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Basis of calculation - how best to calculate WIP for website testing business

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Good afternoon

I have a new client who historically have not calculated WIP as such, more a 'finger in the air' approach. Year end is approaching and I am seeking advice on how best to form the calculation this year. The 2 main costs are hosting fees and staff costs, and invoicing is 'as and when'. I had planned to check in with the client at year end, to ask them to ask staff how much time each relevant staff member had worked on unbilled work, and using salary rates, calculate the total unbilled work at year end. However, that does not take into account the other main cost of hosting fees. It's been many years since I studied WIP and have not had to calculate it in practice ( I work in industry) would be grateful of someone's input with greater experience than mine.

Thank you in advance

 

 

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By tom123
25th May 2017 12:00

I would book staff hours to WIP, and treat any part of a subscription for hosting as a prepayment, rather than WIP.

The effect would be broadly the same though.

How far back are you looking - can you now tell whether the year end WIP projects ended up profitable?

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