01 The P&L blind spot
Two jobs. Same profit. Opposite cash reality.
Both jobs below have incurred $400k in cost and both project $80k in profit. On the income statement they look identical. But one is sitting on the bank's cash, and the other is quietly funding its client.
Cost and profit match — only billing and cash diverge
Grouped by metric. The first and last clusters sit level; the middle two fan apart.
Job A billed $520k against $400k of cost — it's $120k cash-positive. Job B billed only $300k — it's $100k cash-negative. Same profit. The P&L cannot tell them apart.
Your underwriter reads this exact billing position, and reads it differently than you might expect. A heavily overbilled book may not look like strength to them — it may look like capacity you've already borrowed against. Those billings in excess are a liability that has to be earned out, and if the work behind them is thin, the surety sees a contractor who has spent tomorrow's revenue today.
But the issue isn't overbilling itself — it's overbilling they can't account for. Some is healthy: front-loaded billings that match your contract's payment terms keep cash flowing, and sureties expect to see it. What they scrutinise is billing running well ahead of earned revenue on a job whose margin is soft. The contractor who can explain why each job sits where it does looks credible. The one whose overbilling is just hiding thin jobs looks like they've borrowed against tomorrow.
02 The estimate that runs everything
The default cost-to-complete is a formula — and the formula assumes nothing goes wrong.
Under percentage-of-completion accounting, revenue is recognised as % complete × contract price, and % complete is driven by cost incurred ÷ total estimated cost. That denominator depends entirely on the Cost to Complete (CTC).
Here's the catch: unless someone updates it, the CTC the system carries is just budget cost − actual cost to date. It's calculated, so it looks authoritative — but it silently assumes every remaining dollar lands exactly on budget. Drag the estimate off that default and watch the profit move.
Interactive: the calculated default vs. the honest CTC
Fixed: $1,500k contract price, $1,250k budget cost, $600k actual cost to date. The slider opens at the calculated default.
Drag the slider — watch how one estimate moves every number below it
Profit of $120k is being booked on the assumption the remaining work holds budget.
Every surety submission asks for a WIP schedule — sometimes called your work-on-hand (WOH) — and now you can see why. The underwriter cannot grade you on the P&L alone for exactly the reason this whole page lays out: it can't tell a job that's earning its margin from one that's coasting on a stale cost-to-complete. The WIP is the only document that shows where every open job actually stands, and it lives or dies on the honesty of that CTC.
So when the surety asks for it, they're not adding paperwork — they're asking for the one schedule that reveals whether your reported equity is real. A clean, current WIP with disciplined CTCs is what earns capacity and rate. A sloppy one, or one that gets trued up with a surprise every year-end, is what shrinks it.
Here's the part that matters most: the underwriter asks for the WIP because it's the truest picture of your business. That's the same reason you should be running on it every month — not because they require it, but because it's the best management tool you have. The submission is just the one time someone else makes you do what you should already be doing for yourself.
03 Why it catches up
The margin looks fine — until it doesn't.
Here's the same job over eight months. The job's true margin is fading the whole time as real costs come in heavier than estimated. But the reported margin stays propped up flat, because the CTC never gets updated.
Every month the gap between the two lines widens — that gap is profit being booked that the job was never going to deliver. Then the estimate finally gets trued up, and the reported line falls off a cliff to meet reality.
Reported vs. true margin over the life of a job
The drop only looks sudden because the estimate was finally corrected.
The collapse at true-up isn't a new problem appearing. It's months of old problems arriving at once.
A current CTC would have had the reported line tracking the true line from month one. The contractor would have seen the fade in month two or three — while there was still runway to renegotiate scope, tighten the crew, or reprice the remaining work. Without it, they only ever see the flat blue line, which is comfortable right up until the moment it isn't.
That cliff at true-up isn't just an accounting event — it's a hit to the working capital and equity your bonding capacity is built on. Sureties size your program off those numbers, so a job that gives back its margin in one period doesn't just dent your P&L; it can quietly shrink the program you rely on to win the next job.
The contractor running a current WIP catches the fade early and manages it down gradually — protecting both the margin and the capacity. The one who waits for year-end hands their underwriter a surprise, and surprises are the single fastest way to lose a surety's confidence.
04 The bottom line
What the WIP dashboard actually protects.
Four things your P&L will never tell you
Billing position is a gauge, not noise. Over- and under-billing move cash, not profit — but they're the earliest signal you have. Cash pain precedes profit pain.
The CTC runs your income statement. A soft estimate inflates % complete and books profit that doesn't exist. Accurate CTC is what keeps revenue connected to reality.
Fade is gradual; the reckoning is not. A stale CTC defers months of erosion onto one ugly period — usually the same quarter the cash runs dry.
WIP is an operations tool, not an accounting deliverable. Its whole value is moving the information forward in time — so it's a steering wheel, not a rear-view mirror.
The WIP your surety requires is the WIP you should run anyway. The underwriter asks for it because it's the truest picture of your business. That's the same reason to run on it every month — the submission just makes you do what already serves you.
Stop Flying With Broken Gauges
Get your gauges reading true.
Marawood builds bonding-ready WIP reporting and job-costing systems for Western Canadian contractors — so your income statement reflects the job you're actually running.