How do you calculate WIP days?
The short answer
WIP days = unbilled work in progress at the month end ÷ fee income for the last three months × the number of days in those months.
It shows how long, on average, work sits between being done and being invoiced: the professional-services version of stock days, for time already paid for in salaries but not yet billed.
Every figure shown here is invented for illustration. Nothing on this page is computed from anyone’s accounts.
An architecture practice with £186,000 unbilled waits about 28 days to invoice
An invented practice has £186,000 of unbilled WIP at the end of June. Its fee income for April to June was £612,000, over 91 days.
WIP days = 186,000 ÷ 612,000 × 91 = 27.7 days
Work done today is, on average, invoiced about four weeks later.
Where WIP comes from in the trial balance
WIP is a balance sheet asset. In a trial balance it usually appears as either:
- a WIP or unbilled revenue (accrued income) account, posted at the month end from the practice management or time system; or
- nothing at all, where the firm recognises revenue only when it invoices. Then WIP days can't come from the ledgers alone: take the unbilled value from the time system each month.
Value WIP at what you expect to bill, not at full charge-out rates, or the days and the balance sheet are both overstated.
Use three months of fees, the same window as debtor days
One month of fees jumps with milestone billing. Three months smooths that out and matches the window used for debtor days, so the two add up to lock-up days.
What pushes WIP days up, and how firms bring it down
WIP days rises with billing only at milestones, partners holding bills until a job feels finished, disputed scope that nobody wants to invoice, and time recorded late.
- Bill monthly on time-and-materials work, and agree interim billing on fixed fees.
- Review WIP over 60 days at the monthly partners' meeting, by partner.
- Write off what won't be billed, and record it, so it shows in realisation.
- Track WIP days by service line: advisory and compliance work behave very differently.
Four ways WIP days misleads
- WIP at full charge-out rates instead of recoverable value.
- WIP posted only at the year end, so monthly WIP days falls to zero.
- Disbursements in WIP one month and out the next.
- A firm-wide average only. One stalled matter can double the number; show it by partner or service line.
Magic MIS computes debtor days; WIP days takes the formula above
WIP days isn't one of the figures Magic MIS computes. It computes fee income and debtor days every month, and the WIP balance, wherever the books post it, is one click away in the ledgers behind the balance sheet; the formula above does the rest.
What people ask about WIP days
Is WIP days the same as lock-up?
No. Lock-up days = WIP days + debtor days: the whole time from work done to cash received.
Should disbursements be in WIP?
Unbilled recoverable disbursements often are. Either way, be consistent.
Our WIP isn't in the ledger. What then?
Post a month-end journal from the time system, or record the WIP value separately. Without it, WIP days can't be calculated from the trial balance.
Read next
- How do you calculate lock-up days?Lock-up days = WIP days + debtor days: how long money is tied up between doing the work and being paid. The formula, a worked example, and how firms bring it down.Read
- How do you calculate debtor days?Debtor days = trade receivables ÷ the last three months' revenue × the days in them. A worked example, why three months beats one or twelve, and the GST effect nobody mentions.Read
- How do you calculate realisation?Billing realisation = fees billed ÷ time recorded at standard rates × 100, and collection realisation after it. The formulas, a worked example, and what a firm should watch.Read
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