schedule is not included
Can also use if you have a new CPA firm and want to check their work
Have an excel spreadsheet that can be used

11. WIP Cash Flow Analysis
Contractor Cash Flow Analysis