I'm an electrical contractor, and for years "WIP" was a word my accountant used that made my eyes glaze over. Then I understood what it actually measures, and it turned into one of the few numbers I check on every active job. WIP — work in progress — is just the gap between how much of a job you've earned and how much you've billed. That gap tells you whether the job is funding itself or quietly funding it for the customer.

Earned vs. billed

Two numbers, and they're rarely equal:

  • Earned — the value of the work you've actually completed. If you're 60% done on a $100k job, you've earned $60k.
  • Billed — what you've actually invoiced the customer so far.

WIP is the difference, and which way it leans matters a lot.

Under-billed: you're the bank

If you've earned $60k but only billed $45k, you're under-billed by $15k. You did the work, bought the material, paid the crew — and you haven't invoiced for it yet. That $15k is coming out of your cash to keep the job moving. A little is normal. A lot, across several jobs, is how a busy, profitable contractor runs out of money.

Under-billed means you're financing your customer's project with your own cash. Do it on enough jobs at once and being "busy" becomes a cash crisis.

Over-billed: borrowed time

The other direction: you've billed $60k but only earned $48k. You're over-billed by $12k — you've collected ahead of the work. That feels great for cash flow, and a bit of it is fine and normal. But it's borrowed against work you still owe. If you're leaning on over-billing to stay liquid, a job that stalls can leave you having spent money you now have to work off with no incoming draw.

Why you can't see it on paper

Here's the catch: WIP needs earned, and earned needs an honest, current percent-complete and live costs. On a paper system you don't have either until month-end, so WIP is always a backward-looking accountant's adjustment instead of a number you can steer with. When your costs post live and percent-complete is set as the work progresses, WIP becomes a real-time gauge: glance at it and know, today, whether to get an invoice out the door or whether you're sitting on a draw you've already earned.

The practical move: a job that's drifting under-billed is a signal to bill. Don't let earned work sit uninvoiced because the billing cycle "isn't until the 30th" — that's your cash on the street.

The one-minute version

  • WIP is the gap between work earned and work billed.
  • Under-billed = you're financing the job with your own cash; bill it.
  • Over-billed = you've collected ahead of the work; fine in moderation, risky as a crutch.
  • WIP only works as a live number — it needs current costs and honest percent-complete.