Understanding WIP Methods

As a job progresses, materials, resources, and other expenses are consumed and must be posted to the job. Work in Process (WIP) is a feature that enables you to estimate the financial value of jobs in the general ledger while the jobs are ongoing. In many cases, you might post expenses for a job before invoicing a job. When only expenses have been posted, your financial statement will be inaccurate.

To track the value in the general ledger, you can calculate WIP and post the value to the general ledger. For more information, see Monitor Job Progress and Performance.

Business Central supports the following methods of calculating and recording the value of work in process.

WIP Method	Calculation Formula	Calculation Description
Cost Value	Recognized Revenue = Billable Invoiced Price Estimated Total Costs = Billable Total Price x Budget Cost Ratio WIP Costs = (Percentage of Completion - Invoiced %) x Estimated Total Costs Percentage of Completion = Usage Total Costs / Budget Total Costs Invoiced % = Billable Invoiced Price Billable Total Price Recognized Costs = Usage Total Costs - WIP	Cost value calculations start by calculating the value of what has been provided by taking a proportion of the estimated total costs based on percentage of completion. Invoiced costs are subtracted by taking a proportion of the estimated total costs based on the invoiced percentage. This calculation requires that the billable total price, budget total price, and budget total costs be correctly entered for the whole job.
Cost of Sales	Recognized Revenue = Billable Invoiced Price Recognized Costs = Budget Total Cost x Invoiced Percentage Invoiced % = Billable Invoiced Price / Billable Total Price (Invoiced % exists as column on job task lines) WIP Costs = Usage Total Costs – Recognized Costs	Cost of sales calculations begin by calculating the recognized costs. Costs are recognized proportionally based on budget total costs. This calculation requires that the billable total price and budget total costs be correctly entered for the whole job.
Sales Value	Recognized Costs = Usage Total Costs Recognized Revenue = Usage Total Price x Expected invoicing ratio Cost Recovery % = Billable Total Price / Budget Total Price WIP Sales = Recognized Sales - Billable Invoiced Price	Sales value calculations recognize revenue proportionally based on usage total costs and the expected cost recovery ratio. This calculation requires that the billable total price and budget total price be correctly entered for the whole job.
Percentage of Completion	Recognized Costs = Usage Total Costs Recognized Revenue = Billable Total Price x Percentage of Completion Percentage of Completion = Usage Total Costs / Budget Total Costs (Referred to as "Cost Completion %" on job task lines) WIP Sales = Recognized Sales - Billable Invoiced Price	Percentage of completion calculations recognize revenue proportionally based on the percentage of completion, that is, usage total costs vs. budget costs. This calculation requires that the billable total price and budget total costs be correctly entered for the whole job.
Completed Contract	WIP Amount = WIP Cost Amount = Usage (Total Cost) WIP Sales Amount = Billable (Invoiced Price)	Completed contract does not recognize revenue and costs until the job is complete. You may want to do this when there is high uncertainty around the estimates of costs and revenue for the job. All usage is posted to the WIP Costs account (asset) and all invoiced sales are posted to the WIP Invoiced Sales account (liability) until the job is complete.

Understanding WIP Methods

See Also