Treat Costs as Fees (TCAF)

Treat Costs as Fees (TCAF) is a flag set on expense types. It determines whether the disbursed amount (out-of-pocket) is treated as revenue or not. This is a choice that is best made in collaboration with your finance team or auditors. You may find that some expense types should have TCAF enabled while others should not. The purpose of this article is to give you a big picture overview of TCAF, some examples of when it would be used, and how it affects your financial data.

Additional Resources

In the Topic of the Day: Accounting Overview Webinar, we provide a general overview of accounting within Projector and provided examples of some of the most common accounting transactions that Projector generates and can be transmitted over to an accounting system. (go to 42:00)

Overview

Before we get into explaining TCAF, let's first make sure that you understand the pieces that go into billing an expense. Two pieces are usually immediately obvious. The disbursed amount is the amount you paid for something. The client amount is what you plan on charging the client. But there are still two more pieces to this equation, revenue and expense amount. They are related by the following equation.

Disbursed Amount + Revenue = Client Amount + Expense Amount

The equation basically says: (what comes out of your pocket + markup) = (portion client paid + amount you had to cover)

With TCAF ON we are treating the Disbursed Amount as Revenue and Expense. However, because they both increase the same amount, your NET is still the same. The following table will help you visualize how the math with TCAF on/off affects the balance of the equation. I have highlighted in green numbers that differ between the two rows. Notice how in the first row the revenue is the delta between disbursed and client whereas in the second row it is the full client amount.

TCAF	Disbursed	Client	Revenue	Expense	NET
OFF	$100	$150	$50	$0	$50
ON	$100	$150	$150	$100	$50

Example

Okay, so now you see that by toggling TCAF we are adding the Disbursed amount into Revenue and causing our revenue/expense numbers to increase. Why would you want to do this? TCAF is useful when you consider an expense type to actually be revenue. An example would be for a business who primarily bills through subcontractors. You don't consider the subcontractor a one-time expense that the client is responsible for. Subcontractors ARE your business.

Try thinking of it this way. In Projector we have the time-side and cost-side of a project. On the time-side you may have salaried employees. When they work a billable hour they earn revenue, but you also have to pay them so they have an expense. You don't treat the revenue they earn as the delta between revenue and expense. It is all revenue. You want your subcontractors to behave the same way, just on the cost-side of Projector.

Accounting

No matter which setting you choose, on or off, your P&L effect will be the same. Only your revenue and expense numbers will shift.

Some organizations that run a cash rather than an accrual based accounting system might turn on TCAF for all expenses. You should understand the implications of this prior to trying it in your own installation.

If you take an existing expense type that has cost cards associated with it and flip the TCAF flag on/off, the cards will not be affected unless some type of revalue operation is performed. For example, editing the card, voiding an invoice, etc. If you decide that you want to start using TCAF for an existing expense type, there are two approaches we recommend. First, if there is a strict cutover period you can simply turn TCAF on. This assumes all existing cards will stay as they are and all new cards will have TCAF on. If there is transition period planned where some card might have TCAF on and others OFF, we instead recommend creating a new expense type.