It is the first of the month. Shopify says you have 45 navy tees. You also have fabric for 300 sitting in your store room, 240 cut and on a stitching table in Tirupur, and 120 back from the job worker waiting to be pressed and tagged. You own 825 units of that SKU. Your storefront can see 45. That gap is work in progress inventory — stock you have already paid for that is not finished, not sellable, and not visible outside someone's head. It is also the most common reason a founder concludes a product is short and reorders units that were three days from going live.
Key takeaways
- Accounting formula: Ending WIP = Beginning WIP + Manufacturing Costs Added − Cost of Goods Manufactured.
- The operational version you actually run on is units per stage, each carrying a date stamp.
- Tracking is four decisions: name your stages, define the event that moves a unit forward, record quantity + date + location at every handoff, reconcile monthly.
- WIP aging — units sitting at one stage longer than its standard cycle time — points straight at your bottleneck.
- Cycle time per stage is what turns “a couple of weeks” into a date you can promise a customer.
Your stock is in four states at once
Once you manufacture rather than buy finished goods, one SKU exists in four places at once:
- Raw material — fabric, trims, bottles, components sitting in your store room.
- At the job worker — material you have issued out on a delivery challan and no longer physically hold.
- Work in progress — partly built units: cut but not stitched, stitched but not washed, filled but not labelled.
- Finished goods — complete, QC-passed units. Only these are sellable, and only the ones you have released to the store are in Shopify.
Shopify is a storefront, not a factory floor. It answers one question correctly: can I sell this right now? The trouble starts when that number drives a production decision. Shopify saying 45 means 45 are sellable today; it says nothing about the 780 that exist. Order against the 45 and you have committed cash and factory capacity to units you already own.
The reverse failure is quieter. Untracked WIP means untracked shrinkage: material issued to a job worker that never fully comes back, rejects that vanish into “wastage”, a lot parked at one stage for three weeks because nobody counted the days. You find out at stock-take, six months late, when it is a write-off instead of a question.
The accounting formula, worked in ₹
Your CA needs WIP as a rupee value on the balance sheet. The formula is standard:
Two terms need defining. Manufacturing costs added is everything poured into production during the period: materials issued out of the raw material store, job work or labour charges, and the share of factory overhead you allocate. Cost of goods manufactured (COGM) is the value of units that came out the far end and became finished goods.
Take an apparel brand's July. Opening WIP on 1 July was ₹4,20,000 — fabric with two job workers plus a half-finished lot in the finishing room.
- Fabric issued to production: ₹6,80,000
- Trims, labels, packaging issued: ₹95,000
- Job work charges (cutting, stitching, finishing): ₹2,15,000
- Allocated overhead — QC staff, store rent, electricity: ₹60,000
- Manufacturing costs added: ₹10,50,000
- Value of goods completed and moved to finished goods in July: ₹9,70,000
So ₹5 lakh of working capital is sitting inside the production process on 31 July. If that number climbs month after month while sales stay flat, you are pushing material in faster than the line pushes product out — a capacity problem, not a demand problem. Overhead allocation and closing valuation methods vary, so confirm yours with your CA before it hits the books.
The operational formula a small brand actually needs
The rupee figure is useless on a Tuesday afternoon when a customer asks when the navy tee is back. What you need then is the same idea in units, with a date on each pile:
The date stamp turns a list into an answer. Quantity tells you what exists; quantity plus date tells you when it becomes sellable, which is the question everybody is actually asking. Here is that navy tee, SKU TEE-NVY-M, on the morning of 1 August:
| Stage | Units | In stage since | Standard cycle | Days elapsed |
|---|---|---|---|---|
| Raw material (fabric, equivalent units) | 300 | 12 Jul | — | 20 |
| At job worker — cut & stitch | 240 | 21 Jul | 6 days | 11 |
| Finishing — wash, press, tag | 120 | 30 Jul | 3 days | 2 |
| QC | 60 | 31 Jul | 1 day | 1 |
| Finished, not yet released | 60 | 31 Jul | 1 day | 1 |
| Live in Shopify | 45 | — | — | — |
That table takes ten seconds to read and answers three questions Shopify cannot. How many exist? 825. How many can I sell today? 45, with 60 more one release action away. When do the rest land? The 120 in finishing clear QC and release by about 4 August; the 240 at the job worker are the problem, and the table already says why.
Note the raw material line is in equivalent units, not metres — 300 tees' worth of fabric, not 420 metres. That conversion comes off your bill of materials, waste allowance included, and it is the only way to put a material pile and a finished goods pile on the same row. If you have not built consumption per unit yet, start with our BOM guide — WIP tracking without a BOM is guesswork with a spreadsheet on top.
How to track WIP in four steps
1. Define your stages — four to six, no more
Every stage you add is a handoff someone has to record. Model the transitions that actually change where the goods physically are; collapse the rest. Most small brands land on: raw material → issued to job worker → in production → received back / finishing → QC → finished goods. If cutting and stitching happen at the same unit on the same day, that is one stage.
2. Pick the single event that moves a unit forward
This is the step people skip, and the one that makes the system work. For each transition, name one unambiguous physical event — not a status someone “sets when they get a chance”. Material moves to issued when the delivery challan is written. A lot moves to finishing when the goods arrive back at your unit and are counted. A unit becomes finished when it passes QC, not when stitching ends. If two people could disagree about whether a unit has moved, the definition is not tight enough.
3. Record quantity, date and location at every handoff
Three fields. Quantity moved, date moved, where it now sits or who holds it. Add the challan number for anything leaving your premises — in India that document is your proof the goods are still yours, which we cover in the job work and delivery challans guide. Nothing else is mandatory on day one. Design a beautiful twelve-field form and you get a form nobody fills in on a busy Thursday.
4. Reconcile monthly
Once a month, count what is physically at each stage and compare it with what the ledger claims. Two numbers matter: variance per stage, and the return ratio at the job worker — units received back against material issued out. A stable 3% shortfall at cutting is normal wastage; build it into your BOM. A jump to 9% is a conversation, and you can only have it if you wrote the issue quantity down eight weeks ago.
What to record at each stage — and what breaks if you don't
| Stage | What to record | Failure mode if you skip it |
|---|---|---|
| Raw material received | Quantity, date, supplier, storage location | You re-buy fabric you already own, and hit a supplier MOQ twice in one season |
| Issued to job worker | Quantity issued (material units and equivalent units), date out, challan number, job worker | Material vanishes from your books; nothing to reconcile returns against; the challan trail breaks |
| In production | Quantity per operation, date the operation started | No aging, no bottleneck visibility — “it’s with the tailor” is your best answer |
| Received back / finishing | Quantity returned, date in, shortfall vs issued, location | Wastage and short returns stay invisible until year-end stock-take, by which point they are a write-off |
| QC | Quantity passed, quantity rejected, date, rejection reason | Rejects become “missing” units; your true yield is unknown, so every future plan starts wrong |
| Finished, not released | Quantity ready, date ready, location | Sellable stock sits in a carton while the storefront shows less and you order again |
WIP aging: your bottleneck, in one column
Once every unit carries a stage entry date, aging comes free — days elapsed at the current stage. Compare it with that stage's standard cycle time and the bottleneck stops being a matter of opinion.
In the table above, the 240 units at cut & stitch have sat 11 days against a 6-day standard. Nothing else is late. That is not “production is slow”; it is one job worker, one operation, 240 units, five days over — a specific phone call. The 300 units of fabric untouched for 20 days are a different signal: material bought ahead of capacity, cash converted into cloth with no line free to process it.
Two habits worth building. Set a per-stage threshold — flag anything at 1.5× standard cycle time — so exceptions surface instead of you scanning rows. And log the reason when something ages out: machine down, shade mismatch, job worker took a bigger order, festive labour shortage. Three months of reasons beats any average as an input to your production plan.
Cycle time per stage turns a vague lead time into a promised date
Aging data yields the number small brands most often lack: how long each stage really takes. Measure it across a few runs and your manufacturing lead time stops being folklore.
Thirteen days, not “two to three weeks”. The arithmetic now runs both ways. Forwards: the 240 units at stitching, if the job worker closes them in two more days, are sellable around 8 August — a date you can put in a back-in-stock email instead of a shrug. Backwards: a drop that must be live by 5 October needs material issued by 22 September, and the PO placed early enough to survive the supplier's own lead time.
Stage cycle times feed everything downstream. They are the manufacturing half of the lead time in your reorder point calculation, and they show where to add capacity: a second stitching unit does nothing if finishing is the real constraint.
Where this ends up living
You can run all of this in a spreadsheet, and at 20 SKUs you probably should — one row per lot, one column per field, updated at each handoff. The method matters more than the tool. It breaks when lots multiply: at 60 SKUs across three job workers, nobody holds “which lot is where” in a sheet that gets updated when someone remembers, which is roughly where brands make the switch.
That is the argument for tracking stages in software rather than a file. Honey Shelf models production as six explicit stages — Check Stock, Production Orders, Buy Materials, Receive Goods, Produce, Release to Store — so a unit's stage and entry date get recorded by the act of moving it, not by a separate bookkeeping chore. Finished units reach Shopify only at Release to Store, which is exactly the boundary this article is about.
Whichever way you do it, the test is the same. Someone asks how many units of SKU-X exist and when they will be sellable. Answer in under a minute, with a date, and your WIP tracking works. If the answer starts with “let me check with the factory”, it doesn't — and somewhere in that gap you are ordering stock you already own.