Most contractors look at their bank balance and call that "checking the numbers." The bank balance tells you almost nothing on its own. The P&L (Profit and Loss statement) tells you what you earned. The balance sheet tells you what you own and owe. The WIP (Work in Progress) schedule tells you where your cash actually is — and that third one is the report most contractors have never seen.
The Three Reports You Actually Need
- Profit & Loss — revenue minus expenses over a period of time. It tells you whether the business made money, but nothing about when that money will hit the bank.
- Balance Sheet — a snapshot of what you own (assets) and what you owe (liabilities) at a single point in time. This is where working capital and debt load live.
- WIP Schedule — construction-specific, and the one most standard accounting doesn't produce. It compares billed-to-date against earned-to-date on every open job, and shows you exactly who's over-billed and who's under-billed.
The One Number Most Contractors Miss
Underbillings — jobs where you've earned more than you've billed — are cash you're owed but haven't asked for yet. Overbillings are the reverse: cash you've collected ahead of the work, which can quietly fund payroll on a different job until that job's own bill comes due. Neither shows up on the P&L. Both show up on the WIP schedule.
Illustrative example
Not a real client — shown to demonstrate the math
A contractor with $500,000 in underbillings across three open jobs looks perfectly healthy on the P&L — the revenue is recognized. But that's $500,000 of work performed and not yet invoiced, which means it's $500,000 that hasn't touched the bank account either.
What To Do About It
Review all three reports together, monthly — not the bank balance alone, and not the P&L alone. If your bookkeeping isn't currently producing a WIP schedule, that's the single most useful report to add next.
The bank balance answers "how much cash do I have right now." It never answers "why," and "why" is the question that actually runs the business.
Frequently Asked Questions
Which report matters most?
None of them alone — the P&L, balance sheet, and WIP schedule each answer a different question, and you need all three together for the full picture.
What's the difference between overbilled and underbilled?
Underbilled means you've earned more than you've invoiced — cash owed to you. Overbilled means you've invoiced more than you've earned — cash you're holding ahead of the work.
Why doesn't my current bookkeeper give me a WIP schedule?
It's construction-specific and requires job-level cost and billing tracking most general bookkeepers don't set up by default.