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Define project cost and revenue profiles

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Project cost and revenue profiles determine the accounting rules for project transactions. These profiles are configured in Project management and accounting.

Complete the following steps to create a new project cost and revenue profile:

1. Go to Project management and accounting > Setup > Posting > Project cost and revenue profiles.

2. Select New to create a new project cost and revenue profile.

3. In the Name field, enter the name and a brief description of the profile.

4. In the Billing method field, select Time and material or Fixed price.

5. Expand the Ledger FastTab. The fields on this tab define the accounting principles that are used when project transactions are journalized by using the Project Operations Integration journal and are then invoiced through the Project invoice proposal.

6. Select the appropriate information in the following fields on the Ledger FastTab:

   • Post costs – hour:
     • No Ledger - The cost for time transactions will not be posted to the ledger when the Project Operations Integration journal is posted. However, the accountant can post costs by using the Post costs function later.
     • Balance - The cost for time transactions will be debited to the ledger account type WIP - Cost value and credited to the Payroll allocation account on the Ledger posting setup page. The accountant will use the Post costs function to move this cost from a Balance account to a Profit and loss account on a periodic basis.
     • Profit and loss - When you are posting the Project Operations Integration journal, the time transaction cost will be debited to the ledger account type Cost and credited to the Payroll allocation account that is defined on the Cost tab on the Ledger posting setup page (Project management and accounting > Setup > Posting > Ledger posting setup). This setup is the most common for time and material transactions.
     • Never Ledger - The cost for time transactions will never be posted to the ledger.
   • Post costs – expense:
     • Balance- When you are posting the Project Operations Integration journal, the expense transaction cost will be debited to the ledger account type WIP - Cost value, as defined on the Cost tab on the Ledger posting setup page, and credited to the offset account on the journal line. Default offset accounts for expense are defined in Project management and accounting > Setup > Posting > Default offset account for expenses. The accountant will use the Post costs function to move this cost from the balance account to the profit and loss account on a periodic basis.
     • Profit and loss - When you are posting the Project Operations Integration journal, the expense transaction cost will be debited to the ledger account type Cost, as defined on the Cost tab on the Ledger posting setup page, and credited to the offset account on the journal line. Default offset accounts for expense are defined in Project management and accounting > Setup > Posting > Default offset account for expenses.
   • On account invoicing:
     • Balance - When you are posting the Project invoice proposal, an on-account transaction (billing milestone) will be credited to the ledger account type WIP Invoiced - on account, as defined on the Revenue tab on the Ledger posting setup page, and debited to the Customer balance account.
     • Profit and loss - When you are posting the Project invoice proposal, an on-account transaction (billing milestone) will be credited to the ledger account type Invoiced revenue- on account, as defined on the Revenue tab on the Ledger posting setup page, and debited to the Customer balance account. Customer balance accounts are defined in Accounts receivable > Setup > Customer posting profiles.

   When you define the posting profiles for Time and material billing methods, you have the option to accrue revenue for each transaction type (hour, expense, and fee). If the Accrue revenue option is set to Yes, unbilled sales transactions in the Project Operations Integration journal will be recorded to the general ledger. The sales value is debited to the WIP - sales value account and credited to the Accrued revenue - sales value account that was set up on the Ledger posting setup page on the Revenue tab.

   Note

   The Accrue revenue option is available only when the respective transaction type Cost is posted to the profit and loss account.

7. Expand the Estimate FastTab. The fields on this tab define the calculation settings for fixed price revenue estimates. The fields on this tab only apply to project cost and revenue profiles with a billing method of Fixed price.

8. Select the appropriate information in the following fields on the Estimate FastTab:

   • Principle used for project completion calculations:
     • Completed contract - Cost matching and revenue recognition does not occur until the end of the project. Costs reflect as WIP in the balance until the project is complete.
     • Completed percentage - Accrued revenue is calculated and posted to the ledger every period based on the project completion percentage. Multiple methods are available to help you calculate percentage completion. These methods can be automatic or manual depending on the configuration.
     • No WIP - This setup is used for fixed price projects with a short time span and where the invoice and the costs occur in the same period. In this case, the On-account invoicing field value on the Ledger FastTab is automatically set to Profit and loss to ensure that revenue is recognized at invoicing. The revenue estimation process will not be used for this project cost and revenue profile.
   • Matching principle - This field determines how the calculated sales value (accrued revenue) will be posted to the ledger.
     • By using the Sales value principle, the system will calculate the sales value by matching costs and revenue and then posting it as a single amount.
     • By using the Production and profit principle, the system will split the sales value into realized costs and calculated profit. These items are posted separately.
   • Cost templates - Allow project transactions to be grouped based on transaction type and project category and then define percentage completion calculation rules for these groups.
   • Period codes - Define the frequency with which revenue estimates are calculated for a given Project cost and revenue profile.
   • Categories for estimate - Used for sales value (accrued revenue) posting to project transactions. First, configure the dedicated project category for a Fee transaction type and then set the flag Estimate for this project category. Next, depending on selected matching principle, pick this project category in the Sales value or the Profit field in the Project cost and revenue profile.

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