Works in Progress (WIP)

Work in progress, commonly abbreviated to WIP, describes all jobs that are currently active - started, costs being incurred, but not yet finished and invoiced. For businesses running multiple concurrent projects - construction contractors, AV integrators, electrical installers, furniture dealers - WIP is the space between how busy the order book looks and how much cash is actually being collected. A business can have 12 live jobs and a near-empty bank account. A large, poorly managed WIP balance is often the reason.

WIP in Practice

The critical distinction in WIP accounting is between two states. Underbilling happens when the value of work completed to date is greater than the total invoiced so far. Costs are being spent faster than revenue is being recovered. Overbilling is the opposite: more has been invoiced than the value of work actually performed. Overbilling can look healthy in the short term, but it creates a delivery liability and understates how much work remains.

A commercial fit-out electrical contractor running eight concurrent jobs might have $240,000 in committed labor and materials across those projects before a single final invoice goes out. If stage invoicing is structured tightly, deposits and progress invoices will have already pulled much of that cost back in. If it is not, the contractor is funding their customers' projects from their own reserves.

For construction businesses specifically, Procore research found that nearly half of projects run behind schedule or over budget. When that happens, the cost side of WIP grows while billing opportunities stall, compressing the margin that was already tight.

Why Tight Milestone Invoicing Reduces WIP Risk

The most direct way to keep WIP from becoming a cash flow problem is to link billing to project milestones before work starts. Define the invoicing events at contract stage: deposit on signing, progress invoice at a defined completion percentage, and final invoice tied to a specific handover trigger. When those events are missed because the invoice is not raised the same day the milestone is reached, the WIP balance grows without recovering any cash.

The other discipline is cost capture. Van stock booked out on jobs, sub-contractor costs confirmed in writing, and labor tracked at burdened rates rather than direct wages all affect how accurately WIP is calculated. If $800 in materials leaves the van for a job without being logged, the WIP figure is understated and the job margin looks better than it actually is until reconciliation happens at close.

Zigaflow tracks purchase orders, works orders, and invoices against each job record, giving a live view of costs committed versus revenue raised across every active project.