Work-in-progress that reconciles at month end

Track work-in-progress with four entries, issue, consume, yield and scrap, and reconcile it in kilograms at month end. A worked example for small factories.

To track work-in-progress inventory, record four entries for every batch: issue (material leaves the store for the floor), consume (material goes into the process), yield (finished goods come out) and scrap (waste and rejects come out). At month end, opening WIP plus issues, minus yield and scrap, should equal the WIP you physically count. If it does not, the gap tells you exactly which entry is missing.

Why does WIP go missing in a small factory?

Most small factories keep two good registers: the raw-material store and the finished-goods godown. The trouble lives between them. Material is issued in the morning, half of it is in a mixer or on a cutting table by evening, and nobody writes down what happened to it until the batch is done. Sometimes not even then.

So at month end the store shows less material, the godown shows some new finished goods, and nobody can say whether the difference is reasonable process loss, an unrecorded batch, material sitting on the floor, or theft. Without a WIP record, all four look the same.

The fix is not more paperwork. It is four entries, made at the right moments, in the same unit.

What are the four entries that close the loop?

Entry	When it is made	Effect on store	Effect on WIP
Issue	Material physically leaves the store against a job or batch	Decreases	Increases
Consume	Material is loaded into the process for that batch	No change	Moves from "on floor" to "in process"
Yield	Finished or semi-finished output is weighed and moved out	No change (finished goods increase)	Decreases
Scrap	Waste, trimmings, rejects and process loss are weighed or recorded	No change (scrap stock may increase)	Decreases

Issue is the handover. The storekeeper records it against a batch number, not "for production" in general. Unused material that comes back is a negative issue, also against the batch.

Consume is optional for some shops but useful when material waits on the floor for days. It separates "issued but not started" from "in the machine". If issue and consumption happen within the same hour, you can treat them as one entry.

Yield is what came out good. Weigh it; do not calculate it from the recipe. The whole point is to compare what should have come out with what did.

Scrap is everything else that left WIP: offcuts, rejected pieces, sweepings, and recognised loss such as moisture or evaporation. Record saleable scrap and pure loss as separate lines, because one has resale value and the other does not.

Why must everything be in one unit?

Because you cannot reconcile kilograms against pieces. If you issue resin in kg and record output in pieces, the equation never balances and every month becomes an argument.

Pick a base unit per material, usually kilograms, and convert everything to it at the point of entry. A finished piece gets a standard weight, checked by weighing a sample every so often. Packaging and consumables that do not end up in the product are tracked separately, not mixed into WIP.

How does a month-end WIP reconciliation work?

The formula is:

Expected closing WIP = opening WIP + issues − returns − yield − scrap

Then compare expected closing WIP with the physical count on the floor on the last day.

Worked example (illustrative figures)

A small plastics unit makes moulded containers from one grade of granules. All figures below are illustrative.

Line	Kg
Opening WIP (counted at last month end)	180
Add: issued from store during the month	4,200
Less: returned unused to store	120
Less: yield, good containers (weighed)	3,710
Less: saleable scrap, regrind and rejects	290
Less: recorded process loss	40
Expected closing WIP	220
Physical WIP counted on the floor	185
Unexplained difference	35

Expected closing WIP is 180 + 4,200 − 120 − 3,710 − 290 − 40 = 220 kg. The floor count finds 185 kg. So 35 kg is unexplained, a little under 1% of the material issued.

What do you do with the 35 kg?

Work through the entries in this order, because this is roughly where errors are most common:

Yield. Was any batch produced on the last day but not weighed or entered? Check the finished-goods godown receipts against the production log.
Scrap. Was the regrind bin emptied into a grinder or sold without being weighed?
Returns. Did unused bags go back to the store without a return slip, so the store has them but the books still count them as issued?
Count. Was the floor count complete: machine hoppers, half-filled bags, material on the dryer?
Standard weights. If yield is calculated from piece counts, has the actual piece weight drifted from the standard?

If all five checks come up clean, record the remaining difference as an unexplained loss for the month, against the material and the batch period, and carry the counted 185 kg forward as next month's opening WIP. Never carry forward the book figure. Opening WIP must always be a counted number, or errors pile up month after month.

What does a month-end WIP checklist look like?

Fix the cut-off time and stop issues and yield entries until the count is done
Count WIP by location: store staging area, each machine, between processes
Weigh the scrap bins before anyone empties them
Match every finished-goods receipt for the month to a batch
Match every store issue and return to a batch
Run the reconciliation per material, in kg
Investigate gaps outside your agreed tolerance before closing
Record the counted closing WIP as next month's opening figure

What are the common mistakes?

Issuing "to production" without a batch. If issues are not tied to batches, you can reconcile the month but you cannot find the batch that leaked.

Recording yield from the recipe instead of the scale. If yield is always the theoretical figure, all real loss ends up in "unexplained", and you lose the chance to fix the process.

Lumping scrap and loss together. Saleable scrap is stock. Evaporation is not. Mixing them hides both.

Carrying forward book WIP. It feels quicker, but it buries this month's error in next month's opening figure.

Reconciling in mixed units. Pieces, metres and kg in one sheet will not balance. Convert at entry.

When does this approach not fit?

If you make to order in one shot and nothing ever sits on the floor overnight, a separate WIP record adds little; issue and yield on the same day is enough. Assembly units that work in countable parts rather than weight should reconcile in pieces per component instead of kg. The logic is the same, only the unit changes. Continuous process plants with tanks and pipelines need meter or level readings rather than floor counts, and usually a process engineer to set loss norms.

Valuing WIP for your accounts is outside the scope of this guide. Give your reconciled quantities to your CA for that.

Spreadsheet or software?

A well-kept spreadsheet can run this reconciliation for a handful of materials. It struggles once you have many batches a day, several people entering data, and the need to trace a gap back to one batch. We compare the two honestly in Excel vs inventory software. Once your yield and scrap numbers are reliable, use the real consumption figures to set raw-material reorder levels with the reorder point formula. Using the recipe figures will understate them.

FAQ

What is work-in-progress inventory? Work-in-progress is material that has left the raw-material store but has not yet become finished goods or scrap. It sits on the shop floor, in machines or between processes. It is still your stock and still worth money, so it needs its own record instead of disappearing between the store register and the finished-goods register.

How often should a small factory reconcile WIP? Monthly at minimum, closing on the same day as your stock-take. Units running many batches a day, or handling costly material, benefit from a weekly check on their highest-value items. The cadence matters less than consistency: the same cut-off, the same units of measure, and the same people counting every time.

What is an acceptable gap between book and physical WIP? There is no single right figure. It depends on your process, material and measuring equipment. Agree a tolerance per material with your production head, based on a few months of your own reconciliations, and investigate anything outside it. A gap that keeps growing in one direction matters more than one month's number.

How do I value WIP for my books? Valuation of work-in-progress is an accounting question and depends on your costing method and the standards that apply to your business. This guide covers quantities only. Take your reconciled kilogram figures to your CA, who will advise how to value them for your accounts and returns.