Over-billing and under-billing,
the two states WIP reveals.

Work-in-progress reporting compares what a builder has billed against the value of work actually earned, and on any unfinished job those two numbers rarely match. The comparison resolves into one of two states. When billed to date exceeds earned revenue, the job is over-billed; when earned revenue exceeds billed to date, it is under-billed. This reference is the detailed treatment of those two states, sitting under the construction WIP reporting hub, with the arithmetic that produces the earned figure set out in the WIP formula explained.

Over-billing, in accounting language billings in excess of costs and estimated earnings, means you hold the client's cash for work not yet done. Under-billing, costs and estimated earnings in excess of billings, means you have done work you have not claimed. The plain-English introduction to both lives in the WIP reporting guide; this page is the reference-grade version, the mechanism, the risks and the corrective disciplines underneath it.

Why the distinction matters

Both states are the same lesson read from opposite sides, that cash in the account and profit earned on the job are different numbers. Over-billing shows you cash you have not yet earned; under-billing shows you profit you have not yet collected. Confusing either one with the bank balance is how a builder misreads the health of a job, and the whole point of WIP reporting is to hold the two apart before they get mixed up. The revenue is billed through progress claims, which is why the billing side of this page and the claiming side of that one are the same subject from two angles.

These are not a stage of the job, they are a reading taken of it at any moment. From the first claim to practical completion a job is continuously in one state or the other, and the state moves as the work is built and the claims are raised. The billing side is set by progress claims, the earned side by how much of the contract has actually been completed, and WIP reporting is the instrument that reads the gap between them.

Both states feed straight into cash. Over-billing is the reason a builder's construction cash flow can look comfortable while the underlying jobs are not, and under-billing is a cash flow leak, money earned and not collected. Because a claim schedule's dates and values are the receipts line of any honest cash flow forecast, a job that is over-billed against a late programme quietly makes the forecast optimistic, and the amount that actually lands on each claim is shaped by retention and payment terms standing between the claim and the cash.

The operator's observation is that over-billing is the most dangerous good feeling in construction. The bank balance says win while the WIP says you have pre-spent next month's work, and the bank balance is the one a tired builder trusts at the end of a long week. The builders who come unstuck in a downturn are very often the ones who were structurally over-billed and mistook claimed cash for earned profit, because when volumes fall there is no new deposit coming in to refill the pile, and the work they were already paid to do still has to be built out of an account that turned out to be emptier than it looked.

So the experienced habit is to read the WIP position, not the bank balance, as the true statement of where a job and a business stand. Under-billing gets chased immediately, because it is earned revenue sitting idle and the fastest cash in the business to recover, and the fix is almost always to raise the claim that was never assembled. Over-billing gets treated as spoken-for money, ring-fenced in the forecast and never counted as margin, with a reason attached to every over-billed job so a funded plan is never confused for a drift. The discipline is worth most exactly when the market is softest, the point made in the building through a downturn guide.

Where software fits the workflow

The reason WIP goes stale is that its inputs go stale, so the fix is keeping the inputs current. In VIABUILD, progress claims track what has been billed by stage while cost tracking holds what has been earned against each job, and Oryn™ reads and codes supplier invoices as they arrive so the cost side stays live rather than weeks behind. Because both sides of the comparison are current in one place, the over-billed and under-billed positions can be read across the whole portfolio as a live picture rather than reconstructed at month-end, when the drift has already happened.

Over and under-billing are a standard construction-accounting mechanism rather than a legislated one, but the way each is carried on the accounts and read by third parties has an Australian context. The points below are labelled by evidence class. Accounting and eligibility treatments change and are specific to a business, so confirm the current position with your accountant and the relevant scheme before relying on any of them.

• Common practice. Over-billing is commonly carried as a liability on the balance sheet, billings in excess of costs and estimated earnings, and under-billing as an asset, costs and estimated earnings in excess of billings. The general logic is that over-billed cash is owed back as work and under-billed work is revenue still to be collected. The exact classification, measurement and presentation are an accounting treatment for the builder's accountant, and this page states the mechanism only, not the treatment.
• Common practice. WIP schedules built from these positions are what accountants, financiers and home warranty eligibility assessments commonly ask a builder to produce, and a heavily over-billed portfolio can read as a business leaning on client cash to fund itself. The specific eligibility rules and thresholds differ by scheme and change over time, so confirm the current requirements with the relevant home warranty or builder eligibility body rather than relying on a general description.
• Statistics. Evidence-labelled and to be confirmed against the current source. A record 3,596 Australian construction companies entered external administration for the first time in FY 2024-25, up 21 per cent on the prior year, with construction topping the industry count. Insolvency figures move each reporting period, so confirm the current numbers against ASIC's published statistics. The pattern behind the figure is the relevant point here, that building businesses rarely fail for lack of work; they fail on cash, and a structurally over-billed book is one of the ways a busy builder runs out of it.
• Professional recommendation. Industry commentary through the current contraction has been consistent that cashflow discipline matters more in a downturn, not less. Reading the WIP position rather than the bank balance, chasing under-billing promptly and treating over-billed cash as spoken-for are exactly the habits that put a builder in a materially different position when volumes soften and the next deposit stops arriving to cover the last job.

Illustrative only, not a benchmark. Two fixed-price homes are each contracted at $600,000. On the first, the builder front-loaded the claim schedule and has billed $360,000 to date, while the work actually completed is 45 per cent, so earned revenue is $270,000. The job is over-billed by $90,000. That $90,000 is not profit; it is the client's money held against work still to be built, and if the account has been treated as surplus and spent, the later stages have to be funded from somewhere else.

On the second home, the builder has completed 60 per cent of the work, earned revenue of $360,000, but has only billed $300,000 because the fixing-stage claim was never raised after the stage finished. The job is under-billed by $60,000, an asset sitting idle and a cash flow leak of $60,000 in earned revenue the builder has delivered and not collected. The correction is not construction, it is raising the claim. Now read the two together at the company level, and the danger is clear, the business looks cash-positive on the first job's borrowed $90,000 while quietly starving itself of the second job's earned $60,000, and only the WIP roll-up shows that the healthy-looking cash is borrowed and the missing cash is owed.

Over-billing (billed to date above earned revenue, also billings in excess of costs and estimated earnings), under-billing (earned revenue above billed to date, also costs and estimated earnings in excess of billings), earned revenue (contract value multiplied by percentage of completion), billed to date (the total of progress claims raised and approved on the job), front-loading (weighting the early stages of a claim schedule to fund early cash on purpose), cash versus profit (the distinction both states expose, cash held or cash owed against profit actually earned). Definitions for the wider vocabulary live in the construction glossary.

When an over-billed position quietly erodes the margin a job was meant to make, the slow loss it produces has a name of its own; the next reference is profit fade.

• Your accountant, for the classification, measurement and balance-sheet presentation of over-billed and under-billed positions, which are an accounting treatment specific to your business rather than a general rule.
• Australian Securities and Investments Commission , publisher of the insolvency statistics behind the external administration figures, the reference for the current numbers.
• Your state or territory's home warranty or builder eligibility scheme, for the current rules on the WIP schedules a builder is asked to produce and how an over-billed position is read in an eligibility assessment.