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Hello everyone,
I am currently starting learning about the Project Management and Accounting module. in D365 Finance and Operations. I´ve learned about project groups and categories. I have set all my projects to post into profit and loss accounts and I am curious if I am managing itthe correct way.
1- Project Type: Investment Project
I use the budget control functionality to have control of my costs and post different type of transactions (hour, items, and expenses). I then post my corresponding estimates (where the costs are credited and wip is debited) indicating it will be eventually capitalized into a fixed asset. Once all my estimates are completed, I eliminate the last estimation (credit wip account and debited it into the fixed asset account).
Is this process correct or am I missing something relevant to the nature of the investment projects?
2- Project Type: Times and Materials
I use the budget control functionality to have control of my costs and revenues and post different type of transactions (hour, items, and expenses). I understand the concept of the project contracts, in this case i would be using times and materiales project contract. Once published my transactions, i will only create invoice proposals and publish invoices.
Whenever i post the invoice is when i recognize revenue, correct?
Is this process correct or am I missing something relevant to the nature of the investment projects?
3- Project Type: Fixed Price
This is the project that I have the more doubts.
Whenever i create my budget, do i need to state revenue budgets ? I don´t think so since the revenue is based on the contract value of the projects, correct?
What is the purpose of estimation? To create/recognize the WIP accounts?
Should i post my transactions, then estimate and then invoice (based on the project contract)? Or what would be the correct way?
Hi Daniel,
Welcome to the world of D365 Projects!!
To answer your query:
Investment Projects are used to capitalise cost one of fixed asset/ledger account/Another project. You build up the costs by posting the transactions against the project as actuals with the corresponding GL posting to a balance WIP account.
Once all transaction are posted you are ready to eliminate the project to one of the choices. In order to do this you first create an estimate where you can select where you want to eliminate to and then post it. The system will then allow you to create an elimination for the estimate which takes the full amount of WIP accumulated against the project and post it as an fixed asset acquisition or just to one of the other options.
For time and material projects you can accrue revenue when you post the item/expense/hour transactions to do this set it up on the project group where there are sliders to turn the functionality on. The invoice process will reverse the accruals and post actuals at point of invoicing
For fixed price projects you are correct you don't have to have a revenue budget but it is good practise to create one.
The main purpose of the estimation is to recognise revenue. When you invoice a milestone amount the sales value goes into a WIP account, The estimate process then releases the revenue WIP (Dr WIP Cr Sales P&L) based on the settings on your cost templates (E.g. percent complete based on actual cost vs budget total cost)
The invoice and revenue recognition postings are independent from each other so it doesn't matter what order you complete them.
Hope that helps
KR
Mark
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