Regarding the cost structure in the IT staffing (IT personnel dispatch) business.

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Posted on by CU08052056-0

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Hello all,

I would like to seek your advice on how to approach cost accounting in the IT staffing business.

This is a business where we procure a software engineer for 1,000,000 JPY and dispatch the engineer to a client for 1,500,000 JPY. The gross profit is 500,000 JPY.

In reality, if the engineer only worked an amount equivalent to 500,000 JPY, but we would still invoice 1,500,000 JPY.

In this case, is it correct that the accounting cost should be 1,000,000 JPY?

I look forward to your advice.
Nobuhara

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Dynamics 365 Business Central

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Teagen Boll 1,436 Super User 2026 Season 1 on at

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This would be less of a business central and more of an accounting question but you can calculate the Labor Variance. When performing variance analysis you have two different variances you can calculate. There is good info online at resources like this one here: Variance Analysis - principlesofaccounting.com

In summary:

Rate Variance = (Actual Hours x Actual Rate) - (Actual Hours x Budget Rate)

Efficiency Variance = (Actual Hours x Budget Rate) - (Budget Hours x Budget Rate)

When looking at both of these you can determine if you billed at less than budgeted or if you were either more efficient or less efficient in work done.

You can then add the rates together to determine if the variance is favorable or unfavorable.

In your example you have the following variances:

Rate Variance = 0 JPY

Efficiency Variance = 500k JPY

Favorable Variance of 500k JPY (got the work done in less hours than budgeted)

Your general ledger entries in BC would just reflect the actuals with your labor costs and revenue - in this case you have 1500k in revenue and 500k in costs and a net of 1000k. But for project reporting and cost accounting analysis you can use the variance analysis to compare to budget.

Hopefully that helps answer your question.

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CU08052056-0 1,249 on at

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Hi Teagen Boll,
Regarding your statement that the General Ledger entries in Business Central reflect only actuals:
You mentioned that the cost would be the actual working hours of the procured engineer, meaning the cost would be 500,000 JPY. However, since we are paying the supplier 1,000,000 JPY, wouldn’t 1,000,000 JPY be the accounting cost instead?

Nobuhara

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OussamaSabbouh 12,965 Super User 2026 Season 1 on at

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Hello Nobuhara,

Yes — if you are contractually paying 1,000,000 JPY for the engineer, then the accounting cost remains 1,000,000 JPY, even if the engineer only effectively delivered work worth 500,000 JPY. The full committed amount is your cost for that period; underutilization does not reduce the expense, it simply impacts operational efficiency and margin analysis. So revenue 1,500,000 JPY minus cost 1,000,000 JPY equals 500,000 JPY gross profit, regardless of how much of the engineer’s capacity was actually used.

Regards,
Oussama Sabbouh

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CU08052056-0 1,249 on at

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Thabk you all,

Once again,
We purchased the resource for 1,000,000 JPY and originally planned to sell it for 1,500,000 JPY. However, due to low utilization, we were only able to invoice 800,000 JPY. As a result, we incurred a loss of 200,000 JPY.

In this case, from an accounting perspective, what would be the cost amount?

Would it still be 1,000,000 JPY, or would it be 800,000 JPY corresponding to the actual utilization?

Look forward to your suggestions.

Nobuhara

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Dhiren Nagar 2,898 Super User 2026 Season 1 on at

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Hi,

You have mentioned different details in your question and then in comments.

The simple logic from accounting perspective is whatever your Engineer has Invoiced you (Your Vendor has Invoiced) i.e. your Purchase Invoice becomes your Cost of Sales.

What you Invoice to your client (You invoice to your client for service) will become your revenue.

So if you billed your client 1,500,000 JPY that is your revenue.

And As you are paying 1,000,000 JPY to your supplier (As mentioned in your comments) that will be your cost of sales.

This is based on normal accounting principle.

If there are any more details, please add to the question or comments and keep it consistent so that experts can answer.

Regards,

Dhiren.

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