General Contractor

Hi Everyone!  We are currently re-evaluating our process for handling WIP adjustments and have a few questions we would love to hear others' responses to/opinions on:

1. Do Operations and Accounting use the same WIP or does Operations have there own reporting in CMiC separate from Accounting?

2. Who in your company is responsible for entering, reviewing, and posting WIP adjustments (contract and gross profit overrides) each month?  Is it Operations or Corporate Accounting?

3. If Operations can input overrides, how is that information reviewed or approved with Accounting before the financials are closed?

4. What are the main reasons you do a contract override?

5. Do you do contract overrides for a return of savings to the owner?

6. What controls do you have in place to ensure overrides are accurate and justified (documentation, review thresholds, approval workflows)?

I realize we have several questions and I know everyone is super busy, so we would really appreciate any feedback you can offer.

Thanks!

------------------------------
Robin Thomas CCIFP
Director of Project Accounting
The Beck Group
Austin TX
(512) 367-9675
------------------------------

Robin-I don't have many comments on the Ops vs. Accounting debate as our Ops team is not involved in financial reporting, but I would say think through the impacts on different financial statement users. You may want to maintain different WIPs for different purposes and remember that different parties may have different motivations for WIP. For example:

Early in a job, you may want to circulate a more conservative WIP (lower margins, higher cost estimates) to external parties (e.g. lenders, bankers, sureties, investors, etc.) to give you wiggle room on costs. A leaner WIP (higher margins, lower costs estimates) may be given to the operations team to encourage them to hold costs down, maintain job efficiency, and reach job bonus targets. Theoretically the WIP profit margins would start to converge as the project is completed.

Anytime you're dealing with complex accounting estimates, you want them as accurate as possible for financial reporting purposes (particularly audit/reviews), but often times accounting is stuck between competing interests from various users of WIP and you need to understand what someone's motivation is when there is an angle for a change in process. I'd say prioritize being consistent across all jobs, segments, and units in approach. I'd also take into account that if there are big variances between an original estimate in margin and the final margin on a job, questions will likely be asked, an explanation will be required, and you don't want the explanation to be something that make it looked like the team missed something it shouldn't have missed. If someone analyzes trends across all projects, they may notice a similar pattern that repeats itself over and over again (like sandbagging or profit fade).

In terms of Ops override, I'd think through potential motivations for override (you likely have a clue to what the issue is in your situation) and adjust for that at the financial reporting level. I'd think you'd accrue an estimate for return of savings to the owner on a monthly basis as the job progresses and it may have swings up or down. Or maybe the ops team wants to present as a change order with revenue/costs/margin partially in place that hasn't met the thresholds for financial reporting to external parties-accounting would back the revenue and costs out on it or at a minimum show no profit on it (may be considered a liability where you recognize the cost but not the revenue if there is question as to whether the change order will be approved).

------------------------------
Melvin Schneider CPA, CGMA, CCIFP
CFO
Clement Building Company, LLC
Metairie LA
(504) 837-2000
------------------------------

You bring up some great points!  I really appreciate your response and will pass this along to my CFO.  Hope you are doing well! 

------------------------------
Robin Thomas CCIFP
Director of Project Accounting
The Beck Group
Austin TX
(512) 367-9675
------------------------------

Original Message:
Sent: 11-03-2025 16:17
From: Melvin Schneider
Subject: WIP Adjustments

Robin-I don't have many comments on the Ops vs. Accounting debate as our Ops team is not involved in financial reporting, but I would say think through the impacts on different financial statement users. You may want to maintain different WIPs for different purposes and remember that different parties may have different motivations for WIP. For example:

Early in a job, you may want to circulate a more conservative WIP (lower margins, higher cost estimates) to external parties (e.g. lenders, bankers, sureties, investors, etc.) to give you wiggle room on costs. A leaner WIP (higher margins, lower costs estimates) may be given to the operations team to encourage them to hold costs down, maintain job efficiency, and reach job bonus targets. Theoretically the WIP profit margins would start to converge as the project is completed.

Anytime you're dealing with complex accounting estimates, you want them as accurate as possible for financial reporting purposes (particularly audit/reviews), but often times accounting is stuck between competing interests from various users of WIP and you need to understand what someone's motivation is when there is an angle for a change in process. I'd say prioritize being consistent across all jobs, segments, and units in approach. I'd also take into account that if there are big variances between an original estimate in margin and the final margin on a job, questions will likely be asked, an explanation will be required, and you don't want the explanation to be something that make it looked like the team missed something it shouldn't have missed. If someone analyzes trends across all projects, they may notice a similar pattern that repeats itself over and over again (like sandbagging or profit fade).

In terms of Ops override, I'd think through potential motivations for override (you likely have a clue to what the issue is in your situation) and adjust for that at the financial reporting level. I'd think you'd accrue an estimate for return of savings to the owner on a monthly basis as the job progresses and it may have swings up or down. Or maybe the ops team wants to present as a change order with revenue/costs/margin partially in place that hasn't met the thresholds for financial reporting to external parties-accounting would back the revenue and costs out on it or at a minimum show no profit on it (may be considered a liability where you recognize the cost but not the revenue if there is question as to whether the change order will be approved).

------------------------------
Melvin Schneider CPA, CGMA, CCIFP
CFO
Clement Building Company, LLC
Metairie LA
(504) 837-2000
------------------------------

Answers in line below:

1. The team has one WIP
2. The team (minimally an accounting team member and a PM) have a monthly job costing projection meeting to review the GP. The PM has a contingency budget to use as they see fit and has the autonomy to add / remove expected costs that affect the GP, though leadership may verbally ask for their thought process. An accounting team member then enters any adjustments.
3. " "
4. The contract price remains unchanged unless their is an executed change order. 
5. Very few instances do we have an Owner Allowance.
6. As for controls, OPS, accounting, and leadership are all a part of this transparent discussion. We keep our WIP as accurate as possible to maintain trust with our Surety, etc.

Accounting is responsible for manual adjustments

------------------------------
Kayla Addison
Project Coordinator
Empowered Electric LLC
North Kansas City MO
(816) 814-0194
------------------------------

Original Message:
Sent: 11-06-2025 14:31
From: Robin Thomas
Subject: WIP Adjustments

You bring up some great points!  I really appreciate your response and will pass this along to my CFO.  Hope you are doing well! 

------------------------------
Robin Thomas CCIFP
Director of Project Accounting
The Beck Group
Austin TX
(512) 367-9675
------------------------------


Original Message:
Sent: 11-03-2025 16:17
From: Melvin Schneider
Subject: WIP Adjustments

Robin-I don't have many comments on the Ops vs. Accounting debate as our Ops team is not involved in financial reporting, but I would say think through the impacts on different financial statement users. You may want to maintain different WIPs for different purposes and remember that different parties may have different motivations for WIP. For example:

Early in a job, you may want to circulate a more conservative WIP (lower margins, higher cost estimates) to external parties (e.g. lenders, bankers, sureties, investors, etc.) to give you wiggle room on costs. A leaner WIP (higher margins, lower costs estimates) may be given to the operations team to encourage them to hold costs down, maintain job efficiency, and reach job bonus targets. Theoretically the WIP profit margins would start to converge as the project is completed.

Anytime you're dealing with complex accounting estimates, you want them as accurate as possible for financial reporting purposes (particularly audit/reviews), but often times accounting is stuck between competing interests from various users of WIP and you need to understand what someone's motivation is when there is an angle for a change in process. I'd say prioritize being consistent across all jobs, segments, and units in approach. I'd also take into account that if there are big variances between an original estimate in margin and the final margin on a job, questions will likely be asked, an explanation will be required, and you don't want the explanation to be something that make it looked like the team missed something it shouldn't have missed. If someone analyzes trends across all projects, they may notice a similar pattern that repeats itself over and over again (like sandbagging or profit fade).

In terms of Ops override, I'd think through potential motivations for override (you likely have a clue to what the issue is in your situation) and adjust for that at the financial reporting level. I'd think you'd accrue an estimate for return of savings to the owner on a monthly basis as the job progresses and it may have swings up or down. Or maybe the ops team wants to present as a change order with revenue/costs/margin partially in place that hasn't met the thresholds for financial reporting to external parties-accounting would back the revenue and costs out on it or at a minimum show no profit on it (may be considered a liability where you recognize the cost but not the revenue if there is question as to whether the change order will be approved).

------------------------------
Melvin Schneider CPA, CGMA, CCIFP
CFO
Clement Building Company, LLC
Metairie LA
(504) 837-2000

Hello, 

1 - In CMiC, WIP is strictly for Accounting, (Project accountants, Controller) However, you can have the forecasting module feed to the WIP program. 

2 - Entering, reviewing, posting WIP adjustments, again is strictly Accounting, as Accounting may want to follow GAAP rules or other accounting standards for Revenue recognition. There could be a process made in place, of WIP vs Forecasted numbers. WIP does a "snapshot" of accounting current numbers while forecasting does the anticipated numbers for the life of the project. 

3 - Based on collaborations, typically accounting is the only group that should be making final changes in WIP. A review in process can be placed for a CFO and VP of operations as an example meet to review WIP numbers, and they have final say on numbers changing, but a process would need to be in place to document and provide reasoning for changes for your internal team to know, and eventually your audit team. 

4 - Not very common, but when Contract overrides are done, mostly seen during a company fiscal end. Increasing, decreasing Revenue based on what your team can prove as "approved" by owners. 

5 - No, typically for savings, project teams reflect this in their forecasting numbers, that your accounting team should discuss around your project team during the forecasting review. 

6 - All WIP numbers, should have backup justification, Current change order signed, or email validation, job cost reports, proving spent, and having AP images to validate any cost. An accounting hierarchy approval process is typically what I see., only certain users can access WIP, certain user have updatable privileges, and certain users can post WIP. 

I hope this is useful and helps. 

------------------------------
Johnny Palafox
Business Consultant
Palmer Consulting Group
Chino CA
(909) 261-9372
------------------------------