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 = 216 B)# of Productives = 6 C) Hours Attended in 1 day = 8 (Per Productive) D) Work In Progress Days = 4.5 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.