What Is WIP in Water Restoration—and Why It Can Make or Break Your Financials
In water restoration accounting, Work in Progress (WIP) is often misunderstood—and frequently ignored. But if your team is actively working jobs that aren’t yet invoiced, WIP can drastically skew your profitability and cash flow if not handled correctly.
Here’s what you need to know.
What Is WIP in Water Restoration?
Work in Progress (WIP) refers to revenue you've earned but haven’t yet billed. In the restoration industry, this happens when:
A mitigation job is underway but not yet completed
A reconstruction project is staged across multiple phases
Xactimate estimates are being finalized before billing
An adjuster hasn’t approved a scope, but the work is already performed
In accrual accounting, WIP captures that “in-between” stage—when expenses have hit your books, but the matching revenue hasn’t.
How WIP Impacts Your Financial Statements
Here’s how failing to track WIP correctly can distort your financials:
1. Profitability Looks Worse Than It Is
Let’s say you spent $20,000 on materials and labor this month, but the jobs aren’t billed yet. If you don’t book WIP revenue, your P&L shows a loss—even if the job will net you $40,000 next month.
2. Cash Flow Forecasting Becomes Unreliable
If you don’t know how much unbilled work is in the pipeline, it’s hard to predict incoming cash—especially with carriers delaying payment.
3. Job Costing Gets Disconnected from Actuals
If you only recognize revenue when an invoice goes out, your financials will not align with when the work was done. That makes job-level profitability reports unreliable.
How to Book WIP in Your Accounting System
If you're using accrual-based accounting (which you should be for accurate job costing), here’s a simple example of the journal entry:
When Work Is Performed (But Not Billed Yet):
Debit: WIP Asset (Balance Sheet)
Credit: Revenue (P&L)
When the Invoice Is Sent:
Debit: Accounts Receivable
Credit: WIP Asset
This keeps your books accurate by showing revenue when the work is done—not just when the invoice goes out.
Note: You’ll need strong job costing systems (like Xactimate and QuickBooks Projects) and periodic WIP schedules to calculate these entries accurately.
Why Restoration Businesses Need WIP Visibility
For water restoration contractors juggling dozens of open jobs, WIP is the difference between feeling broke and realizing you’re actually profitable—just not yet paid.
Tracking WIP lets you:
See true monthly profitability
Improve forecast accuracy
Catch scope creep and job delays early
Align labor and materials with revenue timing
Provide better financials to lenders or investors
Get Help Setting Up WIP the Right Way
Most bookkeepers don’t handle WIP correctly—especially in industries like restoration, where progress-based billing and insurance delays are the norm.
At Ledger Management, we specialize in water restoration financials. We can help you:
Track WIP accurately
Improve job costing
Clean up your P&L and balance sheet
Build forecasts you can actually trust
📅 Ready to stop guessing and start planning? Schedule a call today to get your financials aligned.