Work in Progress (WIP)

What Is Work in Progress (WIP)?

Work in Progress (WIP) — also called Work in Process — is the value of goods or projects that have been started but not yet completed at the end of an accounting period. WIP sits on the balance sheet as a current asset, between raw materials (inputs not yet used) and finished goods (output ready for sale).

In manufacturing, WIP represents production runs that are mid-process. In project-based businesses like construction or engineering services, WIP represents work that has been performed but not yet invoiced or delivered.

WIP on the Balance Sheet

WIP is classified as inventory on the balance sheet:

Assets:
  Current Assets:
    Cash
    Accounts Receivable
    Inventory:
      Raw Materials         $XXX
      Work in Progress      $XXX   ← partially completed jobs
      Finished Goods        $XXX

The WIP balance grows as costs are applied to jobs in progress and shrinks as jobs are completed and transferred to finished goods.

What Costs Are Included in WIP?

WIP accumulates the same three cost categories as job costing:

• Direct materials: Materials issued to the job from inventory
• Direct labor: Labor hours applied to the job
• Applied overhead: Indirect costs allocated to the job via an overhead absorption rate

WIP as a Leading Indicator

For manufacturing and project-based finance leaders, WIP aging is one of the most important leading indicators available:

Cash flow signal: A growing WIP balance means capital is tied up in production before it can be converted to revenue. Slow-moving WIP is a leading indicator of cash flow pressure.

Margin risk signal: WIP jobs where actual costs are running ahead of estimate signal margin compression before the job closes. Catching this mid-job allows corrective action; catching it post-delivery doesn’t.

Billing and revenue signal: In project businesses, unbilled WIP represents earned but unrecognized revenue. Aging WIP often signals billing backlogs or project delays.

Operational signal: Abnormally high WIP relative to revenue can indicate production bottlenecks, capacity constraints, or scheduling problems on the shop floor.

Common WIP Reporting Challenges

WIP data lives in multiple systems. Production status is in the MES or production scheduling system. Costs are in the ERP. Labor is in the time-tracking system. Without integration, finance teams have no real-time WIP visibility.

Manual job cost updates create lag. When labor and material postings happen weekly or at month-end, WIP balances are always stale. Finance leaders can’t identify at-risk jobs until after they close.

Overhead absorption timing distorts WIP. If overhead isn’t applied to WIP until month-end, mid-month WIP balances understate true cost.

WIP aging reports require custom work. Most standard ERP reports show WIP balance, not WIP age by job. Identifying jobs that have been open for 60, 90, or 120+ days typically requires manual analysis.

How Go Fig Improves WIP Visibility

Go Fig connects production, labor, and costing systems to surface real-time WIP balances and aging by job. Finance leaders get a live view of WIP exposure — which jobs are running over estimate, which have been open too long, and which carry the most margin risk — without waiting for month-end close.