Work in progress as part of the working capital calculation

August 21, 2025

by a searcher from University of Cambridge in Windsor SL4, UK

Does anyone has experience of completion based on completion accounts with WIP (Work In Progress) calculation in a manufacturing business? Is WIP accounted for as Working Capital calculation i.e. normalised WIP just as normalised WC is included and anything above or below this level needs readjustment of pricing? thank you for the response. Murtaza

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Reply by a searcher
from Columbia University in Fairfax, VA, USA

Yes, you'll want to include it in your NWC calculation. Pretty common in project-based businesses. Some good responses here, but a few nuances to look out for in diligence: > Valuation - how WIP is measured can materially change the balance (e.g., standard costing, % completion, cost to cost). > Accounting Consistency - some businesses expense sooner, some later. Just make sure it's consistent. > Conversion Risk - make sure WIP reliably converts to revenue/cash. If parts are routinely written off, factor that into your normalization. And be sure to diligence both sides. WIP can appear on both the asset side (costs tied up in production) and the liability side (billings in excess / deferred revenue). So you'll need to reconcile both halves of the story for your NWC peg.

Reply by a professional
from University of Michigan in Detroit, MI, USA

Hi ^redacted‌, yes, WIP is addressed in the working capital adjustment (if possible). Because of the nature of manufacturing, it may also make sense to break out the adjustment into components. E.g., a separate adjustment for (1) AR/AP, (2) Inventory, and (3) WIP. Happy to discuss further. Feel free to reach out at redacted

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