Work in progress (WIP)

Work in progress shows up most often in professional services, construction and agency businesses, where staff have logged hours or completed part of a job that hasn’t been invoiced yet at the moment a sale closes. Unlike finished inventory sitting on a shelf, WIP has to be estimated based on percentage of completion, billing rates and the likelihood the client actually pays.

Why it’s a common negotiation point

• WIP is often excluded from the purchase price and settled through a separate true-up once invoices actually go out.
• Sellers usually want credit for work their team already did; buyers want to avoid paying twice for work they still have to finish and collect on.
• Disputes commonly centre on how much of a partially completed project counts as WIP versus post-closing work.

How it typically gets handled

Purchase agreements commonly include a WIP schedule prepared as of closing, with an agreed method for valuing it and a mechanism — often a holdback or post-closing adjustment — for reconciling estimates against what actually gets billed and collected.