Skip to main content

Notifications

Announcements

No record found.

Microsoft Dynamics AX forum
Answered

Fixed price projects: On-Account postings and revenue recognition

Posted on by

We're facing an issue with one of our processes that I would expect would be a fairly common scenario, but we've been unable to find a solution to it within AX.

Currently, we perform fixed-price projects for customers based on a quote generated and then attached to a project. Everything seems to work perfectly except when it comes to how revenue is being recognized. When a fixed-price project is invoice, it posts to WIP-On Account...there is only one option in terms to what GL account to post to. It will not let you specify project category, etc. So in effect, you are lumping all your revenue (items, hours, expenses) together into one GL posting. 

Unfortunately, we need to recognize those individual types of revenue into separate GL accounts. We have one account for parts, one account for labor, etc. Time and Materials projects do this type of revenue recognition just fine, but Fixed Price projects do not...at least how we have things configured. Has anyone else ever faced this challenge and/or know of a configuration fix?

  • gfadden400 Profile Picture
    gfadden400 on at
    RE: Fixed price projects: On-Account postings and revenue recognition

    Got it! I see where you're going with this Adam, and I think out of the box this is probably the only/best way to make this work. Thanks!

  • Verified answer
    Adam Seaton Profile Picture
    Adam Seaton on at
    RE: Fixed price projects: On-Account postings and revenue recognition

    Don't make it fixed price, but T&M instead.  The only functions you lose (really) is the ability to create Estimate projects, and some of the default accrual options.  But based on the fact that we need revenue recognition based on cost lines posted, we can use the method above to recognise revenue monthly, based on work done.

    Whether you run contract complete or % complete projects doesn't really matter.  You can either point the costs at P&L via the project group, then recognise the revenue side to match via the T&M invoice, or point the costs at balance sheet.  Again, still use the T&M invoice as your release mechanism.  

    The Post Costs function is always there as well to move costs around P&L to Balance or visa versa if required, though you do have to manage and release those manually (via post costs).

    So in short, use T&M features to manage internal cost and revenue matching, and on-account features to manage the customer invoice profile only.

  • gfadden400 Profile Picture
    gfadden400 on at
    RE: Fixed price projects: On-Account postings and revenue recognition

    Hey Adam -- I like your idea and conceptually get it. But how do you create T&M chargeable lines on a fixed price project? I didn't think that was possible.

  • Suggested answer
    Adam Seaton Profile Picture
    Adam Seaton on at
    RE: Fixed price projects: On-Account postings and revenue recognition

    Does the following get you anywhere close?

    1. Use on-account for client billing, line type 'Milestone'  This is the invoice the customer gets as suits your billing contract rules, milestones and timing needs.

    2. Make the line property of the T&M elements chargeable, and consume those as normal.

    3. When the items have been consumed, run an invoice proposal to check the number.  In the perfect world the value of all T&M lines will equal the on-account invoice already issued, but you'll maybe have to adjust a little. (add additional positive or negative on-account line to balance).

    4. Cancel the proposal and add an on-account line of type 'Deduction' to the value of the T&M lines.

    5. Run the proposal and include the on-account line (s) not yet included.  The result should be that you have a zero value proposal.

    6. Post the invoice for zero value.  The on-account will be removed by the deduction line, and the chargeable T&M lines will realize the revenue in the ledgers at a detail level.

    Maybe not exactly what you're after but worth playing with that concept.  We use this principal internally for support contracts that have pre-paid bank days.  We bill upfront for fixed number of hours, then use the hours journal to check usage.  We run the invoice proposal monthly, add a deduction line to reduce the actual consumption and then post the proposal to realize the value of work done that month.

  • André Arnaud de Calavon Profile Picture
    André Arnaud de Cal... 288,420 Super User on at
    RE: Fixed price projects: On-Account postings and revenue recognition

    Hi,

    I was afraid for your reply...

    You could have a look at the Billing rules in AX 2012. Perhaps this could help you. 

  • gfadden400 Profile Picture
    gfadden400 on at
    RE: Fixed price projects: On-Account postings and revenue recognition

    Thank you Andre! We have explored the Production + Profit, but unfortunately we hit a dead end there as well.

    Time and Materials projects work terrific for us on the revenue recognition side. However, since it is "technically" a fixed price project, in the sense that we only want to invoice the customer what was quoted, we've ran into that obstacle on the time and materials side. Do you know of any way to accomplish that on the time and materials side of things? My guess is that would be physically impossible..but you never know.

  • André Arnaud de Calavon Profile Picture
    André Arnaud de Cal... 288,420 Super User on at
    RE: Fixed price projects: On-Account postings and revenue recognition

    Hi,

    When invoicing a fixed price project, you are invoicing a lump sum which is usually based on a calculation, but the invoicing itself is not related to used hours, expenses, items.

    You can try to use Matching principle Production + Profit for estimates to see if it would help you  in the transactions, but I doubt it.

    If you need revenue per transaction type, you might consider using the time and material project type.

Helpful resources

Quick Links

Replay now available! Dynamics 365 Community Call (CRM Edition)

Catch up on the first D365 Community Call held on 7/10

Community Spotlight of the Month

Kudos to Saurav Dhyani!

Congratulations to the June Top 10 community leaders!

These stars go above and beyond . . .

Leaderboard

#1
André Arnaud de Calavon Profile Picture

André Arnaud de Cal... 288,420 Super User

#2
Martin Dráb Profile Picture

Martin Dráb 225,672 Super User

#3
nmaenpaa Profile Picture

nmaenpaa 101,148

Leaderboard

Featured topics

Product updates

Dynamics 365 release plans