Work in progress (WIP) simply refers to the number of hours that have been booked onto jobs that have not yet been invoiced. This vital KPI informs you of the number of days Work In Progress that you have accumulated.
Example:
A) Hours booked as WIP = 120 B) # of Technicians = 6 C) Hours Attended in 1 day = 8 D) Work In Progress Days = 2.5 Days (A ÷ B ÷ C)
Discussion:
Many financial reports have a tendency to provide WIP as a total monetary value, but this can often be misleading. You must ask the question, is it reporting a value based upon the Labour Cost of Sales, Hours Sold at retail value, or Hours Sold at the current recovery rate?
The example above just deals with the number of hours accumulated in WIP and this is therefore more useful in trend analysis and deals with all eventualities.