Which estimates should you use?

There's generally confusion about which estimates to use when building a work in progress schedule. It's 12/31/2025; do you use estimates from the time you bid the job, the estimates at the time of the balance sheet date, or where the estimates currently stand? So, do you use estimates as of 9/24/25 when you bid the job, estimates at 12/31/25, or the estimates as of 2/15/26, on your 12/31/25 work in progress (WIP) report?

The answer everyone is looking for is... it depends. However, as a general rule, you should use current estimates.

Estimates at the time you bid the project: It is very likely that the estimated contract price and estimated total cost at the time of the bid have changed since the time the job was bid. Change orders happen all the time, either positive or deducts. Turns out you need to sub out more work than anticipated at the time of the bid, which means that we will need to increase estimated total costs. Hopefully, we can get a change order to the project owner and increase the contract price because of it. Site conditions change and so should estimates. So, as a general rule, the estimates at the time of bid are not the best estimates to use. However, If you've just started the job and have not made much progress, using original estimates can be fine, so long as you are not aware of any changes to site conditions.

Estimates as of the balance sheet date: "Those were the estimates of the balance sheet date, so that's what we're going with." That's great, but similar to the estimates at the time of bid, the 12/31/25, are likely to have changed after year end.

So at this point, what should we do? Use current estimates.

Current estimates: Current estimates generally provide the clearest picture of backlog; costs and profit remaining on the project. Some of the projects in progress at 12/31/25 may have already closed out after year end. Hindsight is 20/20. We can use actual numbers as estimates for the 12/31/25 WIP. For projects still in progress, we may have obtained new information about site conditions and what's remaining on the project. These inputs should be reflected in the estimates to provide a more accurate picture of what's remaining to complete the project. As a general rule, it's best to use your most current estimates.

Thanks!

Ara

info@thewipreport.com