WIP Management for Architecture & Engineering Firms:
How to Protect Revenue Between Delivery and Billing
Work in progress is not an accounting entry. It is a management tool. Firms that review WIP late — or not at all — consistently write off work their team has already been paid to deliver. Here's what WIP is, how to calculate it, and how to manage it before it becomes a write-off.
What Is Work in Progress (WIP)?
Work in progress is the value of work that has been completed but not yet invoiced.
It represents the gap between what your team has delivered and what has actually been billed to the client.
Formula: Earned Value − Billed to Date
Earned value is the portion of the contract fee that corresponds to the work completed so far. If a project has a $200,000 fee and the team has completed 40% of the work, the earned value is $80,000. If $60,000 has been invoiced, WIP is $20,000.
That $20,000 represents real work — work your firm has already paid for in labor and overhead — sitting between delivery and the invoice.
Why WIP Is a Management Tool, Not an Accounting Entry
Most A/E firms encounter WIP on a balance sheet as an asset. That framing makes it feel like an accounting concern.
It isn't. It's an operational one.
WIP is where revenue is either protected or lost. Firms that review it regularly catch over-billing risks, under-billing patterns, and stalled projects before they become write-offs. Firms that treat it as a month-end accounting cleanup consistently discover write-offs after the fact — when the options for recovering them are already gone.
The distinction matters because WIP problems are almost always solvable when caught early and rarely solvable when caught late.
WIP is not money you've lost. It's money you haven't protected yet.
The firms that write off the least WIP are not the ones with the fewest problems. They're the ones reviewing WIP weekly and acting on it while the work is still fresh, the client relationship is active, and recovery options still exist.
Where WIP Problems Come From
Billing that lags behind delivery
The most straightforward WIP problem. Work is completed, but invoices don't go out promptly.
Two weeks of billing lag across a ten-project portfolio creates a significant unbilled balance. Left unreviewed, that balance ages. Aged WIP is harder to collect — the work is less recent, the client's memory of it is less clear, and billing it becomes a conversation instead of a routine invoice.
Percent complete estimates that don't reflect reality
WIP is calculated from percent complete. If percent complete is estimated loosely — or entered by project managers who are optimistic about progress — the WIP figure is wrong from the start.
Over-estimated completion creates overbilling risk: the firm invoices more than the work earned supports. Under-estimated completion hides unbilled WIP that should already be on an invoice.
Accurate WIP depends on honest, consistent percent complete entries — by phase, not just by project.
Fixed fee projects with no phase tracking
On a fixed fee project without phase-level tracking, percent complete is often a single project-wide estimate. That number is easy to misstate and hard to verify.
When phases are tracked separately — schematic design, design development, construction documents — percent complete becomes measurable. Each phase has a defined scope and a defined fee. Completion can be evaluated against real deliverables, not overall impressions.
→ Read: Architectural Project Management Process
Scope that expanded without a change order
When additional work gets absorbed into the base contract rather than flagged as an additional service, the earned value calculation becomes distorted. The team is doing more work than the contract fee supports — which means the WIP figure understates the real value of what's been delivered.
That gap between real earned value and contract earned value is where quiet write-offs originate.
→ Read: What Are Additional Services in Architecture?
Projects that stall mid-phase
A project that goes quiet — client delays, permitting holds, funding issues — can accumulate WIP that sits unbilled for months. The longer it sits, the harder it becomes to invoice without a client conversation. The harder that conversation becomes, the more likely the firm writes it off instead.
Regular WIP reviews surface stalled projects before the balance becomes uncomfortable to bill.
WIP benchmarks to watch:
WIP older than 30 days — review and determine billing eligibility
WIP older than 60 days — escalate to principal, determine whether a client conversation is needed
WIP older than 90 days — high write-off risk, recovery options narrowing
WIP that exceeds remaining contract value — over-billing or scope expansion that hasn't been addressed
The goal is not zero WIP. Some WIP is normal and expected in project-based work. The goal is WIP that is current, understood, and actively moving toward an invoice.
Review WIP weekly, by project
Monthly WIP reviews are too infrequent for active project portfolios.
A weekly review does not need to be long. The purpose is to look at every active project, identify any WIP that is aging or growing unexpectedly, and make a decision — bill it, investigate it, or flag it for a client conversation.
That decision made at two weeks is almost always easier than the same decision at eight weeks.
Connect percent complete to phase deliverables
The most reliable percent complete estimates are tied to specific deliverables, not to elapsed time or overall project feel.
"We've used 60% of the SD budget" is a financial fact. "We think we're about 60% done" is an impression.
For WIP management to work, percent complete needs to come from phase-level tracking that project managers can evaluate against real work product — not from a single number entered for the whole project.
Review over-billing as carefully as under-billing
WIP management is not just about finding unbilled work. It's about finding billing that's out of alignment with earned value in either direction.
If a project has been billed more than the earned value supports, that overbilling is a liability — the firm owes the client work it hasn't yet delivered. That risk needs to be visible and managed.
Firms that only focus on under-billing miss half the picture.
Make WIP part of the billing preparation process
The cleanest way to manage WIP is to review it as part of billing preparation — not as a separate exercise.
Before each billing cycle, project managers review active projects, confirm percent complete by phase, identify unbilled WIP, and either generate invoices or document why the billing is being deferred. That documentation matters — it creates a record that protects the firm if the deferred WIP becomes a write-off conversation later.
The write-off conversation is always harder than the billing conversation.
Asking a client to pay for work just completed is routine. Asking them to pay for work completed three months ago, on a project that has since stalled or shifted, requires justification, negotiation, and often a relationship cost. Managing WIP actively means having the easier conversation instead of the harder one.
How WIP Connects to the Rest of Your Financial Metrics
WIP sits at the intersection of three other metrics in the financial chain.
It connects to the realization rate because unbilled WIP that never gets invoiced reduces the percentage of billable work that becomes collected revenue. Every dollar of WIP written off is a direct reduction in realization.
It connects to the net multiplier because write-offs reduce net revenue without reducing the direct labor cost that was already incurred. A portfolio of projects with chronic WIP write-offs will show a weaker multiplier than the billing activity alone suggests.
It connects to operating profit because WIP write-offs don't appear as a line item in most reporting — they simply reduce the revenue that flows through to margin. Firms with persistent WIP problems often show operating profit that appears lower than their billing activity warrants, with no clear explanation in the P&L.
What Good WIP Management Looks Like
A firm managing WIP well can answer these questions at any point in the month:
- What is the total value of completed but unbilled work across all active projects?
- Which projects have WIP that is more than 30 days old?
- Which project managers consistently have high unbilled balances at billing time?
- Are there any projects where billed amounts exceed earned value?
- Which stalled projects are carrying WIP that needs a client conversation?
Those are not complicated questions. They just require visibility that most A/E firms don't build until after the first significant write-off forces the issue.
→ Read: Realization Rate for A/E Firms
→ Read: Financial Metrics for A/E Firms: The KPIs That Actually Predict Profitability
Cut Your Billing Time by 60% Within 90 Days — Or We Refund Every Penny
We're so confident BaseBuilders will transform your billing process that we're putting our money where our mouth is.
BaseBuilders’ easy-to-use software is specifically designed to help small to mid-sized firms track time, manage projects, stay on top of expenses, and more. We’ll handle the invoicing for you so you can focus on growing your firm and designing wonderful spaces.