Work in progress (WIP)

Cost incurred on jobs or production that is not yet fully recognised as revenue or finished goods — typically actual cost less what has already been certified or completed.

Also searched as: work in process, job WIP, contract WIP, percentage of completion inventory

In contracting and project work, you spend before you bill. WIP holds that spend on the balance sheet (or tracks it as a memo) until certification, completion, or billing policy says it can hit cost of sales.

A practical ops definition used on profitability reports: WIP ≈ actual cost − certified (or completed) value for open jobs. Cancelled jobs should not keep inflating WIP.

If every job bills in the same week it is delivered and you never carry unfinished work, you can skip heavy WIP accounting. Multi-month contracts without WIP visibility are flying blind.

Open job WIP from actual vs certified

Job J-22 budget $100,000. Actual cost posted $45,000. Certified to date $30,000. Job still open.

  1. Actual = $45,000.
  2. Certified = $30,000.
  3. WIP = $45,000 − $30,000 = $15,000.

Show $15,000 WIP for J-22. Billing the next $15,000 of certification without more cost would clear this WIP slice.

Related modules

Related terms

FAQ

Is WIP the same as inventory?

Manufacturing WIP is a class of inventory. Project WIP is often a contract asset / cost schedule. Both mean “spent, not yet finished or billed.”