Job System - WIP Release - how it works

We want to match costs to income so the P& L is not like a roller coaster ride, however actual costs and income don't move together through periods.

For example, if you get a $50k deposit on job commencement you don't want to take it all up as income.

Therefore if we process invoices in a period, we want that period to bare costs.

If there are no costs we have to use an estimate.

The Estimate

The estimate is based on the margin the Project Manager believes he will make. Job 873 as 40%.

Therefore, if will $5000 on the job then when the Project Manager does his WIP Release (to cost of sales in the P & L) it will release $3000 (60% of $5k)

Actual costs may be $4000 and that reflects in WIP. $4000 in time and materials less $3000 released to cost of sales leaves $1000 in WIP.

Similarly, if actual costs are $2000 then: $2000 - $3000 = $-1000

Negative WIP

Now negative WIP might seem absurd but all it is stating is we are billing ahead of costs in the early project stage. This is the norm in construction such as electrical work and where deposits are paid.

No Income for the Month

If no income in the month then nothing is released (unless the default job margin is changed).

Reporting

The job comparisons report (Job menu > reports > Jobs provides a summary of job numbers . It shows the actual running GP % and beneath that the estimated GP% for the job.

Final Adjustment on Completion

When the job is flagged as complete the month-end (or whenever it is run) WIP Release compares the final actual cost with the estimated cost taken up and processes an entry adjusting.