WIP Reports as a Risk Management Tool for Construction Companies
Construction is inherently risky. Implementing practices and utilizing tools to manage the risks is important, and quality work-in-progress reports (WIP) are one of the most powerful risk management tools available to contractors. WIP reports provide a clear picture of potential risks and issues that could affect a construction company’s project completion, and ultimately their financial stability. Regularly updating and analyzing WIP reports allows companies to not only identify risks, but to take proactive measures to avoid or mitigate the issues.
Common Construction Risks
|
The Risk
|
The Benefit of WIP reporting
|
|
Cost Overruns
|
Using WIP reports to track actual costs against estimated costs helps identify projects that are running over budget. This allows for early intervention and adjustments for more stable finances.
|
|
Cash Flow Problems
|
Underbilling or delayed billing can strain a company's cash flow. WIP reports highlight these issues, so steps can be taken to improve cash flow and keep operations going
|
|
Project Delays
|
WIP reports include timelines and progress metrics to predict delays. Early identification allows for proactive interventions, like reallocating resources or adjusting schedules, to keep projects on track and avoid penalties or client dissatisfaction.
|
|
Resource Allocation
|
Effective WIP management supports efficient allocation of resources across projects, minimizing the risk of resource shortages or overextension.
|
Securing Surety Credit
Taking steps to mitigate those common risks puts companies in a better position to obtain surety credit. Since much of what sureties evaluate about a company is related to their financial standing, it makes good sense for the company to reduce risks that can impact their finances. And simply investing in a robust WIP reporting system isn’t enough. It's crucial to commit to regular updates, along with analysis of the reports, both of which are best practices for any construction company. The process not only identifies risks but also provides actionable insights which can allow for problems to be corrected, which can strengthen a company’s financial standing and their case for obtaining surety credit.
How do I get a Surety Bond?
Surety bonds are issued by Merchants Bonding Company (Mutual) through insurance agents. Contact your local insurance agent or use our Find an Agent tool. They will guide you through the process, informing you of what documents and information are needed by the surety (Merchants Bonding Company (Mutual)) to underwrite your bond.