The FIFO (first in first out) method allocates amounts against the WIP entries incurred first, with the earliest entry at the head of the queue. This method is preferred if you are carrying forward WIP transactions. This is illustrated in the table below where the bill amount of $1,000 is allocated against the oldest entries until all of the $1,000 is allocated, with the remaining WIP entries being carried forward.
The major advantage of this method is that it is very clean and simple to manage your WIP. It will not lead to the situation outlined with the pro-rata method whereby the practice needs to clean out WIP entries with small values.
The disadvantage of the FIFO method is that if the practice determines the bill amount at the assignment (AE)/job (AO) level rather than the employee level, employee recoverability can be impacted. If employee recoverability is important, we would recommend billing at the employee level in which case the FIFO method will manage the WIP entries cleanly and simply while maintaining your reporting requirements.
In writing off amounts, the system will allocate the bill amount using the FIFO method and the latest transactions will be used for the write off.
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