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Partial revenue recognition

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Posted on by Boyan Dukov

Hi Everyone,

I need some advice on revenue recognition in D365.

Let's say we have time and materials project where we post timesheets and we accrue revenue. However, it is unclear when the work done will be invoiced. That is why we want to recognize only partially the revenue in the period when timesheets are posted.

To do that, I was thinking to use indirect cost compoment group and when assigning indirect cost components to put setup only for Revenue rate with negative percentage, and my intend was to adjust the transactions later changing the indirect cost component group, however it seems this is working only together with Invoice rate. If I fill both, it posts additional transactions which change the total invoice amount too and I do not want that. As a workaround I decided to use Cost rate field only and on regular basis to post additional expense journal with negative amounts and non chargeable line property. As a result posted timesheet will show correct total sales amount and increased total cost amount and a few lines further I will have 0 for total sales amount and minus total cost amount for the expense transaction in the posted project transactions. If I name the project categories correctly simple sorting will be sufficient to check if something is missing. Another option is to trace trial balance per account and project to see what should be recognized.

Do you have any idea if there is a setup allowing to be able to use only Revenue rate in Assign indirect cost compoment form (compundig rules for all types are set and all related main accounts are with allow blanks properties in the account structures which are all activated and added to ledger, we do not have suspended dimension values or main accounts, all fiscal periods are open without restrictions per user/group) or any other standard functionality that solves that issue?

P.S.

I was also thinking for allocation term on the main accounts that are used in ledger posting setup in project management and accounting for the timesheets and then manual posting ledger vs ledger in general journal but in this way we will not see what is going on in the project transactions.

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Ludwig Reinhard Microsoft Employee on at

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Hello Boyan,

Can't you accrue the revenue with the standard functionality that posts your accrual when the timesheet is recorded?

This can be realized by enabling the respective parameters in the project group form.

Invoicing the project does not matter in this case because at the time you invoice your customer no costs or revenues are posted. This will only be a balance sheet transactions that clears your WIP accounts.

I don't understand why you try to find a workaround and cannot use the standard functionality?

Best regards,

Ludwig

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NataliaLeal on at

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Hi!

As far as I know Indirect cost component are used for posting indirect cost in hour transactions but not revenue as in direct cost components. The ways to recognize revenue in time and material project are:

1. invoicing project transactions with a line property with chargeable checkbox marked. In case accrue revenue has been posted, it will also be cancelled.

2. Using Accrued revenue, you will be able to recognize revenue temporarily till project transaction is included in a project invoice where the revenue will be recognized definitely and accrued revenue (temporary revenue) will be cancelled.

There are two options to work with accrued revenue:

1. Mark accrue revenue parameters in project group so that temporary revenue is posted automatically when posting hour costs, expense cost,...

2. Use project group without accrue revenue and post manually accrue revenue by using Accrue revenue process (From project/ Manage tab/ Accrued revenue/ Time and Material or From Periodic/ Time and Material/ Accrue revenue). Setting Accrue revenue option, you will recognize revenue temporarily:

As well this process allows you to reverse accrue revenue or temporary revenue by selecting Reverse revenue option. It will reverse accrued revenue voucher and then the project invoice will post definitive revenue,

Note that with this process, the user will be able to select which project transactions will recognize temporary revenue as long as it contains a line property with accrue revenue marked but it will recognize the entire transaction and not a percentage of transaction.

So this means you only can recognize definitive revenue in a time and material project by invoicing it but you can temporarily recognize revenue by using accrue revenue that will be cancelled in the invoice. Then possible work arounds to use accrued revenue functionality to recognize part of revenue in time and material projects before invoicing:

- Define project group with accrue revenue only for fee transactions (not for the rest). Post hour, expense, item transactions with a line property defined as chargeable. These transactions will be used to post cost amounts and definitive revenue when invoicing them. Then post fee transactions with line property defined as chargeable and as accrue revenue when you need to recognize partially revenue and previously posting definitive revenue. Finally before posting the project invoice, you will need to cancel accrue revenue by using Accrue revenue process with Reverse revenue option.

- Other option is not to use fee transactions to post accrue revenue and work with a project group without accrue revenue. Then use Accrue revenue process to select some of project hour, expense,..transactions to post temporary revenue (Line property will be setup with chargeable and Accrue revenue checkboxes). In case, you need to split the project transaction to recognize partially revenue, you will be able to run project adjustment to do that creating additional lines and using percent field to distribute amounts:

This will allow you to select one of new adjusted transactions when running Accrue revenue process to recognize revenue partially. Take into account that as well cost amount will distributed in two or more project transaction according to percentage defined when adjusting.

Finally accrue/temporary revenue will be canceled in project invoice, when definitive revenue will be posted either.

Best regards,

Natalia

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NataliaLeal on at

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I forgot to say in the first workaround that you will have to prevent to include those fee transactions in project invoice proposal so that just definitive revenue from hour, expense and items transactions is posted.

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