What is work in progress (WIP) in an accounting firm?
Work in progress (WIP) in an accounting or professional services firm is the value of work done for clients that has not yet been invoiced, usually recorded as time at charge-out rates or as progress on fixed-fee jobs. It is revenue the firm has earned but not billed, so it ties up cash until it is invoiced and collected.
Also calledWIPunbilled workunbilled time
Compare the softwareBest practice management software for accounting firms →All 11 practice management vendors →
- Means
- Work done but not yet billed
- Valued at
- Charge-out rates or job stage
- Measured as
- Days in WIP
How work in progress is tracked
Staff record time against client jobs, and the system values it at each person's charge-out rate; on fixed-fee work, WIP may be measured by stage reached. When the firm bills, the WIP is cleared to the invoice, and any difference between the value of the time and the amount billed is a write-off or write-up, which feeds the realisation rate. Partners review WIP reports by client and job to spot work that has run over budget or sat unbilled. Days in WIP, the average time between doing the work and billing it, is one half of lock-up, the total time cash is tied up before collection. Progress billing and recurring fixed fees reduce WIP by invoicing as work goes on. Karbon and Canopy produce WIP reports and bill from them, and Aiwyn focuses on reducing days in WIP.
Common questions
How is WIP valued?+
Usually as recorded time multiplied by each person's charge-out rate. For accounts, firms value it at cost or at the recoverable amount under the applicable accounting standards, which can differ from the charge-out value.
Why does high WIP matter?+
It is work the firm has paid for in salaries but not yet billed, so it ties up cash and raises the risk of write-offs if the client disputes or the job ran over budget.
How can firms reduce WIP?+
By billing in stages or on recurring fixed fees, reviewing WIP reports regularly, and agreeing scope and fees in the engagement letter so work can be invoiced as it is done.
Practice software that tracks WIP
Part of Accountio’s accounting technology coverage · Glossary
