Work in Progress
Partially completed goods on the production floor, representing cash spent on materials and labor not yet converted to revenue.
What is Work in Progress?
Work in progress (WIP) represents products that have entered production but are not yet finished goods ready for sale. WIP includes the material costs, direct labor, and allocated overhead invested in goods at various stages of completion.
From a cash perspective, WIP is cash that has left your account and not yet returned through customer payment. Raw materials purchased last week are now WIP on the production floor. Labor hours worked this week add to WIP value. None of this converts to revenue until the product is finished, shipped, and paid for.
High WIP levels indicate significant cash locked in production. A manufacturer with $600K in WIP and a 90-day conversion cycle has $600K unavailable for other obligations until products complete the full cycle to customer payment. WIP should appear explicitly in working capital reviews, not only on the balance sheet. Rising WIP without matching order backlog is a warning that cash is accumulating on the floor without a clear path to collection.
Why it matters
WIP is invisible in bank balance tracking but represents real cash commitment. Manufacturers who monitor WIP levels alongside collection timelines understand their true cash position.
Formula
WIP Value = Materials Used + Direct Labor + Allocated Overhead (for incomplete units)
Example
A production run of 500 units at $320 material cost per unit with 60% completion: WIP value is $96K ($160K total material × 60% complete).
How RunwayCal helps
RunwayCal models WIP as committed cash within the production-to-collection pipeline.
Common mistakes
- 1Not tracking WIP as a cash commitment
- 2Allowing WIP to accumulate without matching customer orders
- 3Ignoring WIP when calculating available working capital
Get the Financial Clarity Newsletter
Practical tips on cash flow, runway, and financial decisions for founders, business owners, CFOs, investors, and board members. Free, weekly, no spam.
See cash locked in production
RunwayCal tracks WIP as committed cash within your production-to-collection pipeline.
Monitor production cash → Free