Percentage of completion billing for contracts with projects

This topic describes how Sage Intacct determines percentage of completion billing for contract lines associated with projects and shows how to set up percentage of completion billing.

Subscription

Contracts

Project Costing and Revenue
Regional availability

  • Australia

  • Canada

  • South Africa

  • United Kingdom

  • United States
User type

Business
Permissions

Contract: List, View, Add, Edit, Delete, Post

Generate invoices: Preview, Generate
Configuration
  • Track time by = Project and task OR Customer, project, and task in the Configure Projects page
  • The Contract dimension is enabled in the Configure Projects page
Dependencies
  • The project Billing type must = Fixed fee
  • The project and associated task, if applicable, must be linked to the contract line

About percentage of completion billing

You can bill fixed-fee projects associated with contracts based on percentage of completion. You can associate the percentage of completion with the project as a whole or with specific tasks associated with the project. In either scenario, the percentage of completion can automatically be calculated by the system based on a ratio of time duration or it can be determined by a user.

Using a percent complete template type, you can choose to bill:

  • as the project progresses at whatever percentage of completion exists for the specified period
  • when certain completion percentage threshold values are met
  • when the project is completed or accepted

Time-based percentage of completion

Intacct can calculate a project's or task's percentage of completion using a ratio determined by the number of approved hours for a given period divided by the total number of source hours. For projects, the source hours can be the total Planned or Estimated hours from all project tasks or the value entered as Budgeted hours for the project. For tasks, the source hours can be the value entered for either Planned or Estimated hours for that task.

Intacct calculates the percentage of completion when a user executes Preview in the Generate Invoices page. It gathers all approved timesheet hours dated on or before the selected As of date, determines the completion percentage, and multiplies the percentage against the total contract line Flat/Fixed amount.It then presents the amount available to be billed, if any.

Example

Say you have a contract line for a three-month project starting January 1. You want to bill based on the planned duration of the project as a whole. You agree on a Flat/Fixed amount of 10,000.00 and you plan the project to take 50.00 hours.

As of January 31, employees have submitted timesheets totaling 18 hours, all of which are approved. You then run Preview as of January 31. Intacct presents 3,600.00 to be invoiced in January.

(18 / 50 = 36%) * 10,000.00 = 3,600.00

As of February 28, employees submitted timesheets totaling 22 hours, but only 20 hours were approved.When you run Preview as of February 28, Intacct shows 4,000.00 available to invoice.

( (18 + 20 / 50 = 76%) * 10,000.00 = 7,600 ) - 3,600 = 4,000.00

User-determined percentage of completion

You can bill a contract line based on a user-determined percentage of completion for a project or task. A user, usually the project manager, simply enters the desired percentage value in the Observed percent completed table on the applicable project or task.

As the project or task progresses, the user adds each applicable Observed percent completed value accordingly. When a user executes Preview in the Generate Invoices page as of a selected date, Intacct multiplies the unbilled percentages against the total contract line Flat/Fixed amount, subtracts any previously billed amounts, and then presents the amount available to be invoiced, if any.

Example

Say you have a contract line for a three-month project starting January 1. You agree on a Flat/Fixed amount of 10,000.00. You want to bill at the project level.

On January 31, you evaluate the project's progress and believe the project is 30% completed. You enter 30 in the Observed percent completed table on the project. You then run Preview in Generate Invoices as of January 31. Intacct presents 3,000.00 to invoice in January.

30% * 10,000.00 = 3,000.00

On February 28, you evaluate the project's progress and believe the project is 65% completed. You enter 65 in the Observed percent completed table on the project. You then run Preview in Generate Invoices as of February 28. Intacct presents 3,500.00 to invoice in February.

(65% * 10,000.00 = 6,500) - 3,000 = 3,500.00

Billing thresholds

With either time-based or user-defined billing sources, you can set threshold values in billing templates so that the project is only billed when certain thresholds are met. When Intacct identifies the applicable percentage of completion, it compares it against the applicable threshold level. If the percentage is equal to or greater than a threshold level, Intacct will present an amount for billing. If the percentage is less than the applicable threshold level, Intacct does not present an amount for billing.

Example

Say you have a design company, and you typically invoice in stages as a project progresses. However, you do not invoice in exact proportion to the project's percentage of completion as many last minute changes usually come in at the end of a project. You want to invoice as follows:

  • When the project is 35% complete, invoice 30% of the flat/fixed amount
  • When the project is 65% complete, invoice an additional 30% of the flat/fixed amount
  • When the project is 100% complete, invoice the remaining 40% of the flat/fixed amount

You have a contract line for a three-month project starting January 10. You agree on a Flat/Fixed amount of 10,000.00 and you want to invoice at the project level.

You run Preview as of January 31. Intacct finds a percentage of completion value of 30%. Intacct does not present an amount to invoice for the project as 30 is less than the first threshold setting of 35.

You run Preview as of February 28. Intacct finds a percentage of completion value of 60%. Intacct presents 3,500.00 to invoice as 60 is greater than 35 but less than the next threshold level of 65. You invoice 3,500.00 in February.

35% * 10,000.00 = 3,500.00

You run Preview as of March 31. Intacct finds a percentage of completion value of 100% as you finished the project earlier than expected. Intacct presents the remaining 6,500.00 to invoice.

(30% + 40% = 70%) * 10,000.00 = 6,500.00

Set up and run percentage of completion billing

In order to use percentage of completion billing, a contract must be associated with a project.

Keep the following rules in mind when deciding how you want to link your projects with contracts:

  • The customer associated with the project must be the same customer associated with the contract
  • A project can only be associated with one contract. The project can be associated with one or more contract lines of a particular contract.
    As a project can only be associated with one contract, the child contract in a renewal will not be linked to the project that was linked to the parent. In this scenario, see Extend the project-contract link when a contract is renewed.
  • A contract can be associated with more than one project.
  • For multi-entity only: The project location or entity cannot be blank and is restricted to the location or entity associated with the contract. The project location or entity can be a child of the contract location or entity.
  • For hierarchical projects (where child project invoices with parent project): Associate the parent project with the contract. The Contract field on the parent project and all child projects that invoice with the parent will display the associated contract.

To set up and run percentage of completion billing:

  1. Create one or more percent complete billing templates.
  2. Create a fixed-fee project and associated task, as applicable. The project's Billing type must be "Fixed fee" or "Fixed fee and expenses".
  3. Create a contract.
  4. In the contract, create a contract line with Billing method = "Fixed price", specify the project's or task's fixed fee in the Flat/Fixed amount field, select a percent complete billing template, and associate the contract line with a project and task, as applicable to the billing template's type. Complete other contract line fields as applicable.

    Billing schedules based on percent complete templates will not show any scheduled amounts after you create the contract line as they are dependent on the existence of the applicable source data and running Preview in the Generate Invoices page as of a valid date.

    Preview validates available percentage dates against the contract line GL posting date.

  5. Do one of the following as applicable to the billing template's percentage source metric:
    • If the billing template is based on hours, create timesheets for the applicable time period and associate each timesheet with the project and task, as applicable.
    • If the billing template is based on Observed percent complete, update the project's or task's Observed percent completed table as of the applicable date.
  6. When it is time to invoice, go to the Generate Invoices page and execute Preview as of the desired date.
    • If the billing template is based on hours: The system gathers all approved timesheet hours dated on or before the selected As of date, determines the completion percentage, multiplies the percentage against the total contract line Flat/Fixed amount, and then presents the amount available to be invoiced, if any.
    • If the billing template is based on Observed percent completed: The system multiplies the percentage from the project's or task's Observed percent completed table that has the most recent As of date that is on or before the Preview As of date against the total contract line Flat/Fixed amount, subtracts any previously invoiced amount, and then presents the amount available to be invoiced, if any.

Percentage of completion and bill in advance

The bill-in-advance feature automatically creates billing schedules that start before a contract line starts. While you can combine percent complete billing templates with bill in advance, it works a little differently as there is not a traditional billing schedule with percentage of completion.

In this scenario, you set the invoice date and GL posting date for the invoice to the applicable advance date when you run Preview in Generate Invoices. However, the Preview As of date must be on or after the contract line start date and on or after the effective date of the applicable data source.

Example

Say that you have a project with a fixed fee of 10,000.00 that will be billed by task percentage of completion. The project contract line starts on March 1, and you want to invoice 20% of the total fixed fee on February 1. The contract and contract line have Bill in advance set to 1 month, and the percent complete billing template is based on task Observed percent complete.

In the applicable task, edit the Observed percent complete table to indicate 20% complete effective February 1. In the Generate Invoices page, set the Invoice date and GL posting date to February 1, set the As of date to March 1, and run Preview. Intacct will present the invoice for 2,000.00.

If you set the task's Observed percent complete Effective date to March 15 instead of February 1, you can still use February 1 as the invoice and GL posting date, but you would use March 15 as the As of date when you run Preview.

How to bill 100% with time-based percentage of completion

If a contract line is using a percent complete billing template based on hours, 100% billing is reached when the total approved hours equals the total source hours. However, there may be scenarios where the total approved hours will never equal the total source hours, but you still want to bill 100% of the project. In this scenario, update the Observed percent completed table on the project or task to indicate that the project or task is 100% complete as of the applicable date. This will trigger the remaining flat/fixed amount to be invoiced when you run Preview in Generate Invoices as of the applicable date.

Adjustments to percentage of completion billing

If data is modified after a percent complete invoice is previewed that would result in an amount less than what was previously invoiced, the system subtracts the applicable difference in a subsequent invoice Preview.

For example, say you created an invoice based on 10 hours of a project's fixed fee in January. In February, a January timesheet is edited to reduce the number of hours previously counted from 10 to 8. If there were no hours counted in February, no billing is scheduled for February when you run Preview. If there were 3 or more hours counted in February, the system subtracts 2 hours from the total approved hours and then performs the percent complete calculation.

Cancel percentage of completion billing schedules

If you need to cancel a contract line before it reaches 100% complete, you can select whether to generate unbilled percent complete amounts and schedule them in the billing schedule on cancellation. If there's unbilled percent complete billing dated before the cancellation date, Intacct automatically generates the applicable billing amount and schedules it to bill on the cancellation date minus one. This saves you a step by not requiring you to run Preview in Generate Invoices before canceling a project percent complete contract line. If you do not select this option and you do not run Preview before canceling the contract line, Intacct terminates the remainder of the billing schedule on cancellation.

While you can uncancel a contract line that uses a percent complete billing template, it cannot be uncanceled if it is also associated with a percent complete or quantity-based revenue template.

Learn more about canceling percent complete schedules.