Revenue Recognition Wizard
Revenue recognition is the process of realizing your earned revenue. This is a manual process and ensures that your accounting matches Generally Accepted Accounting Practices (GAAP) and does not violate IRS laws. In Projector, this process is done through the revenue recognition wizard. You should always run revenue recognition on your FP engagements. You should almost never run it on your T&M or NTE engagements. If you are using the rev rec wizard with those kinds of engagements you should visit our revenue recognition how-to and make triple sure you know why you are doing it.
This screen is reached by right clicking on any project on the project browser and choosing Perform Revenue Recognition. Despite the fact that this screen is reached from the project browser, revenue recognition is calculated at the contract line item level, not at the project level. The screen you are presented depends on whether you are recognizing revenue using the percent complete vs. revenue schedule method.
Permissions and Settings
To perform revenue recognition you must have the cost center permission Revenue Recognition for the engagement's cost center.
Your Percent Complete method is determined by the system setting Base Percent Complete On. Your choices are Person Hours, Resource Direct Cost, or Contract Revenue. If you have chosen the RDC method, then your users who run revenue recognition will likely want to have the global permission Resource Direct Cost (RDC) Data. Otherwise they won't be able have Projector calculate percent completely automatically for them. The reason for this limitation is because through some clever math you could back calculate RDC rates based on revenue recognition numbers. If you are not sure what percent complete is, see our revenue recognition how-to.
Revenue recognition should almost always be run on FP engagements. Revenue recognition should almost never be run on T&M or NTE engagements.
On Fixed Price engagements you can optionally specify a Holdback amount. This amount is set aside until the client has signed off on the contract. When performing revenue recognition, Projector subtracts the holdback from the contract amount when calculating values like percent complete. In order to recognize the the held back amount, zero it out on the contract tab and then make a final revenue recognition run.
Revenue recognition is only run for time cards, not for cost cards. However, you can now run Rev Rec for projects with zero hours.
The revenue recognition dialog you are displayed depends on whether you have chosen Percent Complete or Revenue Schedule on the Engagement Contract Tab.
Once a time card has been through revenue recognition, you typically cannot transfer it to another project or unapprove it. This is because that time card now has earned revenue associated with it. If you remove the time card, that revenue needs to go somewhere. In these cases you should probably undo revenue recognition, transfer/unapprove the time, and then redo revenue recognition. Step-by-step instructions for this process are available in our Reversing Revenue Recognition tutorial. Notice that I said typically you cannot transfer/unapprove, however, there is a system setting called Allow transfer/unapprove of fixed price time cards that have been through revenue recognition that bypasses this limitation. You should only use this feature if you know what you are doing. Some cases where it would be okay to transfer/unapprove time cards that have been through revenue recognition are:
The transferred time card had zero revenue to begin with
You know that you are going to rerun revenue recognition and correct the time cards
You can perform revenue recognition regardless of whether your accounting periods are open or closed, but where your revenue lands after the revenue recognition process does depend on whether the accounting periods are open.
If the time period that you recognized revenue on is still open for time cards, then any time cards approved after your rev rec run will have zero revenue on them. You will need to either rerun revenue recognition to get revenue properly allocated to them, let them sit as zero, or you should close the period or project for time entry to prevent further hours from being added.
Revenue Recognition Wizard
To launch the revenue recognition wizard, go to your projects tab. This next part is a little confusing. Revenue recognition is always run at the engagement level, but it is launched from the project browser. So find the project whose engagement you want to rev rec. Right click that project and choose Perform Revenue Recognition. Depending on whether you have chosen to use Percent Complete or a Revenue Schedule on the Engagement Contract Tab, you'll be presented with one of two dialogs. See the appropriate subsection below depending on what your choice was.
Percent Complete
At it's core, the percent complete recognition process is pretty simple. You choose a start date, an end date, and how much revenue you want to recognize between those two dates. Projector finds all time cards between the dates, divvies up the revenue to each time card according to your Percent Complete method (Hours, RDC, or CR), and you are done. If you have run revenue recognition previously on your selected date range, then all time cards before the start date are left alone. All time cards after the end date are zeroed.
Date Range
The upper half of the dialog is where you pick the date range you want Projector to recognize revenue on. The layout is a little confusing because you specify the end date first (Use Actuals Through). Then you specify the begin date (From).
Control | Description |
|---|---|
Use Actuals Through | The end date for your revenue recognition period. If you have run revenue recognition previously, and there is revenue sitting on time cards AFTER this date, that revenue will be zeroed out. |
From ... | The begin date for your revenue recognition period. Choose From the beginning of the engagement to redo revenue recognition from the very start. Choose From if you want to target a particular date range. If you choose a specific start date, then all recognized revenue on time cards BEFORE that date is left alone and is considered sacrosanct. All time cards after and up to the end date will have their recognized revenue recalculated. |
Revenue Amount
The lower half of the dialog is where you specify how much revenue should be allocated across the given time cards. You have four options. The first is an automatic calculation done by Projector. The remaining three are manual override amounts. Each is explained in the table below.
Revenue Amount | Description |
|---|---|
Using the X method | You will see one of three different wordings here depending on your installation's Percent Complete method.
This is the "automatic" option. Projector gathers the following information:
With this information in hand Projector can then calculate what percent of the work you have completed according to your Percent Complete Method (Hours, CR, RDC). An explicit revenue number is then formulated ($X) and allocated to the approved time cards. Include Requested Hours in calculation - Consider requested hours as booked hours for the purposes of calculating percent complete. Useful when you have a plan that is in flux, but you know that requested hours will be incorporated. *The RDC option is grayed out unless you have the global permission Resource Direct Cost (RDC) Data |
Overriding Percent Complete To | Rather than have Projector calculate your percent complete based on remaining booked hours, override that value to an explicit completeness percent. This is often chosen when you have a better idea of how complete a project is. For example, there may be a large number of hours left, but perhaps it is all easy, low-level work. You know that the project is more complete than just the numbers would indicate. |
Recognizing Revenue to Date Of | Enter the total revenue, including revenue recognized prior to your begin date, that you would like recognized. For example, if two months ago you recognized 10k, and now for last month you earned another 5k, you would enter 15k here. Projector will back calculate the percent complete automatically. |
Recognizing Additional Revenue Of | Projector looks at all revenue currently recognized (even in the future) and adds this number to it. That revenue is then applied to your specified date range. If there is already revenue on time cards in that date range, then the revenue is first removed and the new amount allocated. |
Once you have confirmed the information, click Next again and then see the Confirmation Screen section of this document.
Reversing Revenue Recognition
To reverse revenue recognition after a specific date, set the date range to the period preceding that date. For example, to reverse revenue recognition performed on and after October 1, set the date range to September 1 through September 30. Next, specify the amount of revenue to be recognized for that date range. Most likely, you will be specifying the amount of revenue that had previously been recognized for that preceding period. Projector will re-recognize the revenue for that preceding period (September 1 through 30 in our example). Here is where the reversing happens: the revenue previously recognized on and after the specified date (October 1 in our example) will be reversed.
This reversing action is a subtlety of revenue recognition. Any time you recognized revenue through a date, any revenue created after that date by running the revenue recognition wizard will be reversed. Note that in the very unlikely case that you use the wizard on a T&M or NTE engagement (this is generally not recommended!), what is reversed is the revenue recognized by the wizard, not revenue recognized automatically as time is approved.
Revenue Schedule
If you have chosen to use a revenue schedule, then the wizard is really very straightforward. You are displayed a grid of your revenue schedule that shows all your previously recognized revenue. By default, the next time period for revenue recognition is automatically checked. If you want you can roll back revenue recognition to a previous time period, but you cannot skip a period and recognize something in the future.
To rollback and start over, tick the Undo all revenue recognition checkbox.
Column | Description |
|---|---|
Date | All time cards from either the start of the engagement/last recognized revenue period and up to this date are collected. |
Scheduled Revenue | How much revenue your schedule dictates should be recognized in this date range |
Recognized Revenue | How much revenue has already been recognized for the given period. This will be blank if revenue recognition has not yet been run for this period. |