In 2019, there were over 30 million businesses in the United States.
Conducting regular inventory is an essential part of running any business. Counting raw materials and completed products is fairly simple, but what about counting anything that’s in the between stages?
Such assets are referred to as either works in process or works in progress. You must have a complete understanding of these terms in order to maintain an accurate inventory.
Read on for an overview of the meaning of work in process vs work in progress.
Work in Process
Every product goes through a manufacturing process that converts it from raw materials to a completed item that a company sells.
When an item is in the middle of that process and can neither be considered the raw materials nor the final product, it is a work in process. “Work in process” is therefore talking about a physical object.
Work in Progress
“Work in progress” is a phrase that is more familiar to people outside of the business world. Its colloquial meaning can help you understand its meaning in a business context, too.
In summary, a work in progress for business purposes is a project that is on the way to completion.
This is relevant to your inventory. That project might be a service you sell, meaning you must record its value, even while in progress. Alternatively, the project might be an internal one. In this case, you should still record the value because of the costs it incurs for your business.
Work in Process vs Work in Progress
The easiest way to understand the distinction between a work in process and a work in progress is by considering the former as referring to objects and the latter as referring to ongoing projects or services.
Since the meanings of the terms are very similar, they are sometimes used interchangeably. This is important to be aware of, in case you encounter a situation in which they are used to mean the same thing.
But it will be beneficial to you to use them distinctly because it adds as much clarity as possible to your inventories.
Financing
Inventorying everything is important because it allows you to stay on top of your finances and encourages potential investors who want to see what progress you are making. Since every business will have both works in process and works in progress (both of which can have the acronym WIP), it is clear that you must learn how to calculate their values.
Calculating WIP requires you to consider many different elements and can be somewhat challenging. If you are having difficulty determining how to value WIP on your own, there are services like Your FundingTree that can help you with WIP financing.
Your Business and WIP
Whether you are selling a product, offering a service, or working on a project to develop your business, you will need to be attuned to the relevant WIP values. And now that you know the distinction between work in process vs work in progress, you will be prepared to efficiently inventory these different values.
For more important tips on managing your business, check out our other business articles.
