Fixed Price Invoicing

In this webinar we talk about managing financial processes-billing and revenue recognition for a fixed price project.

Fixed Price is set on the Contract tab. Projector will allow you to set an engagement type to "Fixed Price" on the Engagement Info tab, be sure that the same "Fixed Price" setting is in use on the engagement Contract tab.

FP Time

Once you define that an engagement is Fixed Price for time, Projector begins to expect that you will be using milestone payments to invoice the client instead of billing them for individual time cards entered by resources. These milestone payments are also defined on the Contract tab. Each consists of an amount, a planned date, and an achieved date. Once the milestone has been achieved, you can pull the milestone onto an invoice.

The Revenue Recognition is then used to true up what percent of an engagement's contractual terms you earned as opposed to how much you billed. For example, you may bill the client in thirds, but you know the first third does not require much work. So you bill the client one third, but only recognize one fifth. The difference will remain in deferred revenue until you do more work.

Final invoicing involves the process of netting the deferred revenue created by invoicing for the milestones against the work in progress generated by approving timecards. Projector walks you through this workflow through the use of the Close Engagement form.

FP Cost

Fixed Price cost is not an often used choice in Projector. More commonly, we recommend that you roll costs into a Fixed Price Time engagement. The best way to do this is by setting the cost to Not to Exceed for a client amount of zero dollars. We recommend this over a zero dollar Fixed Price Cost because an NTE prevents you from issuing an invoice if there is a positive client amount on cost cards. As FP is invoiced via milestones, you could still pull non-zero cost cards onto the invoice. The NTE setting will prevent you from issuing the invoice if you made this mistake.

If you have a true situation where you know that the cost is a fixed amount and you do not want to roll its effects into time, then you should go ahead and create a FP Cost engagement. In this case you would create a milestone for the cost. Once achieved you should bring all the associated cost cards onto the invoice and write them up or down to match the milestone amount.

How to clear deferred revenue on fixed price cost contracts