Work in progress

The term Work in progress is used in the financial administration of commercial companies. The work in progress reflects the work that has been done for which an order has been received, but no invoice has yet been sent to the client. In essence, work in progress is meant to produce proper reporting from the ledger account. The costs that are incurred for a project are journalised, while there is no revenue yet. In order to provide coverage for these costs, you add work in progress entries.

Description

Work in progress is defined as: the total of costs of the chargeable actual costing lines that have been entered for the project -/- the amounts that have already been invoiced.

The scope of the work in progress is an indication of the amount of money that a company is still owed or thinks it is owed. Especially in companies that work on a project basis and work on relatively long-term projects, insight into the Work in progress on the balance sheet date is required.

WIP integration vs. WIP totals

WIP in Profit can be split into WIP Integration (business world) and WIP totals (accountancy). The reason for this is that the meaning of WIP differs for the various professional groups. In the business world, WIP is regarded as the difference between the costs incurred (cost price) and the revenues entered for a project. In case of long-term projects, production companies want to account for the project's value on the balance sheet. On the other hand, accountants regard WIP as the difference between the sales price entered and the revenues entered.

Determine work in progress and line processing date

Profit determines the work in progress by looking for lines on which Charge is set to Y(es) and Invoiced to N(o). You can determine the work in progress historically by completing different date fields. You can also use these date fields to check on which date a draft line was written off.

When generating invoices on the basis of drafts, lines are added to the drafts automatically (for instance to compensate for advance lines). For these lines the invoice date from the pre-entry is entered as the creation date.

After the Transfer line action, the system date is entered for both the processing date and the creation date. The system date is also entered as the date in the automatic rounding line.

Compress

The general meaning of Compress is to collect and totalise multiple source lines on one target line. This not only applies to invoices, it can also apply to other lines.

Example:

  • If you enter actual costing lines on work types in Profit Projecten, you can compress the project invoices by work type. This means that all actual costing lines of the same work type are added up so that the invoice will show one line with the total number of hours and the total amount. The original lines are saved as invoice lines and can for instance be printed as a specification.
  • In Profit Projecten you can work with Work In Progress (WIP) integration. Compressed journal entries are then also created for the WIP. In this case too, you would need to return to the source in Profit Projecten for the details, because they are not transferred to Profit Financieel.

Preparation

Procedure

  • Period totals for work in progress

    To gain insight into the state of the WIP, every project entry is updated in the Work in progress period tables table. This table tracks the totals of the work in progress per project per period. The table is updated after every action in Profit that affects the work in progress.

  • Work in progress integration

    You can carry forward the costs and revenues you enter in the actual costing per project to the financial administration. We call this WIP Integration. For this purpose, you link ledger accounts to calculation bases. The journal entries for the work in progress are entered on these ledger accounts.

Also see