Work in progress (WIP) is work you have already carried out but have not yet finished or invoiced. It shows what your organisation has delivered without any revenue against it yet. In this article you can read what work in progress is, how you record and invoice it, how it is valued for tax purposes in the Netherlands, and what it does to your balance sheet and your result.
Table of contents
What is work in progress?
Work in progress refers to work that has already been performed but is not yet fully completed or invoiced. It matters in project management and in financial accounting, because it shows what you have delivered while the revenue is still outstanding. In sectors built around projects, such as construction, consultancy and the creative industry, WIP is the figure that tells you where a project stands both in progress and in money.
What does OHW mean?
OHW is the Dutch abbreviation for onderhanden werk, which is work in progress. If you work with a Dutch accounting package or with a Dutch accountant, you will see OHW on the chart of accounts and in reports where an English system would say WIP. The concept is the same; only the label differs. That is worth knowing, because the tax treatment described further down is specific to the Netherlands rather than general practice.
Projects and cost centres
A project is a temporary undertaking with its own scope, timeline and budget. Costs accrue throughout, and whatever has not been completed or invoiced sits in work in progress. Cost centres are the internal categories you use to assign costs to departments, teams or projects. Tie your WIP to cost centres and you can follow spend, labour and revenue per project, which makes both your invoicing and your bookkeeping easier to defend.
How do you record work in progress?
Recording WIP starts with accurate time tracking: who worked on which task, when and for how long. Alongside that you keep all costs, both direct ones such as materials and subcontractors and indirect ones such as overhead, and you assign them to the matching cost centre. At each period close, monthly or quarterly, you then review the position: which costs have been incurred, and which work has been delivered but not yet billed?
Invoicing work in progress
There is more than one way to invoice WIP. On large projects you often bill in instalments tied to a milestone or to a percentage of completion, which keeps cash coming in and limits your exposure if the client stops paying. Others invoice retrospectively: at the end of a period the work in progress is calculated and billed, either at a fixed or a variable amount. Whichever you choose, agree the moment and the method with your client in advance, for example through a payment schedule in the contract.
WIP on the balance sheet and in the result
Work in progress usually appears as a current asset on the balance sheet, because it represents a right to future income. The valuation is where the rules bite. Recognising revenue as the work progresses is the general principle in modern accounting standards, and in the Netherlands it is mandatory: since 2007, article 3.29b of the Dutch Income Tax Act, which also applies for corporate income tax, requires progressive profit recognition. You therefore cannot wait until the project is delivered or invoiced. If an assignment is half finished, you capitalise half of the agreed price, the percentage of completion method. The Dutch tax authority explains the valuation of work in progress in detail, in Dutch. Outside the Netherlands, check what your own national rules and reporting standard require.
Automating the cost side with TriFact365
A reliable WIP valuation depends on a cost ledger that is complete and current. That is the part TriFact365 takes on: the software recognises your purchase invoices, materials and subcontractors included, and prepares a booking proposal that you can assign to the right cost centre or project. Once you have checked it and sent it through, the entry lands in your accounting package. As a result the project costs are in your records quickly and correctly, ready to feed your work in progress. Read how processing incoming invoices works.
Frequently asked questions about work in progress
OHW is the Dutch abbreviation for onderhanden werk, the equivalent of work in progress. You will come across it in Dutch accounting packages and reports.
Usually as a current asset, because it represents a right to future income rather than cash you already hold.
At the share of the agreed price that relates to the work already performed, known as progressive profit recognition. You take the profit gradually instead of waiting for the final invoice.
WIP covers work performed that is not yet complete or invoiced, valued at its share of the agreed price. Unbilled revenue is the narrower case of work that is finished but for which the invoice has not gone out yet.
It automates the cost side. TriFact365 recognises purchase invoices such as materials and subcontractors and prepares a booking proposal, with a cost centre or project if you want. After your check the entry goes to your accounting package, where the WIP valuation itself is made.
In closing
Work in progress tells you where your projects stand, keeps budgets in view and ties spend to cost centres. Track the costs closely, value the work progressively according to the rules that apply to you, and put the invoicing arrangements in writing. Do that and you get better control of the project as well as a steadier financial base.
