When you have a long list of projects to juggle, you may not always consider what ‘work in progress’ (WIP) means for your productivity.
Essentially, WIP measures how much time is spent on one project and how much money is spent on labour and resources that have not yet been invoiced.
Surprisingly, some people don’t measure their WIP, and those who do won’t necessarily consider it when charging for their services.
At Spark, we believe you should be paid for every minute of your work, but to do so, you need to know how to measure WIP. Here’s how.
Measuring WIP begins at the very start of a project. As soon as you take on work for a client, you must factor in the costs of carrying out and completing the said project.
Think of it like construction; you need materials and resources to complete your tasks. For digital firms, this will include the people assigned to the job and potentially any freelance costs incurred in the delivery to your client.
If you incur any expenses throughout the process, these should be considered when measuring your WIP. At the end of the day, you don’t want to make a loss on any work you’re carrying out for a client, so you need to incorporate these costs into your final charge.
How to measure WIP
Usually, you will consider the amount of time spent on a marketing or digital campaign as well as any freelance costs to calculate the value of WIP.
That being said, two main costs are involved in measuring WIP – time spent and costs incurred.
Time spent assigns time to each customer valued at set rates for each employee by completing timesheets. This will be the time spent creating and delivering the projects agreed upon. With each different step completing the project, more time is added, and so WIP value builds.
Costs incurred will often include skills that an agency has brought in on a freelance basis or extra costs paid for on behalf of customers. For example, if you’re running a digital campaign for a client, you may need to include social media advertising and video production costs which may not be available in-house.
Why bother recording WIP
Recording WIP has many benefits, but two that stand out are Income recognition and job profitability. Both don’t sound exciting, I know, but without being able to understand how much work is completed at the end of a period (month or quarter), you can not measure profitability either by job or for an organisation as a whole.
You will often get to the end of a web build over a few months and not realise how far you have overrun the project until the end, or in some cases, you won’t really know at all! Having a well-run WIP report will flag jobs that overrun part way through, allowing appropriate action to be taken.
Dangers of WIP
In order for WIP to be useful, it must be maintained and reviewed regularly. If WIP is not managed, it can often get too high, which can result in income being overstated and lead to bad data, which causes problems highlighted in one of our previous blogs.
Don’t short-change yourself
We understand the demands of working in a creative industry such as digital marketing and PR. Strict deadlines and a large workload can prove to be challenging at the best of times. That’s why we think you shouldn’t undervalue your work behind the scenes.
Spark can help you calculate your WIP costs, so you know you’ll be paid fairly and accurately for the time you’ve invested in your clients.
Get in touch today for help with your WIP.