Your Work in Progress statement defines the monthly profits. The accuracy of this statement depends on your estimates. Below are tips to improve monthly reporting and a FREE template that includes your “Survivability Rate” for you to download.
- Labor percent complete – The largest margin for error is knowing exactly where you are in the estimate when it comes to labor dollars. Having the Project Managers or Superintendents estimate projections based on percent can leave major errors in your ability to accurately determine the monthly Work in Progress statement. A better way to determine the amount of work completed is to assign a unit of measure to each cost code and collect the quantities of those at the end of each month. Comparing the current production rate to the estimated one will allow you to make a + or – adjustment to the labor budget based on the remaining quantities. This process is difficult to start but once you do you will be amazed at the increased accuracy of your labor cost to complete.
- Material Overages – During the project have your Project Managers or Superintendents maintain a log of all the highest dollar value materials being installed on each project. Such as yards of concrete, tons of gravel for example. At the end of each month compare the quantities to estimate and define any overages and make adjustments + or – to the material budgets.
- Rented Equipment – Monitor daily/weekly to ensure usage and that all equipment has been called off and not being charged. Many times equipment not being used continues to be billed and missed by field personnel.
Always remember to leave the original budgets in place and do an internal adjustment via a change order so that you have an audit trail to reconcile with.
Establishing these processes to accurately determine the actual costs to the budget completion will greatly improve your monthly Work in Progress statements so you can accurately prepare the company’s financial statements.
Finally you can determine your “Survivability Rate”, which is the number of months your gross profit on the remaining backlogged work will pay for your average monthly total overhead costs. Click below for a FREE Work in Progress Statement (WIP) Excel template that you can download and use to find out yours. Incorporating the above processes and monitoring your survivability rate can provide comfort and trust in where your company is each month.
Send a email requesting the WIP with Survivability Rate Excel Spreadsheet Template to firstname.lastname@example.org