Tracking WIP Through to Capitalisation with Forecast 5

Forecast 5, the acclaimed forecasting and budgeting programme, has two very well developed modules to monitor the development of stock for sale and on completion to sell from stock; our Stock on Hand and the Stock Made routines. 

These modules track WIP on the balance sheet and upon unit sale passes the relevant Cost of Sales through to the Profit and Loss Account, showing Gross Profit from Sales. And if required, Forecast 5 can track the opening and closing stock through a Trading Account. 

But what if the Work in Progress is destined to be a Fixed Asset upon commissioning as opposed to the manufacture of Stock for sale? 

Forecast 5 handles this easily, as well.

Operationally, a WIP record is created to be the receptacle in which all the component costs are assembled with the right timing for each component. If pre-commissioning interest is to be included, this can be tracked as well at appropriate interest rates as well as funding raising fees, if relevant.

Once completed – ie at commissioning – the WIP including all costs are capitalised by transfer from the WIP record to a Fixed Asset record whereupon depreciation at the required rate will be applied.

By synchronising the date of transfer out of WIP and into the Fixed Asset record, Forecast 5 ensures no net cash movement takes place at capitalisation.

The WIP can be traced month by month through the Cashflow Report and of course via the Balance Sheet whilst in the pre-commissioning phase. After commissioning, depreciation andd interest would be tracked through the Profit and Loss Account.

As Forecast 5 provides a four-way forecasting process, the fourth report, the FundsFlow statement (think “Statement of Cashflows” in IFRS or IFS 102 in UK GAAP terms) ties it all together – and proves the integrity of Forecast 5 and all its numbers.