Work in Progress (WIP)
Definition
Inventory that is partly made: raw materials and labor already invested in products that are not finished yet.
Want a deeper explanation?
WIP matters for brands that make or assemble products themselves. Without it, production costs land in expenses before the product is ready to sell.
Most brands that outsource manufacturing do not need it. Watch for: production labor expensed as payroll when it should be part of inventory cost.
Example
At month-end, 2,000 candles are poured but not labeled or packed. Their $9,000 of materials and labor sits in WIP, not finished goods.