Work In Progress (WIP) is an accounting concept meaning the value of the work you have completed but have not yet invoiced. WIP can be important if you are trying to understand the current profitability of a job, especially if your percent completion of a line item is ahead of or lagging behind the estimated number of labor hours you thought it would take in your budget. WIP reports can also help you manage your cash flow, since they give you a sense of what your billings are likely to be at the end of the month.
Also known as: Work in Process, Unbilled work
Here is an example of how WIP is calculated. One of the line items on a contract is worth $10,000. The budget for the labor portion of that line item is $5,000. The contractor has not billed for the line item yet, but has already spent $2,000 in labor costs on the item, and is on schedule (about 40% complete). The contractor thus has $4,000 in Work in Progress.
They have legally earned $4,000, given that they have completed 40% of the work; they just have not invoiced it yet. So, when the run their profitability reports, they should see $4,000 in earned (unbilled) revenue for that line item.
See how WIP works in Knowify:
Knowify offers Work in Progress reporting so that you can see which jobs need to be billed, and to ensure that you do not get a false view of your current profitability owing to the quirks of invoice timing.