What makes a WIP schedule bonding-ready

A surety is guaranteeing that you will finish the work you are bonded on. To decide how much of that risk to take, an underwriter wants to know whether your jobs are making the money you said they would, whether you have the working capital to finish them, and whether your numbers can be trusted.

The WIP schedule answers the first question directly and feeds the other two. A bank reading the same schedule is asking a similar question about your line of credit: is the cash you are borrowing against real.

• Underbillings: persistent or growing underbillings suggest costs are outrunning the estimate. See overbilling and underbilling explained.
• Profit fade: estimated gross profit on a job that shrinks from one schedule to the next. A pattern of fade across jobs says the estimates cannot be relied on.
• Completed jobs: how the jobs you finished actually ended up compared to how they were bid. Leaving them off the schedule hides the most useful evidence you have.
• Tie-out: overbillings and underbillings on the WIP that match the balance sheet exactly.
• Backlog: the gross profit still to be earned on open work, which tells them what is coming.
• Timeliness: a WIP dated close to the request, not one rebuilt from last year.

1. Update it every month as part of a monthly close, so the schedule is ready whenever someone asks.
2. Get a real cost-to-complete from each project manager every month instead of carrying last month's forward.
3. Post the percent complete adjustment so your statements and your WIP agree.
4. Keep completed jobs on the schedule for the year.
5. Explain the big movements in a sentence or two before the reader has to ask.

Consistency builds credibility. A surety that has watched your WIP land on time and tie out for a year reads the next one very differently from one it sees for the first time.

Your year-end statements, whether compiled, reviewed, or audited by your CPA, are still the foundation your surety relies on. A clean monthly WIP makes that engagement faster, because the year-end WIP is the twelfth month of a schedule that has been maintained all along rather than a project built from scratch in January. KBRC is not a CPA firm; the monthly work is what makes the CPA's job easier.

KBRC's founder ran exactly this process for twelve years at a mid-sized electrical contractor. Over those years the company's bonding capacity reached $30 million, its line of credit grew to $1 million, and its annual CPA review took less time and less fee. The owner could read the WIP as a job summary and plan from it.