Construction Finance Glossary

B

Billings in Excess of Costs (Overbilling)

When a contractor has billed more than the earned revenue on a project. Appears as a liability on the balance sheet. Learn more

Backlog

The total value of work under contract that has not yet been completed. A key indicator of future revenue.

C

Change Order

A modification to the original contract scope, price, or timeline. Proper tracking is critical for accurate WIP reporting. Learn more

Completion Percentage

See Percent Complete.

Costs in Excess of Billings (Underbilling)

When a contractor has earned more revenue than they have billed. Appears as an asset on the balance sheet. Learn more

E

Earned Revenue

The portion of the contract price that has been earned based on percentage of completion. Calculated as: Contract Value × Percent Complete.

Estimated Cost at Completion (EAC)

The total projected cost to complete a project, including costs incurred to date plus estimated remaining costs.

F

Fade (Margin Fade)

The gradual erosion of profit margin on a project as actual costs exceed original estimates. Learn more

Fractional CFO

A part-time, outsourced CFO who provides strategic financial leadership without the cost of a full-time executive. Learn more

G

Gross Profit

Revenue minus direct job costs. In construction, tracked at both the project level and company level.

J

Job Costing

The process of tracking all costs associated with a specific construction project, including labor, materials, equipment, and subcontractor costs.

O

Over/Under Position

The net difference between billings and earned revenue across all active projects. A key metric in WIP analysis.

P

Percent Complete

The ratio of costs incurred to date divided by estimated total costs. The foundation of WIP calculations. Learn more

POC (Percentage of Completion)

An accounting method that recognizes revenue proportionally as work is completed, rather than when the project is finished.

W

WIP (Work in Progress)

The financial snapshot of all active construction projects, showing the relationship between costs, billings, and earned revenue. Learn more

WIP Adjustment

The accounting entry made to align recognized revenue with the percentage of completion calculation.

WIP Report (WIP Schedule)

A financial report that tracks the status of all active projects, comparing costs incurred, billings, earned revenue, and projected profitability. Learn more