The work-in-progress (WIP) report is one of the most important records that a construction financial professional (CFP) tracks in the industry. Preparation can be time consuming and getting up-to-date information can also be a challenge. Of course, every company has their unique challenges and circumstances, but looking to our peers can help each other find new ideas, formats, or technology to assist in making it a little less challenging. We’ve asked a couple of fellow Specialty Trade Contractors to provide us feedback on the following question:
Do you have monthly WIP meetings and, if so, what do they look like? If not, how do you get job updates?
Leila Bennett-Snow, Controller
Strategic Mechanical Inc.
We have weekly status update meetings as a company with all of our project managers and management staff. We don’t hold monthly WIP meetings but each month the PM’s receive a report showing their specific jobs from the WIP. They have about a week to go through and make any updates to the profitability and then management staff does a final review of all the projects and analyzes the gain/fade of a job. Any job that looks to have made a big swing positive or negative in a month is looked into with more detail. This allows us to keep pulse on how the projects are progressing and any significant changes to profitability from month to month.
Kevin O'Shea CCIFP, President / CFO
Shamrock Electric Co., Inc.
I started at Shamrock when I was five — family business; who doesn't start at the age of five? The words that I remember most from that time are "monthly meeting." It was very important for the big people, but it was best for me because someone brought doughnuts and I got the leftovers.
That was 55 years ago, but our monthly meeting has not changed much. The job cost reports have evolved but are very much the same format as they were 55 years ago. If you can teach non-CFMs to read the report, you don't change it much. We have the project managers, upper management, and purchasing attend. As the CFO, I run the meeting and we review every active job with a combination of $10,000 in billing and cost within the preceding month. That number has increased over the years and is probably primed for another increase.
I show open purchase orders in the accounting system vs. open purchase orders on the estimate. This shows if we are running over or under on material.
The final, most important number is percent complete. Is the job physically as complete as the numbers show?
This is where it is important that I am not the smartest guy in the room. I let the PMs talk it out with each other. They are not easy on each other either, as our company is a "share one, share all" in terms of information, perks, and bonuses. I just sit quietly and take notes.
Then I prepare my WIP report for the financial statement.
In the world of immediate information, I now produce the reports twice a month, although we only have one "monthly meeting." I wouldn't know how to tease out reality from the numbers in any other way.
Ryan Reed, CPA, Controller
Elder Corporation
We have monthly WIP meetings with each project manager for every job included on our WIP schedule that month. The stage of the project determines how we approach it. For new projects coming onto the WIP schedule we discuss what margin the project was bid at and if there are any other incentives or LD’s to be aware of. As projects progress, we will discuss any large outstanding change orders, current progress on groups of line items, and overall job profitability. I then compare this to a billings vs costs report that I run out of our accounting software to get a feel for whether or not those projections line up with actual costs at the time. As we get closer to the end of the job, we discuss the likelihood of receiving any incentives or incurring any LD’s, the status of any other unpaid change order work, and what final costs are expected to be for the project. At the end of the year, we have a longer, more in depth meeting and go job by job (including all open jobs and all closed jobs for the year) and look at individual line items for each job on the WIP schedule. For jobs that are no longer on the WIP schedule, we discuss whether or not there will likely be any final punch list costs that may come in, or any work that could be potentially outstanding that is weather dependent (waiting for seeding to take next spring, making sure plants survive over winter, etc…).
In closing, although the type of work performed varies amongst each of our respondents the process and desired end results are the same.