Job Costing - Cost Recognition

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Posted on by CYC

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Hi, on project or Job costing in Business Central based on Percentage of Completion (POC), any billings upfront is not consider as revenue unless work has started or cost has incurred. I got this. But how do I handle prepayment to resources or a deposit to resources before they start work or before the project incurs cost based on Fixed Fee project. These resources are subcontractors and they bill us some percentage upfront just as we bill our customer on the job some amount upfront. Do I raise a purchase invoice for the payment based on resource type which does not allow any charging to the job task and job planning line or as a service item that will charge to the job task/planning line which defeats the whole point of POC as cost is recognized although no work is done yet.

Any advise would be most appreciated.

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S.Kawamura 1,530 on at

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I haven't tested my idea on an actual BC environment, but I think it is a good idea to use the prepayment of the purchase order. Prepayment posting of purchase orders is not recognized as a job cost.

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S.Kawamura 1,530 on at

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Hi,

I tested my Cronus environment, and my idea works fine.

Instead of using purchase invoice, use purchase orders, and input as below.
Purchase Order card page have prepayment field as out of box. And you have to add Job No. and Job Task No. to Purchase Order line with using personalize feature as you did purchase invoice.

You can post prepayment with "Action > Posting > Prepayment > Post Prepayment Invoice" button.

This posting action didn't create job ledger so that didn't affect Job Cost and Percentage of completion.
After sub-constructor did their work, you post this purchase order so that Posted Purchase Invoice will be created and Job Ledger Entries will be also created. This affect Job Cost and Percentage of Completion.

Does this meet your requirements?

I hope this is useful to you.

S.Kawamura

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CYC 112 on at

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Hi Kawamura-san

Thank you for testing and providing the answer. I also tried and it worked as what you did. The issue is at Job level, the subcons will submit time sheet, the Project manager will acknowledge and post the hours as job journal. So the cost is already recognised from the time sheet. A report will be generated at the end of the month to show all the hours and the corresponding rates each subcon does. This step is important as the Project Manager needs to acknowledge work is done by the subcons. Also, this give the correct status of the job and profitability. Finance just pay based on the hours x rates for each subcon.

It can still work with pre-payment at the PO level. The PO and PO invoice cannot reflect the job task/planning line else it will add additional costs to the job. The item in the PO needs to be resource and the job task/job planning line fields in the PO/Purchase Invoice cannot be entered. Unlike sales invoice where the Project Manager can generate a Sales Invoice inside a Job, there is no such feature for Purchase Invoice.

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S.Kawamura 1,530 on at

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Hi,

I understand the situation. As you said, Job and Resource cannot exist together in an Purchase Order line.
And as far as I know, Timesheets cannot be linked to Purchase Order. I really think It would be much better if the Purchase Orders and Timesheets were linked. But unfortunately, Timesheets and Purchase Orders don't work together, so I think we have to take the next alternative.

- Use Timesheets to recognize Job Costs.
- Use Purchase Order to process prepayments and accounts payable.

In other words, it separates the job's cost recognition from the accounting payment. There will be double entry of Timesheets and Purchase Order line, but I think that is unavoidable. Some customization can be considered to reduce the workload of double entry. For example, one idea would be to add a "Get resource consumption from Job Ledger" button on the Purchase Order page.

I hope this is useful to you.

S.Kawamura

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CYC 112 on at

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Hi, yes, your information has been super helpful. Thank you once again.

YC

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