Revenue Recognition without SD

[former_member299514]

Dear All,

Here we are treating a particular project type as Customer Project and we have WBS elements only (no network activities). These are the projects which are anticipated to include external revenue. For a majority of these projects revenue will be recognized when the customer is invoiced. Customer is invoiced on a monthly basis for cost incurred on the project.

Also there are projects under % of completion method for revenue recognition to be used for fixed price projects. We need to track the actual cost against each WBS, actual amount billed and revenue recognized for the project. The requirement is to recognize revenue based on % of completion and post difference in the amount invoiced and revenue recognized to balance sheet.

To my understanding this can be mapped with Result Analysis cost based POC method. But here SD is not in scope. Keeping that in mind can we map the above requirement?

[Paulo_Vitoriano · Accepted solution]

Hi Suman,

I do not see any issue by the fact of not having SD in scope for described methods.  It is only RRB that requires SD.

Regards,

Paulo

[former_member299514 · Accepted solution]

How the actual revenue is recognized without SD? Here they possibly charge to customers though some finance transaction.

[Paulo_Vitoriano · Accepted solution]

Hi Suman,

That will be an FI document posting with account assignment to billable WBS.

Regards,

Paulo

[kenmelching]

You will need to post revenue to the WBS directly either through a manual FI posting or a FI Invoice.

How are you billing the customer without SD?  What is the process to post revenue?  What about AR?

RA will pick up manual revenue just fine.

[former_member299514]

Hi,

In our case the customer billing and revenue recognition is completely independent.

They want to use POC approach for revenue recognition, but not for customer billing which is depends on the contract and project.

My understanding is that basically they want to recognize revenue each month based on POC method, and when they bill customer, the billing amount will not depend on POC, but commercial contract, the variance between recognized total revenue and customer billing amount needs to be reclassified to a dedicated Assets or Liabilities account depends on whether the variance amounts.

[former_member299514]

Hi All,

Is there also a method of result analysis with the technical progress of the WBS Element. Like POC based on milestones. e.g. 10% of the contract amount is a milestone, 30% of the contract amount is another milestones etc.

[Paulo_Vitoriano]

Hi Suman,

I do not think you can translate directly the percentage from the milestone into RA calculation (without enhancements).

You will need a 2 step process to translate that first into the Progress version and have RA based on that.

Regards,

Paulo

[former_member299514]

Do you mean we need to transfer the POC value in the milestone as a POC for Progress Analysis and then use RA method 07? Transferring the Milestone POC as a POC for Progress Analysis is not standard?

What steps do we need to perform?

[Paulo_Vitoriano]

Hi Suman,

Depends on your Progress Analysis method, I do not know how it is setup in your case.

You are correct, that would be RA method 07.

Regards,

Paulo

[former_member299514]

Progress Analysis is not used here and we are only dealing with WBS, no activities.

[Paulo_Vitoriano]

Hi Suman,

In that case I do not understand why the manual percentage should be maintained at milestones.

You can maintain manual percentage directly at WBS feeding a Progress version with a user estimate and read that in RA method.

Regards,

Paulo

[former_member299514]

Can we not maintain the POC in milestones still and use Result analysis method 07. The POC in Progress Analysis to be used from Milestones?

[Paulo_Vitoriano]

You can use measurement method 3 based on Milestones (if you insist).  I just do not see a value of Milestones if it is used only for POC data entry.  Will you maintain it for every single WBS-element or for the one with RA key?

[former_member299514]

For the one with RA Key only. I am not sure how it can be alternatively addressed as you suggested. Are you proposing to take a Estimate method in Progress Tab and just maintain the percentages inside the estimate tab? But that is with periods. And you mean this will appear as non aggregated POC value? Not sure about my thinking is right.

So just if you can guide on the procedure.

[Paulo_Vitoriano]

Hi Suman,

If you can afford maintaining one POC value for the top level billing element that is fine (and simple). My thought was that different WBS that are account assignments need to have independent POC values.

Regards,

Paulo

[former_member299514]

Yes all the Milestones e.g. M1 10%, M2 30% and final M3 60% assigned to the top WBS Billing element. Would that be fine for RA method 07 to work on the top WBS? I am not whether the Progress Analysis poc will be determined in that case.

[kenmelching]

It's relatively easy to do with Progress Analysis.  First you create the WBS milestones with POC values.  Once you confirm the milestones, you run progress analysis based on milestones, PA writes the POC value to a Statistical Key Figure which the standard RA method reads as the POC.

It's minimal setup and almost all standard delivered.

[former_member299514]

Hi Paulo/Ken,

Thank you so much for clarifying my doubts.

Regards,

Suman