How to record WIP in Quickbooks

Unfortunately QuickBooks is not set-up to handle WIP.

while the previous post is correct there is a workaround solution ...
you will have to control everything 'manually' ... your balance sheet would look something like this:
xx.xx   Inventory ..................................................... a 'current asset' type account ... this would be the "holding account" for all inventory.
xx.xx  WIP  .............................................................. a 'current asset' type account ... 'parent level'
xx.xx        (job#1) ................................................... a 'current asset' type account ... sublevel of 'WIP'
xx.xx        (job#2) ................................................... a 'current asset' type account ... sublevel of 'WIP'
and so on ...
the problem is that perhaps you're going to have one heck of a lot of accounts ... you'd make the accounts 'inactive' as they're finished ...
questions?  my phone # is in my profile.

The flow of information in a manufacturing company is a little different than for a straight retailer. A manufacturer gathers things together, processes them into a condition for sale, and then sells them. A retailer simply buys and sells with no intervening processes.

Without buying a computer program specifically for your type of manufacturing you have to expand your definition of 'accounting system' to include processes that are not a core component of the general ledger software. Use something like Excel or Quattro Pro to complement and enhance the things that QuickBooks can do.

Most manufacturers, at least the one I work with, use a spreadsheet to handle the calculations for their manufacturing operation.

Raw materials are received into RM inventory, then they are transferred to manufacturing. In manufacturing the RM are processed and overhead factors are applied, and the resulting finished goods are transferred into FG inventory. Then the FG are sold, and the FG's are transferred to cost of goods sold.

QuickBooks can easily handle the dollar accounting, it's just a question of where best to do the calculations for the manufacturing. Most of the time an Excel spreadsheet will work for that. I say most of the time, because spreadhseets lend themselves best to fairly static processes - set up the formulas one time and then apply them by rote to the raw data you have. If you are developing new products or doing 'mass customization' it gets a little harder to design a single spreadsheet to handle what might be infinitely variable formulas. But it can be done for the most part if you get the right help.

QuickBooks needs to have a raw materials account that isn't an 'inventory' account, but the finished goods account could be 'inventory' in QuickBooks terms. Then you need a variety accounts in the cost of goods sold section to handle raw materials used in production, overhead applied, and transfers to finished goods - at standard a standard cost for inventory valuation in my scenario.

The spreadsheet software workbook can calculate how much RM's are used, and help you analyze variances from standards in the manufacturing process.

Hope this helps, at least by giving you an idea of the approach ...

The way I set up my WIP in the 2007 Premier Manufacturing edition is modeled after the old manual "batch card" system--where a production card stays with the batch until it is finished.

One poster here said you need a bunch of accounts to do this. I'm not sure that's necessarily correct, especially if you are not doing these as individual jobs that can be inactivated as the poster suggested. We have multi-stage WIP in a straight manufacturing enviornment, rather than custom builds for varying jobs. In our case, actually, account-wise, we find we only need the normal number of accounts in our chart...labor, raw materials, overhead, indirect, that sort of thing.

However, you will need a bunch of ITEMS, especially if you have multiple processes on these assemblies that are in various stages of WIP.

Under the old batch card, more or less, each time WIP was handled or worked on, date, what was done, and initials went of the card, and the card went with the WIP to the next stage. then the card was pulled once the assembly met completion. That's kind of what you have to do "manually" under your item lists with this accounting program.

For each finished assembly item you have one, or perhaps several, "echo" items, these being defined as your WIP assemblies. (Personally, I code all of these as WIP-dash whatever #, so that the in-process items stay in the same place on the item list, and can thereby screen them in or out on an item report.)

Each time you handle the WIP (whether you are adding direct labor, fixed overhead, packaging, indirect, or what have you), you "manually" tag it with date, what done and by whom more or less within your item list as follows:

WIP-BASE-WIDGET (Assembly would be your initial raw materials direct labor, utility overhead, so forth)..., WIP-1-WIDGET (Next stage of in-process assembly item is the original "WIP-BASE-WIDGET" plus any new materials added [chart of accounts inventory] "direct labor" [chart of accounts] plus "overhead" [chart of accounts] plus "indirect" [chart of accounts])...,if another process is required you'd need another item, WIP-2-WIDGET (this in-process assembly would now be built from "WIP-1-WIDGET" plus materials for packaging for example, labor, etc...then if your final step was inspection, or getting the "batch card" off and the finished product warehoused, you last assembly would be WIDGET.

At each step though you need to have the previous sub-assembly available, else it goes as a pending build. Each time you "handle" the WIP, the report showing inventory adjustments or assembly builds gives the date and amount of subassembly product. Each time you handle WIP if the previous required base or sub assembly is available, the program will properly draft that WIP out and move it into the next stage.

So, you don't need a lot of accounts, really. You need a lot of item numbers if you have multistage WIP.

Hello,

Im a construction company looking to incorpate WIP. Does anybody have experience doing this or know how?

wndsurf...the best forum for your question is Builders and Contractors.  You'll find many people here that use WIP.  One thing you can also do is search on "Laura Madeira" in Google.  She is one expert that post frequently in that forum and I know that she has an extensive PDF file explanation of WIP on her website.

Deni