Installed but not invoiced: why your WIP report shows overbilling that isn't real

Most contractors on percentage-of-completion use the cost-to-cost method. Percent complete is costs so far over total estimated cost, earned revenue is that percentage times the contract value, and anything billed above earned revenue is an overbilling, carried as a liability. Cost to date is the one column that relies on someone else's paperwork showing up before close, Corpay, which sells payables software, notes in its guide to WIP reports.

Take a $1 million contract with $800,000 of estimated cost. At month end the crew has $500,000 of work in place and the pay app has billed $650,000. If a $100,000 supplier invoice for installed material hasn't posted, the ledger shows $400,000: 50% complete, $500,000 earned, $150,000 overbilled. Book the invoice and the job is 62.5% complete with $625,000 earned and $25,000 overbilled.

The late invoices post the next month, cost jumps, and a job where nothing went wrong appears to lose margin. Corpay calls that sawtooth the pattern it sees most often in contractors' WIP histories and says margins that swing two-plus points from month to month, with nothing happening in the field, usually point to sloppy accruals. Outside readers notice. Sureties read the schedule for fade, and lenders read the overbilling balance as cash that belongs to work still owed.

The fix is a cutoff routine. Corpay recommends a standing month-end accrual for material that has arrived but hasn't been invoiced, a check of open purchase orders against delivery tickets before close, and PMs confirming subcontractor progress on a set date each month instead of waiting for the sub's bill. The WIP Report blog describes the entry: book the expected cost as an accrued liability, reverse it when the real invoice posts so the cost isn't counted twice, and log each accrual by project, vendor, date and amount.