Recording and tracking the value of work in progress is not as straightforward as recording and tracking the value of material stock. Materials in the manufacturing or retail industry are commonly delivered with a delivery note, making it easy to record their arrival at the warehouse and their value in the stock account. Once they have been “posted”, regular inventory procedures ensure that they are valued at the correct quantity taking into account the use of the goods for production or other purposes (eg internally), shrinkage or deterioration. They are then “accounted for” when they have been used for the final manufactured product delivered or when they are sold.

In the creative industry, as in other service-based industries, where work in progress is a non-material value, delivery notes generally are, inventories are generally out of the question.

However, the only thing that incorporeal WIP and material stock acquisitions have in common is a purchase invoice. However, even an invoice from a supplier does not necessarily mean that those values ​​are still in process, as the final service they are being used for (for example, an ad campaign) could have already been invoiced to the customer, generating revenue.

Therefore, many companies record incoming purchase invoices as costs immediately and the finance department performs regular (monthly) manual adjustment journals between work in progress and cost of sales, depending on the sales invoice value for the same month. Ideally, the records of the projects for which the costs have been incurred will allow them to base their adjustments on a cost allocation and billing for the same projects. Even if the last allocation applies to a lump sum adjustment journal it is not a scientific way to link the correct costs with the correct income. If at any time a report is required detailing which projects have what potential work-in-progress costs at a specific time, this cannot be easily seen in the journal entry. A new interrogation of the job boards or other records on which the diary was based is necessary.

Other companies take a different approach. They calculate for WIP in exactly the opposite way: every incoming invoice related to the project is by default treated as work in progress. The work in process adjustment journals to cost of sales are made when these costs are charged to the customer. If AR invoices have already been issued for costs and cost of sales accruals have been generated, the incoming purchase invoices are processed directly through WIP into cost of sales, reversing the previous accruals at the same time.

This second approach tends to be a more scientific way of calculating the profit (or loss) of the company at any given time. Comparing it to stock and warehouses, when it comes to materials, it also seems like a much more natural way to account for work-in-progress costs. Where there are integrated project management, job cost, and accounting systems in place, this can even be an automated procedure that works job-by-job with the added convenience that incoming AP invoices that relate to more than one job will be correctly assigned to any of the WIP. o Cost of Sales depending on the status of the respective work. Companies that have opted for the second approach and implemented software solutions to address it have found that they improve their reporting, from the project status report to the invoice scheduling report to the management profit and loss report. At any time they can get an analysis of their WIP, cost of sales and therefore profits without having to go through paper records or spreadsheets to obtain detailed information. Along with improved reporting accuracy, most of these companies get a better scheduled workflow and better short- and long-term profitability.