Construction Financing Starts with a Clear WIP Schedule

A contractor can have a strong backlog and still face a shortage before the next payroll. To understand that gap, a financing discussion needs to connect project progress with billing and collections. A work in progress schedule, commonly called WIP, helps organize that conversation.

CFMA describes how a WIP schedule links estimated project costs, costs incurred, earned revenue and billings. Its value depends on keeping those estimates current. The schedule is not a substitute for a separate cash collection forecast.

Give each active project a consistent record

A useful lender discussion starts with the contract amount, approved changes, costs incurred, estimated remaining cost, billings and collections for each project. Show retainage separately where applicable. Identify disputed or unapproved items so the reader can distinguish them from agreed amounts.

Use the same reporting date across the WIP schedule, receivables aging and financial statements. If totals differ, prepare a reconciliation. Ask your CPA to confirm the accounting treatment and presentation appropriate to your contracts.

Explain underbilling before requesting more credit

Underbilling describes a difference between revenue recognized and amounts billed. It can reflect timing, billing administration or unresolved project issues. CFMA notes that persistent underbilling can create pressure on working capital. [1]

For an original, simplified illustration, assume a qualifying contract uses a cost to cost measure of progress. Contract value is $1.5 million, estimated total cost is $1.2 million and costs incurred are $600,000. At 50 percent completion, calculated earned revenue is $750,000. If billings are $650,000, the difference is $100,000. This illustration is not an accounting determination.

The practical question is when that difference can be billed and collected. An explanation tied to an approved milestone is more useful than assuming it will turn into cash immediately.

Connect new projects to the cash already committed

Build a separate weekly cash schedule for major jobs. Include supplier deposits, payroll, subcontractor payments and expected collections. Review the schedules together to see whether several projects require funding at the same time.

Do not treat every dollar collected ahead of completion as spare cash. Include the remaining project costs in your assessment before using that money elsewhere.

Prepare a request that explains the timing

Choose the projects responsible for most of the forecasted funding gap and explain their payment sequence. Include the actions being taken to resolve billing delays and keep costs current.

Lirodean can help construction businesses organize the financial and project information needed to explore working capital financing. Contact us to discuss your project pipeline and the cash required to deliver it. Availability depends on the lender, contract structure and eligible collateral.

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