New Sage Intacct Construction work in progress (WIP) feature revolutionizes WIP reporting for contractors

Q&A with Dennis Stejskal, Head of Strategy for Sage Construction and Real Estate

Dennis Stejskal
Head of Strategy for Sage Construction and Real Estate

I recently sat down with Dennis Stejskal, Sage’s Head of Strategy for Construction and Real Estate, to discuss the importance of Sage Intacct Construction’s new Work-in-Progress (WIP) feature.

We discuss how it helps contractors ensure efficient and accurate financial statements while streamlining reporting and compliance.  

Here’s what we’ll cover

Q: Could you provide a high-level overview of the WIP process?

Dennis:

Sure.

Revenue recognition on long-term projects can be challenging.

There are two ways revenue recognition can be managed: waiting to recognize the revenue until the project is complete or recognizing the revenue throughout the project.

The revenue recognition method that’s used is typically based on project duration.

Shorter projects are usually billed at completion, while projects with a longer duration and multiple billings, more commonly use the percent complete revenue recognition method and rely on WIP reporting.

For example, if a project is billed 70% but only 60% complete, not all the revenue is recognized yet.

This is overbilling.

The same goes for costs. If 60% of costs are incurred but only 50% billed, it may seem like a loss, but it might not be. Adjustments are made to account for this, forming the basis of WIP reporting.

Q: How is WIP usually tracked and how does Sage Intacct Construction’s new WIP feature streamline this process?

Dennis:

The WIP process involves forecasting the project’s final contract value and costs at completion, which are reviewed and adjusted by finance teams.

Finance must also examine over and under billing amounts and translate these into General Ledger entries.

Many contractors currently manage this process in Excel.

However, manually managing this process is time consuming and error prone, as Excel is only as good as the person handling the formulas.

Sage Intacct Construction’s new WIP feature automates the monthly WIP statement, eliminating the need for combing through numbers in separate spreadsheets, increasing efficiency and accuracy.

The new WIP feature also automatically creates over and under billing GL transactions and keeps a record of the data in the ERP system, saving time, ensuring accurate reporting, and maintaining cash flow and compliance.

Teams can run reports to analyze the data and show gross profit margins, which indicate profit gain or fade over time.

These fluctuations can be explained by project manager comments, like anticipating costs for a change order that later doesn’t materialize.

WIP involves job-to-date costs and job-to-date billings, which are ERP facts, combined with forecasted costs and contract values, which are predictions.

The Sage Intacct system combines these elements, providing a more accurate monthly WIP schedule and a clearer financial picture of the project month to month.

It also provides a historical digital record – users can view data by job, offering a comprehensive view over time.

Q: How does this support reporting requirements and industry initiatives?

Dennis:

Bonding companies require WIP statements, often quarterly, to assess how a project is tracking and identify profit trends.

Automated WIP tools help contractors prepare these statements accurately and efficiently.

Also, the industry is moving towards digital formats for financial data, like XBRL for surety automation.

The Sage Intacct Construction WIP tool supports this initiative and will enable contractors to export data in various formats and send WIP statements electronically to bonding companies.

This is a significant advancement in the industry that reflects the changing business landscape and how software is continually evolving to adapt to these changes.

Just like my doctor’s office has gone paperless, the construction industry is moving away from paper and spreadsheets.

This tool helps contractors adapt to these changes efficiently. This ensures they meet the necessary financial performance standards to secure bonds and win more jobs.

Q: Does the new WIP tool enable contractors to break out each performance obligation?

Dennis:

Yes, being able to separate out each performance obligation is crucial for different cases and companies.

For example, a contractor with a project for two buildings under one contract must report them separately due to government regulations.

The Sage Intacct Construction system supports breaking down projects into performance obligations. This enables detailed tracking by building as in the example above, or by specialty, such as separating plumbing and mechanical work.

Projects can be broken into separate lines on the WIP schedule.

This flexibility aligns with what contractors need to file on their WIP schedule, ensuring accurate forecasting and reporting.

Q: How does the WIP feature fit into the Sage Intacct Construction product roadmap?

Dennis:

As a native-cloud solution, Sage Intacct Construction delivers multi-tenant financial management. This ensures that all users are always on the same version with access to the most up-to-date information.

We release quarterly product updates that include new features and functionality.

The new WIP feature was included in the latest release (Sage Intacct Construction 2024 R3). It’s automatically available to Sage Intacct Construction customers now, without complicated and expensive upgrades.

We are always for looking for ways to address contractors’ pain points and make their lives a little easier.

With Sage Intacct Construction, contractors have peace of mind that the solution will serve their needs now and into the future.

While the Sage Intacct Construction platform delivers the most comprehensive solution on the market, we know that software isn’t one size fits all.

We’re committed to being an open platform and growing our ecosystem of integrated partner solutions.

When it comes to WIP, operations typically comes up with a forecast, while finance creates the WIP statement. This is a shared process and sometimes the forecasting piece is performed externally outside the Sage Intacct Construction system, but our integrated partner solutions allow us to accomplish that with ease.

Our priority is to offer the power of choice — the simplicity to choose Sage’s all-in-one solution, and the flexibility to select the right mix of integrated products that work best for a business.

Q: How can contractors purchase the new WIP tool?

Dennis:

The new WIP feature is available now to existing Sage Intacct Construction customers at no extra cost.

New customers can purchase Sage Intacct Construction and the rest of our construction solutions through our VAR channel. The largest and most experienced partner network in the industry.

Final thoughts

Creating WIP statements is an essential part of construction accounting.

However, it has historically been a tedious, time-consuming, and error-prone process that’s managed in spreadsheets.

Sage Intacct Construction’s new WIP feature automates and streamlines this process. It minimizes the risk of errors associated with manual data entry and spreadsheet management.

With the new WIP tool, contractors gain real-time insights into project progress and financial health. This ensures more reliable financial reporting and aids in proactive decision-making.

Thank you for your time and insights, Dennis!

Learn more about the new WIP feature in Sage Intacct Construction. Discover how it can help your business gain more accurate and efficient financial insights.