Unified Operations & Dynamics AX Forum

Expand all | Collapse all

Recognize Revenue and Costs Over Straight line over project life

  • 1.  Recognize Revenue and Costs Over Straight line over project life

    GOLD CONTRIBUTOR
    Posted 20 days ago
    Hoping to tap some creative minds to see if the following scenario is possible in Project Management and accounting.

    Company is providing a SaaS service to customers. The service is of a fixed contract length and the company wishes to recognize Revenues AND costs on a straight line basis across the life of the project.

    The upfront costs are accrued to the Balance sheet as an asset and are then subsequently expensed periodically.

    Ideally, this would use the OOB functionality Project functionality, so there is unified reporting.

    Has anyone done this before? Appreciate any insight.

    Thanks,




    ------------------------------
    Christopher Ho Yee
    Altius Consulting
    Richmond BC
    ------------------------------


  • 2.  RE: Recognize Revenue and Costs Over Straight line over project life

    TOP CONTRIBUTOR
    Posted 19 days ago
    did you look into using a fixed price project, and running an "estimate" project each period for the portion of revenue/expense you want to recognize?

    ------------------------------
    Zvika Rimalt
    Functional Consultant
    Vancouver BC
    ------------------------------



  • 3.  RE: Recognize Revenue and Costs Over Straight line over project life

    GOLD CONTRIBUTOR
    Posted 19 days ago
    Take a look at milestone too. Binary Stream has a Revenue Recognition with some ASC 606 compliance but you will have to use the fixed price for the cost recognition.

    ------------------------------
    Barr Snyderwine
    Business Solution Architect
    Avanade
    Middletown MD
    ------------------------------



  • 4.  RE: Recognize Revenue and Costs Over Straight line over project life

    GOLD CONTRIBUTOR
    Posted 18 days ago
    Hi Zvika and Barr,

    Thanks for the reply. We do know that the Revenue can be straight lined. However, our hurdle is the costs.

    Not being a project accounting expert, I thought that the Fixed price project recognizes costs as incurred. As you incur the costs, they get recognized when you do revenue recognition.

    We want to be able to split the costs evenly over the contract life. We will incur "capitalizable" costs for several months in advance of the contract and likely for a period after the contract. These are the costs we want to amortize over the life if the contract. If this is configurable, can you elaborate on how this can be done?

    ------------------------------
    Christopher Ho Yee
    Altius Consulting
    Richmond BC
    ------------------------------



  • 5.  RE: Recognize Revenue and Costs Over Straight line over project life

    TOP CONTRIBUTOR
    Posted 15 days ago
    you can set expenses to post into a "WIP" balance sheet account (through settings on  the project group).
    when you do that, the "estimate" posting will move both revenue and expense from balance sheet to P&L (=recognize revenue and expense).


    ------------------------------
    Zvika Rimalt
    Functional Consultant
    Vancouver BC
    ------------------------------



  • 6.  RE: Recognize Revenue and Costs Over Straight line over project life

    Posted 14 days ago
    Hi Christopher

    Although it is theoretically possible to use the WIP functionality to manage the cost release it's not what I would use to manage this as it would be considerably manual and therefore overly time consuming. Looking at what you have mention if I was in your shoes I would propose the following.

    1. Create a header project. I would then use this project number as my financial dimension for reporting purposes.

    2. Create a sub-projecct of type 'Investment' which I would then use to record all my up front costs. At the appropriate time the cost on this project can then be 'eliminated', using standard functionality, into the Fixed Asset module (maintaining auditabiliy and referencial integrity back to the costs). I would ensure that the header project number is being used as a financial dimension against this intangible asset. The standard depreciation functionality can then be used monthly over a pre-defined number of months to charge the P & L for the amortisation charge.

    3. Create a second sub-project to manage invoicing the customer for the SaaS. Personally I would create this as a T & M project as it gives greater flexibility given for any additional charges etc and also that I would expect SaaS to have a less defined timeframe. Depending on the complexity of the pricing and the invoicing frequency I also would definitely consider using the subscription functionality, which although initially released as part of the service management module the functionality utilises the projects module to perform the invoicing, which makes it available for non service management invoicing. Again I would ensure that the financial dimension on this project has the project header reference so that the revenue and any monthly operating costs also can be referenced easily. Subscription functionality also has good accrual functionality if the invoicing frequency does not match the financial periods.

    The above proposal allows for greater scalability and requires less manual intervention from the end user. Obviously using the above would mean reporting using the GL module but having the project header number as the financial dimension would make this very straightforward.

    ------------------------------
    David Scattergood
    Solutions Architect
    P2 Dynamics Solutions Ltd
    Corby
    ------------------------------



  • 7.  RE: Recognize Revenue and Costs Over Straight line over project life

    GOLD CONTRIBUTOR
    Posted 14 days ago
    Thank you for the suggestions!

    ------------------------------
    Christopher Ho Yee
    Altius Consulting
    Richmond BC
    ------------------------------



  • 8.  RE: Recognize Revenue and Costs Over Straight line over project life

    Posted 13 days ago
    Hi Christoper

    No worries

    If you decide to go with my suggestions and need any hints, tips and tricks on any of the described functionality please let me know. Subscriptions particularly can be slightly quirky depending on things invoicing frequency. I also came across some instances where we needed to complete a couple of small developments, although this was where the customer was invoicing an annual subscription.

    Regards
    Dave

    ------------------------------
    David Scattergood
    P2 Dynamics Solutions Ltd
    Corby
    ------------------------------