Configure accounting for billable projects
Project Operations supports various accounting options for billable projects that include time and material and fixed price transactions.
- Time and material transaction - These transactions are invoiced as the work progresses based on the consumption of hours, expenses, items, or fees on the project. These transaction costs can be matched with the revenue on each transaction and the project is invoiced as work progresses. Project revenue can be also accrued at the time when the transaction occurs. During invoicing, revenue is recognized and, if applicable, accrued revenue is reversed.
- Fixed-price transactions - These transactions are invoiced according to a billing schedule that is based on the project contract. Revenue for fixed price transactions can be recognized at invoicing or calculated and posted periodically, according to the Completed contract or Completed percentage methods.
A project is considered billable when it is associated with one or more contract lines. A project contract line defines which billing method and transaction types are allowed.
As an example, Fabrikam Robotics has won a project contract with Adatum corporation for equipment optimization. Adatum will pay a fixed amount of USD 10,000.00 to cover incurred project expenses, referred to as a fixed price billing method. Project time and fees will be billed for each use, which is considered a time and material billing method. All work will be tracked under a single project named Adatum equipment optimization.
A project team member submits eight hours of work on the Adatum equipment optimization project. When the project manager approves this time, the system uses the time and material billing method to create actuals transactions, an invoice, and an account. This transaction will not be included in the fixed price revenue estimate calculation.
Another project team member submits a travel expense for USD 2,000.00 against the Adatum equipment optimization project. When the project manager approves this submission, the system uses a fixed price billing method to create actuals transactions and an account for this project expense. The customer will not be invoiced based on this transaction. Instead, they will be invoiced by using separately configured billing milestones. This expense transaction, along with expense estimates, will be included in the fixed price revenue estimate calculation.
Accounting principles for project transactions are defined in project cost and revenue profiles. For every project transaction, the system determines the appropriate project cost and revenue profile by using the project cost and revenue profile rules that have been configured.