Is your WIP profit ahead of the job?

When the paper profit runs ahead

On paper, a WIP report can look profitable while the bank account stays flat, because construction work is often paid in stages and tied to milestones rather than one final handover. If the percent complete is too generous, the report can recognise profit before the job has actually earned it. ([business.gov.au](https://business.gov.au/planning/industry-information/construction-industry?utm_source=openai))

That matters because a job can drift backward long before the warning shows in cash. A cash flow statement tracks money in and out, and business records help you spot issues early, so a stale WIP is not just an accounting problem. It can hide a real cash squeeze until the month is already gone. ([business.gov.au](https://business.gov.au/guide/guide-to-managing-cash-flow?utm_source=openai))

Rebuild the cost to complete

Start by rebuilding the cost to complete from today’s site reality, not last month’s estimate. Add the labour still to go, subcontractor commitments, materials not yet ordered, hire, preliminaries, rework, and any variation work that has been done but not yet claimed. If the scope changed, the number has to change too. ([business.gov.au](https://business.gov.au/guide/guide-to-managing-cash-flow?utm_source=openai))

Keep the evidence beside the estimate. The ATO says records must explain transactions relating to your business income and expenses, and business.gov.au says good records help you track business health and manage cash flow. A WIP figure without backup is only an opinion, and opinions do not tell you what the job is really costing. ([ato.gov.au](https://www.ato.gov.au/api/public/content/0-53cc7a8e-0668-4c9d-95d7-eb841eb09c04?utm_source=openai))

Source: Official guidance

Compare what is left to claim

Once the finish cost is rebuilt, compare it with the value still left to claim. If the remaining claim is smaller than the remaining cost, the job is carrying a hidden loss. That is the point where the report stops being a forecast and starts becoming a warning that needs action. ([business.gov.au](https://business.gov.au/guide/guide-to-managing-cash-flow?utm_source=openai))

Check what caused the gap. Was the completion percentage too high, was a variation left out, or did a subcontractor invoice land late? The aim is to separate what is earned from what is hoped for. Regular reviews of your financial documents help you spot unusual trends before they spread across other jobs. ([business.gov.au](https://business.gov.au/finance/yearly-financial-tasks/review-your-financial-health?utm_source=openai))

Correct the figures, then fix the cause

After that, update the WIP rather than smoothing it over. Rework the job costings, claims register, and cash forecast together so the owner, project team, and accounts file are all using the same number. A clean correction is more useful than a neat report built on the wrong assumption. ([business.gov.au](https://business.gov.au/guide/guide-to-managing-cash-flow?utm_source=openai))

Then fix the source of the error. If you keep reporting against old assumptions, the business can spend real money against profit that never existed. Keep the records that show why the number moved, so the next review is based on evidence, not memory or optimism. That discipline helps you manage cash flow more accurately. ([ato.gov.au](https://www.ato.gov.au/api/public/content/0-53cc7a8e-0668-4c9d-95d7-eb841eb09c04?utm_source=openai))

Act on the loss now

If the corrected WIP shows a loss, respond fast. Tighten purchase approvals, freeze unapproved extras, reprice the work that is still open, and push harder on claim timing if the contract allows it. A report is only useful when it changes the next decision, not when it simply records bad news. ([business.gov.au](https://business.gov.au/guide/guide-to-managing-cash-flow?utm_source=openai))

Today, review each active job, reset the cost to complete, compare it with what is left to claim, adjust the WIP, and then act on the loss. If the numbers still do not make sense, call CRP today about turnaround support. We coordinate independent qualified professionals. This article is general information only, not legal, tax, or financial advice. ([business.gov.au](https://business.gov.au/guide/guide-to-managing-cash-flow?utm_source=openai))