---
title: "What is wip?"
description: "Wip explained in plain English: definition, how it works, an example, and how it appears in QuickBooks and Xero."
url: https://ledgerbpo.com/glossary/wip/
updated: 2026-09-11
publisher: LedgerBPO (SS Support Network LLC)
language: en-US
---

# What is wip?

Glossary

WIP, or work in progress, is the value of costs incurred on jobs or units that are started but not yet completed or billed, carried on the balance sheet as an asset until the work is finished and invoiced. It applies to construction, manufacturing and long-running projects.

Updated September 2026

## How wip works

For a construction or long-project business, WIP is calculated by comparing costs incurred to date against billings to date on each open job, often using the percentage-of-completion method. This produces two figures: costs in excess of billings, which is underbilled and an asset, and billings in excess of costs, which is overbilled and a liability.

A WIP schedule is reviewed monthly alongside job costing, because a job that is significantly underbilled can quietly drain cash even while it looks profitable on paper. Lenders and bonding companies for construction firms often require a current WIP schedule as part of their financial reporting requirements. Some contractors also track WIP by individual job rather than only in total, since a single significantly underbilled job can be masked by other jobs that are overbilled, hiding a cash flow problem within an otherwise healthy-looking total.

## Example

A contractor's $200,000 job is 40% complete, so $80,000 of revenue should be recognized. Costs incurred to date are $75,000 and billings to date are $70,000. The job is underbilled by $10,000, the $80,000 of earned revenue minus the $70,000 billed, recorded as a WIP asset called costs and earnings in excess of billings until the next invoice catches up. The project manager reviews the WIP schedule with the office each month and issues an additional progress invoice to close the underbilled gap before it grows further.

## WIP in QuickBooks Online vs Xero

Not software-specific: QuickBooks Online and Xero do not generate a percentage-of-completion WIP schedule natively, so contractors typically use a spreadsheet or a construction-specific tool alongside job costing data exported from their accounting system. The resulting WIP adjustment is then posted back to the general ledger as a journal entry each month.

## Related terms

- [Job costing](https://ledgerbpo.com/glossary/job-costing/)
- [Retainage](https://ledgerbpo.com/glossary/retainage/)
- [Progress billing](https://ledgerbpo.com/glossary/progress-billing/)
- [All terms](https://ledgerbpo.com/glossary/)

## How LedgerBPO handles wip

We build and update a monthly WIP schedule from your job cost and billing data, showing which jobs are overbilled or underbilled, then post the resulting adjustment to your books. This keeps your financial statements aligned with actual job progress instead of just what has been invoiced so far.

[Bookkeeping and billing for construction companies & contractors](https://ledgerbpo.com/industries/construction/)

Next step

## Books closed. Invoices paid. Every month.

Tell us what is going on with your books or billing. You will hear from a named person within 1 business day, with a custom quote and a plan for the first close.

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Source: https://ledgerbpo.com/glossary/wip/ · Contact: https://ledgerbpo.com/contact/ · Full site map for agents: https://ledgerbpo.com/llms.txt