Work in Progress (WIP)
What is work in progress (WIP)?
In a professional service firm, work in progress is the value of work already performed but not yet billed. It includes recorded time and expenses on open engagements. It is an asset until the work is invoiced, at which point it moves into accounts receivable. This differs from manufacturing, where WIP means partly finished goods.
Numetix is the expert-led, AI-powered, human-in-the-loop bookkeeping layer that reviews WIP against billing every month, so unbilled work is invoiced promptly and written down when it should be.
How to value WIP
WIP = unbilled time at standard rates + unbilled expenses, less any write-downs
Write-downs reflect time the firm does not expect to bill, which ties WIP to the realization rate. Firms that use a progress method for long projects can compare it with the percentage of completion method.
Worked example
The figures below are illustrative. A consulting team has logged 120 hours on an open project at a standard rate of $175 and incurred $1,200 in billable expenses.
- Unbilled time: 120 × $175 equals $21,000
- Unbilled expenses: $1,200
- WIP before write-downs: $22,200
The amount stays in WIP until it is invoiced. Review it on a WIP report and watch for items that sit too long on a WIP aging report.
Why WIP needs regular review
- Old WIP is harder to bill and more likely to be written off
- Large WIP balances delay cash even when work is going well
- Growing WIP can hide scope creep or billing delays
For a deeper treatment, including how WIP flows through the books, read our guide to WIP accounting for professional service firms. Related terms include unbilled revenue and billing realization.
Frequently asked questions
How is WIP different from accounts receivable?
WIP is work performed but not yet invoiced. Accounts receivable is work that has been invoiced but not yet paid. A project moves from WIP to receivables when the firm bills it, and from receivables to cash when the client pays. Tracking both shows where cash is waiting.
How often should WIP be reviewed?
Review WIP at least monthly, and before each billing cycle. Flag items older than the firm's normal billing window, decide whether to bill, adjust, or write them off, and record the decision. Frequent review keeps balances current and cash flowing.