There's often a big pile of value sitting in your business that isn't in your bank, isn't on an invoice, and is easy to forget. It's called WIP, and if you ignore it, it can hide both profit and problems.
WIP, work in progress, is work you've done that hasn't been billed yet. You've spent the time and the costs; the invoice just hasn't caught up.
You've delivered £20,000 of work this month but only billed £5,000.
That leaves £15,000 of WIP: earned, not yet invoiced.
WIP shows up in two ways worth naming.
Accrued income: revenue you've earned but not yet invoiced, so it sits on the balance sheet as an asset until you bill it.
Cost accruals: costs you've incurred but the supplier invoice hasn't arrived, matched into the same period so your margin is honest.
Here's the catch. WIP is value, but it isn't cash. Every pound sitting in WIP is a pound you've funded, out of your own account, until you invoice and collect.
Let WIP build up and two bad things happen. Your cash gets tighter for no obvious reason. And your reported profit can look great while the bank looks empty.
So keep an eye on: how much WIP you're carrying, how old it is, and why it hasn't been billed. Ageing WIP is usually a billing delay, a sign-off stuck somewhere, or scope you never agreed to charge for.
Review WIP monthly. Bill what's ready. Chase what's stuck. Turn earned value into cash before it goes stale.