Work in progress (WIP) is the value of work a business has started but not yet completed or invoiced. In manufacturing it means partly finished goods; in construction and professional services it means time and costs incurred on jobs not yet billed. WIP sits on the balance sheet and directly affects reported profit.
What it means
WIP is valued at cost, or at the recoverable amount if lower, and in contract businesses it may be recognised as revenue in line with progress under the relevant accounting standard. Because valuation involves judgement, WIP is one of the areas where reported profit can be most easily overstated or understated.
How it works in a UK business
In construction, WIP is reviewed contract by contract through a cost value reconciliation, comparing costs to date with the value of work done. Professional services firms track unbilled time by client and age it, because old WIP is often hard to recover.
High or growing WIP ties up working capital. Regular WIP reviews, clear billing milestones and prompt invoicing all help convert it into cash.
Frequently asked questions
Why does WIP matter to cash flow?
Until WIP is invoiced and paid, the business has funded the labour and materials itself. Large or slow-moving WIP balances absorb cash, so growing firms can be profitable on paper yet short of money. Tracking WIP days and billing promptly is one of the simplest ways to release cash.
How do auditors and buyers look at WIP?
They test whether WIP values are recoverable, looking for old balances, disputed jobs and loss-making contracts that should be provided for. Overstated WIP inflates profit and net assets, so in due diligence it often leads to price adjustments if valuations cannot be supported.
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Last updated: 5 November 2026