- Do you have Resources working on projects and hours will not be billed in the month worked?
- When do you recognize revenue for a Milestone based project?
- When are project expenses recorded on the financials?
Most businesses have large projects where resources are working and paid in one month but the client is not invoiced until the next month. In result, you incur the expenses in one month and revenue in another month, thus not properly reflecting true net income in either month. Resolving this issue by properly accounting for the revenue and expenses in each month will allow you to have accurate financials which will, in turn, allow you to make proper business decisions.
For example, if you have a month where your expenses are overstated and you show a loss, you might make changes to correct the issue. Likewise, if you have a month where you have overstated revenue and you show a large net income, you may make a business decision to make an investment in something, only to find out later that you really were not that profitable and the investment should not have been made. Understanding the project reporting and accounting and reflecting the expenses and revenue accurately can have a huge impact to your overall health and success of the business.
How can VPA help?
We have been leveraging Autotask to help produce customized reports in order to manage WIP. Each of our clients may have slightly different processes in order to manage projects, but the goals are the same – to recognize revenue and costs when they occur.The key to attaining accurate reports is to capture the necessary information, have time entered weekly and approved each month, have an accurate estimate of the Project % of Completion and track all Project activity. We have leveraged Autotask’s Project module to store the required information and have developed LiveReports in order to generate the reports. The LiveReports use formulas in order to provide the amount of Revenue that should be recognized at month end for the active project as well as profitability, actual vs estimates and other essential information.
*Remember, WIP may not only apply to Project work in your organization. If your Tickets are billed upon Completion and they take months to complete, this too can be considered WIP!