Project postings with Billing Rule

When Progress Billing Rules are used on the Time and Materials project, then the following things should be kept in mind:

1. The postings setup at the group level for On-accounts and Fee, does not matter. The revenue is directly posted to PNL.

Revenue is posted to à Invoiced revenue (CR)

Accounting entry is as follows:
                       DR Accounts Receivable

                           CR Invoiced revenue

                                        CR VAT payable

2. When the billing rules are used, the revenue cannot be accrued even if the 'Accrue revenue' is checked on the 'Line property' and in the 'Project group' against individual transaction types. With use of progress billing rule on the time and materials project, there is no way one can accrue the revenue, if at all during the month end there is no billing and the user wishes to accrue the revenue. The problem with this kind of behavior is the costs are posted to PNL but the revenue cannot be accrued, if there is no billing at the month end.

3. Chargeable categories on the billing rule are of type 'Hours' and 'Item' ONLY. Not sure why but this is how standard system works. The implication of this is, that for 'Progress' billing rule if the budget is defined for hours and expenses and the transactions posted for the same, when the invoice proposal is created the revenue / invoice amount is calculated with respect to Hours transactions only. The calculation does not take into consideration the expense transaction.

The ‘Chargeable’ categories in the Billing Rule only allows Hours and Items categories. Expense categories are not allowed, rather they are not even there for selection.

With this I created a project with Budget and Billing rule as below:

Hours – 10,000 – Account Admin

Expense – 10,000 – Travel air

Total budget of 20,000.

Billing rule contract value – 100,000

I posted an expense journal of 4000 and created an invoice proposal. No invoice amount was calculated by the system as expense categories are not allowed in the chargeable categories.

I posted an hours journal of 5000 and created an invoice proposal. This time the invoice proposal is for 50,000, as the % complete is 50%. (5000 against 10000)

But this standard behavior of billing rule with respect to expense seems to be wrong as from a total budget perspective I am 45% complete (9000 against 20000).

4. When the billing rule is used on the time and materials project, then even if the transactions are posted as 'Chargeable' / 'Bill' (.i.e. line property = Chargeable), when they are actually posted on the project the invoice status changes to 'Non-chargeable'.

Hours transaction set to go to 'PNL' on project group and Line property = Bill, for a project WITH 'Billing rule'

Hours transaction set to go to 'PNL' on project group and Line property = Bill, for a project WITHOUT 'Billing rule' 

Will update this post as and when more information is obtained about this area.

Thanks

Sarang

On account postings with respect to BS and PNL

On account set to à PNL 

Revenue is posted to à Invoiced – On account (CR)

Accounting entry is as follows:

DR Accounts Receivable

                           CR Invoiced – On account

                           CR VAT payable

On account set to à BS 

Revenue is posted to à WIP Invoiced – On account (CR)

Accounting entry is as follows:

DR Accounts Receivable

                           CR WIP invoiced -On account

                           CR VAT payable

On account set to à PNL with Deduction type transaction

Revenue is posted to à Invoiced – On account (CR)

Accounting entry is as follows:

DR Accounts Receivable

                           CR Invoiced – On account

                                       CR VAT payable

When deductions included at the time of invoice posting

DR Invoiced – On account  

   CR Invoiced revenue

On account à BS with Deduction type transaction

Revenue is posted to à WIP Invoiced – On account (CR)

Accounting entry is as follows:

DR Accounts Receivable

                           CR WIP invoiced - On account

                           CR VAT payable

When deductions included at the time of invoice posting

DR WIP Invoiced – On account

CR Invoiced revenue

Thanks

Sarang

Item requirement and Project PO receipt postings on project

Out of the box, whenever the project PO is receipted (Product receipt posted), the accrual transactions are posted on the GL (General Ledger) level but the cost is not posted on the project. The cost is posted on the project or consumed on the project only after the project PO is invoiced updated (Supplier invoice posted). To make the project PO receipt reflect on the project, there are parameters to be looked into. They are:

1. Include physical value on the Item model group
2. Create item requirement on the Project parameters
3. Item consumption on the Project parameter

'Include physical value' on the Item model group - This is a MUST if you wish the project to consume the cost at the time of product receipt. This parameter woks in conjunction with the other two parameters mentioned above. Assuming the other two parameters to be checked and assuming that this is NOT checked, then the relevant accounts will not be hit and the product receipt will have no impact on the project cost.

'Include physical value'

'Create item requirement' on the Project parameters - To allow the project to consume cost at the time of product receipt of the project PO, ITEM requirement is a MUST. If there is no item requirement, then the product receipt for the project PO, will not post any cost on the project. Item requirement can be created manually on the project as well. But the  significance of this parameter is, it creates the Item requirement record automatically, at the back of the project PO creation. The moment the project PO is created, the item requirement will also be created, if this parameter is checked. If 'Include physical value' is checked and 'Create item requirement' is also checked but 'Item consumption' is NOT checked, then at the time of product receipt the system will display a pop-up asking the user to click 'Yes' if he/she wishes to consume cost on the project.

'Item consumption' on the Project parameter - If the 'Create item requirement' is checked and if you wish to automatically consume the cost on the project at the time of product receipt, then user should check the 'Item consumption' parameter to 'Yes'. However if the 'Create item requirement' is turned off, but this parameter is turned on, the cost can be consumed on the project at the time of product receipt by creating the Item requirement manually and then posting the product receipt.

'Create item requirement' and 'Item consumption'

To sum the entire interaction between these 3 parameters and what needs to be done in each scenario with respect to the cost consumption on the project at the time of product receipt, i have created this table:

Three parameters and Project Cost consumption on Product Receipt

Thanks
Sarang

Dimensions on Project and Project Contract

Dimensions on the Project:

Department - 001

Cost Center - 002

Dimensions on the Project contract:

Department - 001
Cost Center - 003

Dimensions on the Hours, Expense, Fee, On-account transaction posted (from Project):

Department - 001
Cost Center - 002


Dimensions on the Project Purchase order (from Project):

Department - 001
Cost Center - 002

When the invoice is raised:

Dimensions on the Account Receivable / Trade Receivable are from Project contract

Department - 001
Cost Center - 003

Dimensions on the Revenue and VAT are from the Project

Department - 001
Cost Center - 002

If the dimensions are not mentioned on the project contract, then the dimensions on the 'Trade receivable' / 'Account receivable' will be blank.

Thanks
Sarang

Budget and Billing rule Contract value changes and its impacts

Edits in the Billing Rule contract value

Contract value in the Billing rule can only be changed till the time a project transaction is posted to the project. Once the project transaction is posted, the contract value on the billing rule gets non-editable.

Contract value is read-only

Edits in the Cost Budget 

In the example below:

Cost Budget = 10,000
Contract value = 100,000
Hours transaction posted = 4,000

Hence the percent complete is 40%. Therefore when the project invoice proposal was raised, the appropriate revenue amount of 40,000 was suggested by the system to be billed to the customer.

40% percent complete - Invoice value 40,000

However if the cost budget is changed / revised, after the first project invoice is posted, then the % complete calculation takes into account the new cost budget and compares the cost posted against the new budget amount.

Budget revision = 90,000
Hence total cost budget = 100,000
Hours transaction posted = 10,000

When the invoice proposal is created now, the % complete is calculated as follows:

Cost initially posted + Cost posted now = 4000 + 10,000 = 14,000
Total cost budget, after revision = 100,000
Hence the % complete = 14%
There revenue posted from the contract value of 100,000, as per the %complete should be = 14,000
But the revenue already posted on the project = 40,000.
Hence the system will suggest a credit note of 26,000, so that revenue posted on the project is in-line with the % complete.

Please refer the screenshot below:

Credit note created to match the revenue to the %complete

After knowing this i did one more test to confirm this behavior and hence created a new project exactly similar to the one above and did all the steps till the budget revision. However after the budget revision of 100,000 was done, did not post any transaction. Just directly created an invoice proposal, so as to see whether the system will match the revenue with the new %complete. The system did a credit note so as to match the revenue with the new %complete because of the revised budget.

Cost initially posted = 4000
Total cost budget, after revision = 100,000
Hence the % complete = 4%
There revenue posted from the contract value of 100,000, as per the %complete should be = 4,000
But the revenue already posted on the project = 40,000.
Hence the system will suggest a credit note of 36,000, so that revenue posted on the project is in-line with the % complete.

Please refer the screenshot below:

Credit note created to match the revenue to the %complete

Thanks

Sarang

Fee Billing Rule - Strange Behaviour

Fee billing rule also has some strange behavior. Will update this post once i find the right reasons for this behavior. But for now just wanted to note this behavior for future reference.

Fee billing rule can only be defined if there is an existing billing rule in place, which is other than fee or else you get this error message. This is a standard behavior, which is ok and accepted.

Error message when trying to create a Fee billing rule, without having any other billing rule created up-front.

Now that i have created a progress billing rule, i can then create a fee billing rule and can add the progress billing rule into it.

Progress billing rule added to the Fee billing rule, with fee percentage specified

 Now if a new project is created for the same project contract and if a new progress billing rule is created for the new project and if the user wishes to add the newly created billing rule into the already created Fee billing rule, then the system throws this error. This is what i found strange and also could not understand the error message and the logic behind it.

Error message highlighted, which states that Fee line can only reference a Fee line with a lower contact line number

There are two ways in which this can be handled.

First way is to add the project in the already created billing rule.

Adding a project to the already created billing rule

Second is to create a new fee billing rule and then add the new project into it.

New fee billing rule and adding a project to it

Also one last thing is, if the user tries to add a fee billing rule to the 'Selected items' in the fee billing rule, then the system complains and throws this error message. This is a correct behavior.

Error message when trying to add a fee billing rule to a fee billing rule

Thanks
Sarang

Progress Billing Rule - Strange Behaviour

This is just a post for me to remember the strange behavior about the billing rule functionality.

Whenever a progress billing rule is configured, for it to make it automatically calculate the % complete, all the projects till date should be selected in the 'Selected projects' section, with 'Chargeable categories' selected for the project configured in the 'Billing rules' section.

If all the projects till date are not configured then the system does not calculate the % complete automatically and that particular billing rule line is treated as manual progress billing rule line, with user having to define the % complete manually.

Not sure why the system behaves this way, but this is how it behaves as of now. More information to be added, if i get to know the 'WHY' for this behavior.

Please refer to the screenshots below.

Billing rule 76 with project selected in the 'Project' field in the 'Billing rules' section

Billing rules 76 with all the projects till date, selected in the 'Selected projects' in the 'Project' section

Billing rule 75 where all the projects till date, NOT selected in the 'Selected projects' in the 'Project section', hence system treated it as a candidate for 'Manual progress billing rule'

Billing rule 76 where all the projects till date, selected in the 'Selected projects' in the 'Project section', hence system treated it as a candidate for 'Automatic progress billing rule'

Thanks
Sarang