The Most Important Report Most MEP Contractors Get Wrong
The Work-in-Progress (WIP) report is the financial backbone of every construction-oriented MEP contractor. It drives your revenue recognition, informs your banking relationships, determines your bonding capacity, and tells you whether your projects are actually making money.
And most contractors get it wrong.
Not dramatically wrong, most of the time. But consistently, quietly wrong in ways that don't surface until a project closes and the numbers don't add up. A "successful" year that somehow ends in a difficult conversation with your bank. A cash flow crisis dressed up as profitability.
So it's worth understanding exactly how WIP goes sideways — and what it takes to get it right.
Overbilling means you've billed ahead of the work you've completed. It inflates current revenue and creates a hole you'll dig out of later. When the project ends and the overbilling unwinds, that revenue evaporates. Do this across enough projects at once and you've got a cash flow problem that looks, on paper, like a healthy business.
Underbilling is the opposite problem, but it's not a safer one. You're doing the work and not collecting for it, which means you're essentially financing your customer for free. Chronic underbilling usually signals something deeper: poor project management, missed change orders, or a billing process nobody's staying on top of.
The goal is billing that reflects the work you've actually done. Getting there takes discipline in three specific areas.
The Three Pillars of WIP Accuracy
Pillar 1: Percent Complete Methodology
There are two ways to calculate percent complete. The cost method — cost to date divided by total estimated cost — is the more common one because it doesn't require someone to physically measure a job site. The physical method counts units installed against total units.
But the cost method has a real problem. If your estimated cost is wrong, your percent complete is wrong. And estimated costs are wrong more often than people want to admit.
The best approach for larger MEP contractors: use the cost method as your baseline, but validate it against physical progress at defined milestones. At 30%, 50%, and 75% completion, do an actual field check. If your cost-based number says 52% and your field team says 44%, that's not a rounding error. That's a project that needs a hard look right now — not at close-out.
Pillar 2: Estimate to Complete (ETC) Discipline
This is where most WIP reports quietly fall apart.
The ETC is your remaining cost to finish the project. Most contractors set it at the start and don't touch it until something obviously blows up. By then, the WIP report has been giving a false picture for months. The project manager knew it wasn't going well. They just kept thinking it would turn around.
Top performers update their ETC every month on every active job. That means using actual field productivity rates — not the estimating assumption, but the real number from this crew on this job. It means accounting for pending change orders on both the cost and revenue sides. Scope changes that haven't been formalized yet. Material price shifts since the original estimate was built.
When a $3M project's ETC moves by $200,000, that changes the profit projection, the percent complete, and the billing schedule all at once. Catching it in month three is a manageable problem. Catching it in month nine is a crisis.
Pillar 3: Consistent Cost Capture
Your WIP report is only as accurate as the cost data underneath it. Every cost has to hit the right job, the right phase, and the right cost code — and it has to happen close to real time.
If costs are posted to the wrong job, or lagging by two or three weeks, your WIP is fiction. You're making decisions based on numbers that don't reflect what's actually happened in the field.
This is where platforms like ServiceTitan make a real difference. When labor, materials, and subcontractor costs flow directly to the job cost ledger through integrated field operations, your WIP reflects what's actually happening now. Not what happened three weeks ago. You're not spending the last three days of every month trying to reconcile costs that should've been posted before the last draw.
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WIP Report Red Flags
Train your financial team to watch for these patterns at every WIP review. None of them prove a problem on their own. All of them deserve a conversation.
Fade. A project where estimated margin has declined three periods in a row. This almost always means the job is in worse shape than the numbers show — because project managers tend to be optimistic about what it'll take to finish. The ETC doesn't move until they can't avoid it anymore.
Flat ETC with Rising Costs. Actual costs are climbing, but the estimated cost to complete hasn't changed. Someone isn't updating their projection, or doesn't want to. Push on this immediately.
Heavy Overbilling on a Nearly Complete Project. If a job is 85% complete but has billed 95% of the contract value, something's off. Either the remaining work is going to cost significantly more than projected, or the project is further along than the cost data shows. Find out which.
Unexplained Underbilling. Legitimate reasons for underbilling exist — mobilization costs, front-loaded material purchases early in the job. But chronic, unexplained underbilling usually means the project team isn't pushing pay applications hard enough. Your cash flow is worse than it has to be. And that's a fixable problem.
