Many professional service firms record a Work in Progress asset on their balance sheet to represent the value of time spent on client work but not yet billed.
There is a 3-way connection between the value of revenue earned, changes in the level of WIP and the value of invoices issued by the firm each month. Castaway's sales elements make it easy to model these interactions.
To model WIP for professional service firms:
- Add a sales element called, say, 'Fees Earned'
- Enter the value of revenue earned each month. In the sample file below, we used the Units x Rate calculation method to model revenue as Hours charged x Hourly rate
- Click the Revenue button to open the Element Properties dialog
- Change the Invoicing Method to Enter Accrual/WIP Days
- From the Settings tab, set the Accrual Reporting option to Separately as WIP
- In the data entry area, you can enter WIP in 2 ways:
- Enter the number of WIP days against Accrual/WIP Days. Castaway will then calculate the closing WIP balance
- Enter the closing WIP balance into the Accrual/WIP Adjustment data entry line
- Castaway then calculates the GST-inclusive value of Net Invoices billed to clients.
Download a sample file for WIP for Service Firms here: