WIP (Work in Progress)
Introduction
Work in Progress is a method used to handle incurred cost for work that will
later be invoiced. It can also be used for an asset where the value is expected
to increase after the work is finished. During the work money spent towards
completing a product or a service can be seen as a company asset. However, because
of the reason that the work has not yet been completed, the monetary values incurred
from WIP should be kept in separate accounts during the in-progress period.
For an example, if a service that a Service Management organization delivers
is in progress and not completed, the costs incurred cannot be invoiced and posted
to final accounts. Hence, the costs are maintained in a temporary account during
the work in progress period. Once the work is completed and invoiced, WIP can be
released and cost moved from the WIP account to a final account, for example: cost
of sold services.
In the Work Task Managment solution, WIP is configured in the Wok Task Cost Codes
Rules. In the rules its a WIP reversal point also defined, which is the point in
time when the cost is moved from the WIP account to its final account.
WIP Reversal Point
Once the work is completed, and the WIP reversal point is met, the respective
WIP is released to the final accounts.
- Automated release of WIP to final accounts: The WIP revesal point
is evaluated everytime the work task transaction is transferred to finance.
If the WIP reversal point has been met; then the work task transaction is reposted.
When its reposted the following happens; two new posting lines are created on
the exiting work task transaction; . one to revert the current posting line
(WIP postings) and one posting line for the final account posting. The postings
will have the status Valid or Error and the
work task transactions status is updated to Reposted. In order
for the changes to take effect in finance, the work task transaction must be
transferred to finance. When transferred, the status of the transaction is updated
to Transferred.
- Manual WIP reversal: WIP can be manually reversed to final accounts
even before the WIP Reversal point is met. This can be done by using the function
Relase WIP to Final Accounts. This funciotn can be used both
from task level or transaction wise.
Methods of WIP Reversal
- Using WIP reversal conditions and dates: WIP maintained on temporary accounts
can be reversed to final accounts by defining WIP Reversal Conditions and WIP
Reversal Dates on Cost Code Rules.
WIP Reversal Conditions
- Task Finished: WIP will be reposted or transferred to final accounts
when the task get finished.
- Transferred to CO: WIP will be reposted or transferred to final accounts
when the transactions are transferred to customer order.
- CO Line Invoiced: WIP will be reposted or transferred to final accounts
when the customer order line is invoiced.
WIP Reversal Dates
- Event Date: WIP will be reposted or transferred to final accounts on
the specific event date. The event implies the respective event given under
the WIP Reversal condition.
- Transaction Date: WIP will be reposted or transferred to final accounts
considering the transaction date.