Valuing work in progress: jobs that run over year-end
Written by Ilias Aarrass6 min read · Published on · Last reviewed on 
In short
Work that is running on 31 December but has not been invoiced is valued at the share of the agreed price belonging to the work you have already performed; waiting until delivery is not allowed.
- From that value you deduct the instalments you have already invoiced; what remains sits on your balance sheet as work in progress.
- VAT is only due when you invoice or receive a prepayment, while profit follows the work performed.
- An expected loss on a job is taken immediately, even though the work is not finished.
- Instalment invoices on order, at a milestone and on delivery keep your work in progress and your cash needs small.
You started a renovation, a design project or an implementation in mid-December that will not be finished until February. So the invoice only goes out next year, which makes it seem logical to leave it out of this year's figures. It works differently though: work in progress belongs on your balance sheet, and the profit you have made on it counts in the year in which you did the work. That is not a choice but a statutory rule, and it mainly surprises entrepreneurs whose December was busy. This article explains what work in progress is, how you value it and how to avoid being caught out.
What work in progress is
Work in progress is work you started before the balance sheet date and have not yet finished or not yet fully invoiced. Think of a fixed price for a bathroom that is half done, an advisory project in which three of five phases are complete, or a website still under development. It is separate from your stock: stock is material you have yet to use, work in progress is work you have already performed for a specific assignment. For the other case, see valuing stock at year-end.
It is also different from an outstanding invoice. If you have already invoiced and the client still has to pay, that is a receivable and the revenue has long been in your profit; see debtor management. With work in progress there is no invoice yet, but the work exists.
The rule: take profit in proportion to the work done
In the past, entrepreneurs could wait to take profit until a job was delivered. That is no longer allowed: you value work in progress at the part of the agreed price attributable to the work you have already done. If on 31 December you are 60 per cent through a € 10,000 job, € 6,000 of work in progress sits on your balance sheet, minus whatever you have already invoiced in instalments.
How you determine that percentage depends on your work. For hourly work it is simple: hours worked times your rate, plus materials passed on. For a fixed contract price you use progress: what share of the work is done, or what share of the budgeted costs has been incurred. Record your calculation with your annual figures, so you can show how you arrived at it. Your hours log is the handiest support for that.
Worked example: a renovation across year-end
- Contract price excluding VAT
- € 18,000
- Share completed on 31 December
- 40%, so € 7,200
- Instalment already invoiced
- € 5,000
- Work in progress on the balance sheet
- € 2,200
Result: Your profit for this year therefore includes € 7,200 of revenue from this job, of which € 5,000 has been invoiced and € 2,200 sits on your balance sheet as work in progress. The costs you incurred for that part, such as materials and subcontractors, belong in the same year.
VAT, instalments and prepayments
VAT follows a different moment than profit. You pay VAT on what you invoice; as long as there is no invoice, no VAT is due on your work in progress. If you do receive a prepayment or deposit, you must invoice for it straight away and declare the VAT in that period. See booking advances and deposits.
So use instalment invoices on longer projects: on order, at a clear milestone and on delivery. Your work in progress then stays small, your cash flow stays healthy and the discussion about what is finished happens during the job instead of afterwards. For setting up such agreements, see writing a quote and agreeing and invoicing extra work.
At year-end
In the last week of December, go through your running assignments and note per job: the agreed price, the part completed, the instalments already invoiced and the costs incurred. That list is exactly what you need for your balance sheet, and it takes half an hour. Include it in your year-end checklist; how the item lands on your balance sheet is covered in reading a balance sheet and profit and loss account.
If you expect a loss on a job, for example because you quoted too keenly, you do take that loss immediately. Profit is taken in proportion, losses as soon as they are foreseeable. That is the prudence principle, and in such a case it saves you tax in the current year. If you are considering shifting costs or investments around 31 December, read steering profit around year-end.
Frequently asked questions
Do I have to take profit on work that is not finished?
Yes. You value work in progress at the share of the agreed price belonging to the work you have performed. Waiting until delivery is no longer allowed.
Do I owe VAT on work in progress?
No, as long as you have not invoiced for it and received no prepayment. VAT follows the invoice, profit follows the work performed.
How do I determine what percentage of a job is done?
With your hours at your rate, or with progress against the budgeted costs or the parts delivered. Record your calculation so it can be followed later.
Does this apply if I only bill by the hour?
It does, but it stays small: your uninvoiced hours from late December are your work in progress. If you invoice monthly, it is usually only a few days.
Sources
- Valuing work in progressBelastingdienst · belastingdienst.nl
- Valuing stock in your businessBelastingdienst · belastingdienst.nl
Sources checked on
This article provides general information based on the rules known for 2026 and does not replace personal tax advice. For your specific situation, we're happy to take a look with you.
