Products & Solutions
May 25, 2023

How to Maximize Efficiency With WIP Reports

Construction work-in-progress (WIP) reports are a critical component in keeping stakeholders informed about the progress and financial health of their project. These reports outline the project's resource allocation, financial performance, and timeline.

Tracking this information by hand during the course of a construction project can be tedious and burdensome. However, recent technology has made it easier to track work-in-progress, allowing project managers to identify potential risks early on and take corrective actions before they become expensive construction delays.

In this article, we'll explore the importance of construction WIP reports. We’ll start by covering what WIP reports are and why they are essential in construction projects. Then, we’ll take a closer look at the role WIP reports play in financial reporting and the technology available to help improve the accuracy of WIP reports. By the end of this article, you should have a much better idea of how to best utilize WIP reports on your next construction project.

What Are Work-in-Progress Reports?

Work-in-progress reports are regular reports that provide stakeholders with detailed information on the project's progress, including timelines, milestones, and resource allocation. They are perhaps most important as a construction accounting tool, providing an accurate financial picture of costs to date.

WIP reports are typically generated using specialized software or tools, which automate data collection and analysis, streamlining the process for project managers. While there is no single standard format for a WIP report, the reports often contain the following information:

Being able to capture the work in progress in real-time can help paint an accurate financial picture of a project for construction companies.

Why Are WIP Reports Important on Construction Projects?

Construction WIP reports play a vital role in monitoring the progress of construction projects, providing stakeholders with valuable insights, including:

  1. Project timeline: Construction WIP reports provide stakeholders with a detailed breakdown of the project's timeline, including key milestones and deadlines. A WIP report will reflect the percent complete for construction activities.
  2. Resource allocation: WIP reports provide stakeholders with information about resource allocation, including labor costs, materials, and equipment. Tracking this information allows construction businesses to ensure that the project is operating efficiently and within budget.
  3. Budget: Construction WIP reports provide stakeholders with valuable insights into the project's budget. By tracking project expenses and identifying any areas of cost overruns or inefficiencies, WIP reports help project managers to stay within budget and identify cost-saving opportunities.
  4. Financial performance: Construction WIP reports provide insights into the project's profitability. By comparing the actual costs of the project against the budget, project managers can determine whether the project is on track to meet its financial goals.

In a nutshell, WIP reports not only help identify schedule delays but also help measure job profitability throughout the lifecycle of the project and show potential issues from a job costing standpoint.

Let’s say, for instance, that the WIP report shows that only 40% of work is complete in a certain area, even though work is meant to be 50% complete. A good project manager will identify this as a reduced labor production rate and since that portion of the work is taking longer to complete than budgeted, will be able to take corrective action.

The earlier a project manager can identify these risks, the easier and more cost effective it is to take corrective action or adjust financial and schedule projections accordingly .

What Role Do WIP Reports Play in Financial Reporting?

Architect working on floor plans

As outlined above, WIP reports are perhaps most important as a financial reporting tool.

Construction WIP reports provide stakeholders with a detailed breakdown of project costs, including labor, materials, equipment, and other expenses. By comparing actual project costs against the budget or tracking project cash-flow, project managers can determine whether the project is on track to meet its financial goals and make adjustments as necessary. This information can also inform future project planning and budgeting decisions, as estimators will have access to accurate workflow information, such as how long it takes to complete a certain activity.

Additionally, WIP reports can show over and under-billings. Typically, project managers in the construction industry want their projects to be over-billed. They will bill heavily during their first few requisitions so that they are cash positive. However, this can give a false sense of profitability, as this cash will be needed to fund work activities later in the job.

Similarly, WIP reports can also show under-billings. Under-billings are detrimental to the job because that means the construction company is acting as a bank, funding its own project. This can be particularly problematic if unexpected work or change orders arise.

For instance, let’s say that there is an emergency shutdown and a crew has to work a weekend. The crew will need to be paid for this in their next payroll cycle, but the project manager may not be able to bill for the work for another month. Even after billing, the project manager may not receive payment for another 30 to 45 days after that.

In a nutshell, construction companies must have enough cash on hand to be able to fund at least some of the initial work in their backlog, until a project manager can submit a bill. If the project remains underbilled after work has begun, many problems can arise. That’s why it’s important to analyze the WIP report for any under-billings so that the project manager can bill appropriately in the next billing cycle.

How Can Technology Improve WIP Reports?

To ensure the accuracy and completeness of financial data included in construction WIP reports, project managers must establish clear reporting procedures and get regular updates from all parties involved in the project. This may include requiring subcontractors and suppliers to submit detailed invoices and receipts, maintaining detailed records of project expenses, and regularly reviewing financial reports. This can be both time consuming and subjective.

Another way to go about obtaining accurate and objective information is with the assistance of technology. For example, software like Avvir can aid in construction progress tracking. Avvir offers project managers automated schedule tracking, cost and earned value analysis, installation issue detection, and an updated BIM with as-built conditions. This is done through LiDAR scanning, which captures work completed, compares it with baseline information, and identifies deviations from the baseline.

By utilizing technology, project managers can take the guesswork out of work complete. Gone are the days when a project manager sends an intern or an assistant project manager into the field to highlight drawings and validate work complete. Technology improves construction efficiency and accuracy, freeing up time for project managers to proactively manage their projects.

WIP Reports Are Essential for Construction Projections

Engineers wearing hard hats while working on their WIP report

Construction WIP reports are essential tools in monitoring the progress of construction projects, providing an overview of the timeline, resource allocation, and financial performance. WIP reports can help project managers stay on-time and within budget. 

One way to ensure that project managers produce accurate WIP reports is by utilizing technology like Avvir. Avvir’s Progress 5D improves visibility into your projects' financial health by accurately tracking work-in-progress with reality capture from the field. This information is combined with other project data, like subcontractor scope, your BIM, and project schedule to validate work completed. Be sure to contact us today to learn more about how Avvir can help improve your WIP reports and construction projects.

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