WIP in Business Central: The 3 most expensive mistakes and how to avoid them

Scenes like this occur when work in progress (WIP) is not valued correctly. WIP is more than just an accounting obligation. Only if work in progress (WIP) is recorded correctly

• the balance sheet reflects the actual company value,
• liquidity planning functions reliably,
• and production can be controlled in a targeted manner.

But why is WIP so difficult to grasp? And where are the biggest pitfalls?

What is WIP – and why is it important?

Work in progress are products in process – i.e. between raw material and finished product. They are not yet ready for sale, but already have a value: through the material used, working time and overheads.
This value belongs in the balance sheet. If it is not recorded or recorded incorrectly, there will be gaps in the figures, with consequences for planning, reporting and audits.
Example: An order for 100 machine parts is 60% complete. Material and working time have so far cost 24,000 euros. This value belongs in current assets under “work in progress”.

When is WIP relevant to the balance sheet?

According to HGB (Section 266 (2) B. I. 2) and IFRS (IAS 2), work in progress is included in current assets as soon as it has an economic value. The WIP value increases with each work step. Reliable figures can only be obtained if production, costing and accounting work closely together.

Who benefits from clean WIP?

Financial managers:

• have a reliable basis for the balance sheet and reporting,
• avoid hectic postings at the end of the month,
• pass audits with confidence.

Production management:

• sees the percentage of completion per order at all times,
• recognizes losses and bottlenecks at an early stage,
• calculates more precisely thanks to transparent WIP figures.

Management:

• manages on the basis of realistic figures,
• plans liquidity more reliably,
• recognizes capital commitment at an early stage.

The 3 most common mistakes with WIP in Business Central – and how to avoid them

1. WIP is not activated at all or is activated incorrectly

The “Activate production costs” function in Business Central must be set up correctly. Otherwise, WIP values will end up in the warehouse but not in financial accounting – with the risk of hidden stocks and serious valuation errors.

Tip: Configure WIP properly, with clear routines for stock and production postings. This is the only way to keep your financial figures precise and meaningful.

2. A collective account for everything

Material, wages, corrections and transfers often end up in one account. This makes evaluations difficult.

Better: Keep separate accounts, for example for revaluation, scrapping and completion. This allows you to track values and processes in a targeted manner.

Important: Always control postings via subledgers. Direct postings in the general ledger obscure the process.

3. Differences between general ledger and subledger

Business Central makes a strict distinction between inventory and financial accounting. If postings are not exactly reconciled, differences arise, often unnoticed, until the year-end closing.

Solution: Regular reconciliation reports between the general ledger and sub-ledger help to identify and rectify such discrepancies in good time.

A clear view of current assets: WIP is the key

Proper WIP recording has a direct impact – on the balance sheet, income statement and management. It shows:

• the real inventory value in current assets,
• inventory changes in the income statement,
• the current status of production – transparent for everyone involved.

If you ignore WIP, you risk unclear margins, chaotic month-end closings and stress during the audit.

WIP simply under control – with Inventory 365

Business Central offers the functions, but Inventory 365 turns it into a real solution. The app automates the entire WIP valuation process:

• All postings are audit-proof and traceable.
• Material, wages and overheads are automatically recorded separately.
• The general ledger and subledger are always in sync.
• Excel stopgap solutions are completely eliminated.

You save time, avoid errors – and retain control over your work in progress at all times.

👉 Secure your webinar place now and finally have WIP clearly under control.

Or talk to us directly. Together we’ll find out how Lagerwert 365 can bring clarity to your company.

To the webinar dates and registration.