Monitoring your Work in Progress (WIP) is critical because it sits right at the intersection of profitability, cash flow, delivery performance, and risk. When WIP is invisible or unmanaged, businesses often look busy but quietly bleed money.
Here’s why keeping a close eye on WIP matters so much.

1. WIP directly affects cash flow
WIP represents work you’ve paid for but haven’t yet billed or collected.

Too much WIP = cash tied up in unfinished work
Delayed billing = delayed cash inflows
Poor visibility = surprise cash shortages

Many businesses fail not because they’re unprofitable, but because they run out of cash while work sits unbilled.

If you’re working but not invoicing, you’re effectively financing your clients.


2. It reveals true profitability (not just revenue)
Without monitoring WIP, you can’t see:

Whether jobs are running over budget
Which clients or projects are eroding margins
Where scope creep is happening unnoticed

WIP analysis helps you compare:

Time/cost incurred vs
Value you expected to deliver

This allows you to fix pricing, scope, or resourcing before the job finishes at a loss.

3. It exposes bottlenecks and inefficiencies
High or ageing WIP often signals:

Work stuck waiting for approvals
Overloaded staff or poor handoffs
Rework due to unclear scope or quality issues

By monitoring WIP:

You see where work slows down
You can rebalance workloads
You shorten cycle times and improve delivery speed

Lower WIP almost always means higher operational efficiency.

4. It improves forecasting and decision-making
Accurate WIP data helps you:

Forecast revenue and billing timelines
Predict resource needs
Plan hiring or capacity changes with confidence

Without WIP visibility, forecasts are guesswork — and decisions become reactive instead of strategic.

5. It reduces financial and compliance risk
Uncontrolled WIP can lead to:

Overstated profits (especially in project-based accounting)
Write-offs when work can’t be billed
Disputes with clients over scope and value

Regular WIP reviews help ensure:

Revenue is recognised correctly
Issues are caught early
Fewer unpleasant end-of-project surprises


6. It drives better client and project management
When you track WIP well:

Projects stay aligned with scope and budget
Billing conversations are timely and factual
Clients receive fewer “catch-up” invoices

This builds trust, improves client experience, and protects long-term relationships.

In short
Monitoring WIP helps you:

 Protect cash flow
 Safeguard margins
 Improve efficiency
 Reduce risk
 Make better decisions

A healthy business doesn’t just track how much work it has — it tracks how much value it’s actually turning into cash.

McNamara & Company - Chartered Accountants, located minutes from the Melbourne CBD
www.mcnamaraandco.au/contact-us
Phone +61 3 9428 1062
Email admin@mcnamaraandco.au

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