Appendix O: Project Accounting Example | NetSuite Implementation Guide

Section O.1

Project Overview & Scenario

Introduction to our example project and key accounting considerations.

The Scenario

Apex Consulting has won a contract to implement a new CRM system for Global Retail Corp. This example follows the complete project lifecycle, demonstrating how NetSuite Project Accounting tracks costs, recognizes revenue, and provides profitability insights.

PROJECT: CRM Implementation for Global Retail Corp
═══════════════════════════════════════════════════════════════

Contract Type:      Fixed Fee + Time & Materials
Contract Value:     $175,000
  - Phase 1 (Discovery):     $25,000 (Fixed Fee)
  - Phase 2 (Configuration): $75,000 (Fixed Fee)
  - Phase 3 (Training):      $50,000 (T&M, capped)
  - Expenses:                $25,000 (Reimbursable)

Duration:           12 weeks (Jan 6 - Mar 28, 2025)
Billing Terms:      Milestone-based for Fixed Fee
                    Bi-weekly for T&M

Revenue Recognition: ASC 606 (Percentage of Completion)

Project Team

Role	Resource	Bill Rate	Cost Rate	Planned Hours
Project Manager	Sarah Chen	$225/hr	$95/hr	120 hrs
Senior Consultant	Mike Rodriguez	$200/hr	$85/hr	280 hrs
Consultant	Jennifer Park	$175/hr	$70/hr	200 hrs
Technical Lead	David Kim	$250/hr	$110/hr	160 hrs
Total Planned Hours				760 hrs

Key Accounting Concepts

ℹ️ ASC 606 Revenue Recognition

Revenue is recognized as performance obligations are satisfied. For this project:

Fixed Fee phases - Recognize over time using percentage-of-completion (input method: cost-to-cost)
T&M phase - Recognize as services are rendered (right to invoice)
Expenses - Recognize when incurred (principal vs agent consideration)

Project Accounting Flow

flowchart LR
    subgraph PROCESS["PROCESS FLOW"]
        direction LR
        A["TIME
ENTRY"] --> B["WIP
ACCRUAL"]
        B --> C["REVENUE
RECOGNITION"]
        C --> D["BILLING
INVOICE"]
    end

    subgraph GL["GL IMPACT"]
        direction LR
        E["Dr: WIP
Cr: Labor Clearing"]
        F["Unbilled Revenue
Tracking"]
        G["Dr: Unbilled A/R
Cr: Revenue"]
        H["Dr: A/R
Cr: Unbilled A/R"]
    end

    A -.-> E
    B -.-> F
    C -.-> G
    D -.-> H

    style PROCESS fill:#dbeafe,stroke:#3b82f6,stroke-width:2px,color:#1a1a1a
    style GL fill:#dcfce7,stroke:#22c55e,stroke-width:2px,color:#1a1a1a
    style A fill:#8b5cf6,stroke:#7c3aed,color:#fff
    style B fill:#8b5cf6,stroke:#7c3aed,color:#fff
    style C fill:#8b5cf6,stroke:#7c3aed,color:#fff
    style D fill:#8b5cf6,stroke:#7c3aed,color:#fff
    style E fill:#22c55e,stroke:#16a34a,color:#fff
    style F fill:#22c55e,stroke:#16a34a,color:#fff
    style G fill:#22c55e,stroke:#16a34a,color:#fff
    style H fill:#22c55e,stroke:#16a34a,color:#fff

Section O.2

Project Setup in NetSuite

Creating the project record and configuring billing rules.

Create Project Record

Lists › Relationships › Projects › New

PROJECT RECORD: PRJ-2025-0042
═══════════════════════════════════════════════════════════════

PRIMARY INFORMATION:
───────────────────────────────────────────────────────────────
Project Name:        Global Retail CRM Implementation
Customer:            Global Retail Corp
Project Manager:     Sarah Chen
Status:              In Progress
Start Date:          January 6, 2025
End Date:            March 28, 2025

BILLING SETUP:
───────────────────────────────────────────────────────────────
Billing Type:        Mixed (Fixed Fee + T&M)
Allow Expenses:      Yes
Expense Markup:      0% (Pass-through)
Billing Schedule:    Per Phase/Milestone

REVENUE RECOGNITION:
───────────────────────────────────────────────────────────────
Rev Rec Rule:        Percent Complete - Cost Based
Calculate % As:      Actual Cost / Estimated Cost at Completion

Project Budget Configuration

Phase/Task	Type	Budget Hours	Budget Cost	Contract Value
Phase 1: Discovery	Fixed Fee	160 hrs	$14,400	$25,000
Phase 2: Configuration	Fixed Fee	400 hrs	$35,200	$75,000
Phase 3: Training	T&M	200 hrs	$16,000	$50,000 cap
Expenses	Reimbursable	--	$20,000	$25,000
Total		760 hrs	$85,600	$175,000

🎯 Consultant Insight: Budget vs Contract

Note the significant margin built into this project:

Total Contract: $175,000
Budgeted Cost: $85,600
Target Margin: $89,400 (51%)

Project accounting helps track if we're achieving this target margin as work progresses.

Resource Assignment

RESOURCE ASSIGNMENTS - PRJ-2025-0042
═══════════════════════════════════════════════════════════════

PHASE 1: DISCOVERY (Weeks 1-3)
───────────────────────────────────────────────────────────────
Sarah Chen (PM)          40 hrs × $95 cost  = $3,800
Mike Rodriguez (Sr)      80 hrs × $85 cost  = $6,800
Jennifer Park            40 hrs × $70 cost  = $2,800
                                    ─────────────────
                                    Subtotal: $13,400

PHASE 2: CONFIGURATION (Weeks 4-9)
───────────────────────────────────────────────────────────────
Sarah Chen (PM)          60 hrs × $95 cost  = $5,700
Mike Rodriguez (Sr)     160 hrs × $85 cost  = $13,600
Jennifer Park           120 hrs × $70 cost  = $8,400
David Kim (Tech)        120 hrs × $110 cost = $13,200
                                    ─────────────────
                                    Subtotal: $40,900

PHASE 3: TRAINING (Weeks 10-12)
───────────────────────────────────────────────────────────────
Sarah Chen (PM)          20 hrs × $95 cost  = $1,900
Mike Rodriguez (Sr)      40 hrs × $85 cost  = $3,400
Jennifer Park            40 hrs × $70 cost  = $2,800
David Kim (Tech)         40 hrs × $110 cost = $4,400
                                    ─────────────────
                                    Subtotal: $12,500

Section O.3

Time Entry & Approval

Capturing labor costs against the project.

Week 1 Time Entries

Activities › Tracking › Enter Time

TIME ENTRIES - WEEK 1 (Jan 6-10, 2025)
═══════════════════════════════════════════════════════════════

Employee: Sarah Chen (Project Manager)
───────────────────────────────────────────────────────────────
Date        Project                Task              Hours
Jan 6       PRJ-2025-0042         Discovery         8.0
Jan 7       PRJ-2025-0042         Discovery         7.5
Jan 8       PRJ-2025-0042         Discovery         8.0
Jan 9       PRJ-2025-0042         Discovery         6.0
Jan 10      PRJ-2025-0042         Discovery         4.5
                                            ─────────────
                                            Total: 34.0 hrs

Employee: Mike Rodriguez (Senior Consultant)
───────────────────────────────────────────────────────────────
Date        Project                Task              Hours
Jan 6       PRJ-2025-0042         Discovery         8.0
Jan 7       PRJ-2025-0042         Discovery         8.0
Jan 8       PRJ-2025-0042         Discovery         8.0
Jan 9       PRJ-2025-0042         Discovery         8.0
Jan 10      PRJ-2025-0042         Discovery         8.0
                                            ─────────────
                                            Total: 40.0 hrs

Employee: Jennifer Park (Consultant)
───────────────────────────────────────────────────────────────
Date        Project                Task              Hours
Jan 6       PRJ-2025-0042         Discovery         4.0
Jan 7       PRJ-2025-0042         Discovery         6.0
Jan 8       PRJ-2025-0042         Discovery         8.0
Jan 9       PRJ-2025-0042         Discovery         8.0
Jan 10      PRJ-2025-0042         Discovery         6.0
                                            ─────────────
                                            Total: 32.0 hrs

Week 1 Summary

Resource	Hours	Cost Rate	Total Cost
Sarah Chen	34.0 hrs	$95/hr	$3,230
Mike Rodriguez	40.0 hrs	$85/hr	$3,400
Jennifer Park	32.0 hrs	$70/hr	$2,240
Week 1 Total	106.0 hrs		$8,870

Time Approval Process

TIME APPROVAL WORKFLOW
═══════════════════════════════════════════════════════════════

Step 1: Employee submits timesheet
        └── Status: Pending Approval

Step 2: Project Manager reviews
        └── Sarah Chen approves team time entries
        └── Sarah's time approved by Department Manager

Step 3: Approved time triggers GL posting
        └── Status: Approved

APPROVAL BATCH: TA-2025-0042-W01
───────────────────────────────────────────────────────────────
Approved By:     Sarah Chen / Operations Manager
Approval Date:   January 13, 2025
Total Hours:     106.0
Total Cost:      $8,870.00

GL Impact - Time Approval (Week 1)

Dr: Work in Progress - Labor $8,870.00

Cr: Labor Clearing / Accrued Wages $8,870.00

Labor costs flow to WIP upon time approval. Actual payroll will clear the accrual.

Section O.4

Project Expenses

Capturing and billing project-related expenses.

Expense Report - Week 2

Transactions › Employees › Enter Expense Reports

EXPENSE REPORT: EXP-2025-0042-001
═══════════════════════════════════════════════════════════════

Employee:        Mike Rodriguez
Project:         PRJ-2025-0042 (Global Retail CRM)
Period:          January 13-17, 2025
Purpose:         On-site discovery sessions

EXPENSES:
───────────────────────────────────────────────────────────────
Date       Category          Description              Amount
Jan 13     Airfare           ORD → LAX Roundtrip      $485.00
Jan 13-16  Hotel             Marriott LAX (4 nights)  $892.00
Jan 13-16  Meals             Per diem ($75/day)       $300.00
Jan 14     Ground Transport  Uber to client site       $45.00
Jan 16     Ground Transport  Uber to airport           $52.00
───────────────────────────────────────────────────────────────
                              TOTAL                  $1,774.00

Billable:        Yes (100% reimbursable per contract)
Markup:          0%
Receipt Status:  All receipts attached

GL Impact - Expense Report Approval

Dr: WIP - Project Expenses $1,774.00

Cr: Accounts Payable (Employee) $1,774.00

Third-Party Project Costs

VENDOR BILL: VB-2025-0042-001
═══════════════════════════════════════════════════════════════

Vendor:          TechPro Training Services
Bill Date:       January 20, 2025
Project:         PRJ-2025-0042

LINE ITEMS:
───────────────────────────────────────────────────────────────
Description                              Amount
Training materials license               $2,500.00
Custom courseware development            $3,500.00
───────────────────────────────────────────────────────────────
TOTAL                                    $6,000.00

Billable to Project:    Yes
Project Phase:          Phase 3 - Training

GL Impact - Vendor Bill (Project Cost)

Dr: WIP - Project Expenses $6,000.00

Cr: Accounts Payable $6,000.00

💡 Expense Tracking Best Practice

Always assign expenses to the correct project phase/task. This enables:

Accurate phase-level profitability analysis
Proper cost allocation for % complete calculations
Clear audit trail for client billing

Section O.5

WIP Accumulation

Tracking work in progress as costs accumulate.

Phase 1 WIP Summary (Weeks 1-3)

WIP DETAIL - PHASE 1: DISCOVERY
═══════════════════════════════════════════════════════════════

LABOR COSTS:
───────────────────────────────────────────────────────────────
Week 1:  Sarah (34h) + Mike (40h) + Jennifer (32h)    $8,870.00
Week 2:  Sarah (6h) + Mike (40h) + Jennifer (8h)      $4,130.00
Week 3:  [Completion activities]                       $1,400.00
───────────────────────────────────────────────────────────────
Total Labor:                                         $14,400.00

EXPENSES:
───────────────────────────────────────────────────────────────
Travel - Mike Rodriguez (Week 2)                      $1,774.00
───────────────────────────────────────────────────────────────
Total Expenses:                                       $1,774.00

═══════════════════════════════════════════════════════════════
TOTAL WIP - PHASE 1:                                 $16,174.00
═══════════════════════════════════════════════════════════════

Budget Comparison:
  Budget Cost:     $14,400 (labor) + $2,000 (expenses) = $16,400
  Actual Cost:     $14,400 (labor) + $1,774 (expenses) = $16,174
  Variance:        $226 FAVORABLE

Resource	Budget Hrs	Actual Hrs	Variance	Actual Cost
Sarah Chen (PM)	40 hrs	42 hrs	+2 hrs	$3,990
Mike Rodriguez	80 hrs	78 hrs	-2 hrs	$6,630
Jennifer Park	40 hrs	42 hrs	+2 hrs	$2,940
Total	160 hrs	162 hrs	+2 hrs	$13,560

WIP Balance by Account

GL ACCOUNT: 1400 - Work in Progress (Projects)
═══════════════════════════════════════════════════════════════

Sub-Account          Debit        Credit       Balance
───────────────────────────────────────────────────────────────
1400-10 WIP-Labor    $14,400.00   $0.00        $14,400.00
1400-20 WIP-Expense   $1,774.00   $0.00         $1,774.00
1400-30 WIP-Overhead      $0.00   $0.00             $0.00
───────────────────────────────────────────────────────────────
TOTAL WIP                                      $16,174.00

Note: WIP will be relieved when revenue is recognized
      and costs are transferred to COGS.

⚠️ WIP Accounting Principle

WIP represents costs incurred but not yet matched to revenue. Under ASC 606:

WIP accumulates as work is performed
When revenue is recognized, WIP is relieved to Cost of Revenue
The timing difference creates "unbilled revenue" or "deferred revenue"

Section O.6

Percent Complete Calculation

Measuring project progress for revenue recognition.

Cost-to-Cost Method

NetSuite calculates percent complete using the cost-to-cost (input) method:

PERCENT COMPLETE CALCULATION
═══════════════════════════════════════════════════════════════

Formula:
                   Actual Cost to Date
% Complete = ────────────────────────────── × 100
              Estimated Cost at Completion

End of Phase 1 (Week 3):
───────────────────────────────────────────────────────────────
Actual Cost to Date:         $16,174 (labor + expenses)
Est. Cost at Completion:     $85,600 (total project budget)

% Complete = $16,174 / $85,600 × 100 = 18.9%

Phase-Level Progress

Phase	Budget Cost	Actual Cost	Phase % Complete	Status
Phase 1: Discovery	$16,400	$16,174	100%	Complete
Phase 2: Configuration	$40,900	$0	0%	Not Started
Phase 3: Training	$16,500	$0	0%	Not Started

Revenue Recognition Calculation

REVENUE RECOGNITION - END OF PHASE 1
═══════════════════════════════════════════════════════════════

Overall Project % Complete: 18.9%

Fixed Fee Revenue to Recognize:
───────────────────────────────────────────────────────────────
Total Fixed Fee Contract:    $100,000 (Phase 1 + Phase 2)
× % Complete:                18.9%
= Revenue to Recognize:      $18,900

Previously Recognized:       $0
Revenue This Period:         $18,900

Cost of Revenue:
───────────────────────────────────────────────────────────────
WIP to Relieve:              $16,174 (costs incurred)

Gross Margin This Period:
───────────────────────────────────────────────────────────────
Revenue:                     $18,900
Cost of Revenue:             $16,174
─────────────────────────────────────
Gross Margin:                $2,726 (14.4%)

GL Impact - Revenue Recognition (Phase 1)

Dr: Unbilled Accounts Receivable $18,900.00

Cr: Revenue - Professional Services $18,900.00

Dr: Cost of Revenue - Labor $14,400.00

Dr: Cost of Revenue - Expenses $1,774.00

Cr: WIP - Labor $14,400.00

Cr: WIP - Expenses $1,774.00

Section O.7

Milestone Billing

Billing the client for completed milestones.

Phase 1 Milestone Invoice

Transactions › Sales › Create Invoice (from Project)

INVOICE: INV-2025-0042-001
═══════════════════════════════════════════════════════════════

Customer:        Global Retail Corp
Invoice Date:    January 27, 2025
Due Date:        February 26, 2025 (Net 30)
Project:         PRJ-2025-0042

LINE ITEMS:
───────────────────────────────────────────────────────────────
Line  Description                              Amount
───────────────────────────────────────────────────────────────
1     Phase 1: Discovery - Complete           $25,000.00
      Milestone: Requirements documentation
      and gap analysis delivered

2     Reimbursable Expenses                    $1,774.00
      Travel - On-site discovery sessions
      (See attached expense detail)
───────────────────────────────────────────────────────────────
                              SUBTOTAL        $26,774.00
                              TAX                  $0.00
───────────────────────────────────────────────────────────────
                              TOTAL DUE       $26,774.00
═══════════════════════════════════════════════════════════════

Payment Terms: Net 30
PO Reference: GRC-PO-2025-0089

Invoice GL Impact

GL Impact - Milestone Invoice

Dr: Accounts Receivable $26,774.00

Cr: Unbilled A/R $18,900.00

Cr: Deferred Revenue $6,100.00

Cr: Expense Reimbursement Revenue $1,774.00

Note: $6,100 goes to Deferred Revenue because billing ($25K) exceeds revenue recognized ($18,900). This will reverse as more work is completed.

ℹ️ Billing vs Revenue Recognition

Metric	Amount	Notes
Billed (Invoice)	$25,000	Per milestone schedule
Revenue Recognized	$18,900	Per % complete (18.9%)
Deferred Revenue	$6,100	Billed ahead of earned

Section O.8

Phase 2 Progress

Configuration phase work and ongoing WIP accumulation.

Phase 2 Time Summary (Weeks 4-9)

PHASE 2: CONFIGURATION - TIME SUMMARY
═══════════════════════════════════════════════════════════════

WEEKLY BREAKDOWN:
───────────────────────────────────────────────────────────────
Week 4:  Sarah (12h) + Mike (32h) + Jennifer (24h) + David (20h)
         = 88 hrs × avg $88.18 = $7,760

Week 5:  Sarah (10h) + Mike (36h) + Jennifer (28h) + David (24h)
         = 98 hrs × avg $87.45 = $8,570

Week 6:  Sarah (8h) + Mike (40h) + Jennifer (32h) + David (28h)
         = 108 hrs × avg $86.85 = $9,380

Week 7:  Sarah (10h) + Mike (38h) + Jennifer (30h) + David (26h)
         = 104 hrs × avg $87.21 = $9,070

Week 8:  Sarah (12h) + Mike (36h) + Jennifer (28h) + David (24h)
         = 100 hrs × avg $87.80 = $8,780

Week 9:  Sarah (8h) + Mike (30h) + Jennifer (22h) + David (18h)
         = 78 hrs × avg $87.56 = $6,830

═══════════════════════════════════════════════════════════════
PHASE 2 TOTAL:  576 hrs     Labor Cost: $50,390
═══════════════════════════════════════════════════════════════

Resource	Budget	Actual	Variance	Cost
Sarah Chen (PM)	60 hrs	60 hrs	On target	$5,700
Mike Rodriguez	160 hrs	212 hrs	+52 hrs	$18,020
Jennifer Park	120 hrs	164 hrs	+44 hrs	$11,480
David Kim	120 hrs	140 hrs	+20 hrs	$15,400
Total	460 hrs	576 hrs	+116 hrs	$50,600

⚠️ Budget Overrun Alert

Phase 2 is running 25% over budget on hours (576 vs 460). Contributing factors:

Additional data migration complexity discovered
Client change requests (3 approved CRs)
Integration testing took longer than planned

Impact: Since Phase 2 is fixed-fee, margin will be compressed.

Cumulative Project Status - End of Phase 2

PROJECT STATUS - END OF WEEK 9
═══════════════════════════════════════════════════════════════

HOURS:
───────────────────────────────────────────────────────────────
                Budget      Actual      Variance
Phase 1:        160 hrs     162 hrs     +2 hrs
Phase 2:        460 hrs     576 hrs     +116 hrs
─────────────────────────────────────────────────────────
Subtotal:       620 hrs     738 hrs     +118 hrs (19% over)

COSTS:
───────────────────────────────────────────────────────────────
                Budget      Actual      Variance
Labor:          $55,300     $64,160     +$8,860
Expenses:        $8,000      $5,274     -$2,726
─────────────────────────────────────────────────────────
Total:          $63,300     $69,434     +$6,134 (10% over)

% COMPLETE:
───────────────────────────────────────────────────────────────
Actual Cost / EAC = $69,434 / $91,734 = 75.7%

(EAC revised from $85,600 to $91,734 due to Phase 2 overrun)

REVENUE STATUS:
───────────────────────────────────────────────────────────────
Revenue Recognized:    $75,700 (75.7% × $100K fixed)
Billed to Date:        $101,774 ($25K + $75K + expenses)
Deferred Revenue:      $26,074

Project Exception: Change Order (Scope Creep)

During Phase 2, the client requests additional custom reports beyond the original scope. Here's how change orders are handled:

CHANGE ORDER WORKFLOW

flowchart LR
    A["Client
Requests
Change"] --> B["PM Documents
CR (Change
Request)"]
    B --> C["Estimate
Impact"]
    C --> D{"Client
Approves?"}
    D -->|"Yes"| E["Update
Contract"]
    D -->|"No"| F["Not In
Scope"]
    E --> G["Adjust
Budget"]
    G --> H["Additional
Billing"]

    style A fill:#fef3c7,stroke:#f59e0b,color:#1a1a1a
    style B fill:#3b82f6,stroke:#2563eb,color:#fff
    style C fill:#f59e0b,stroke:#d97706,color:#1a1a1a
    style D fill:#dbeafe,stroke:#3b82f6,color:#1a1a1a
    style E fill:#dcfce7,stroke:#22c55e,color:#1a1a1a
    style F fill:#fee2e2,stroke:#ef4444,color:#1a1a1a
    style G fill:#8b5cf6,stroke:#7c3aed,color:#fff
    style H fill:#22c55e,stroke:#16a34a,color:#fff

CHANGE ORDER: CR-2025-0042-001
═══════════════════════════════════════════════════════════════

Project:         PRJ-2025-0042 (Global Retail CRM)
Date Requested:  February 20, 2025
Requestor:       Client - VP Operations

CHANGE DESCRIPTION:
───────────────────────────────────────────────────────────────
Title: Custom Executive Dashboard Reports

Client requests 3 additional executive dashboard reports
with real-time KPI tracking not included in original scope:
  1. Sales Pipeline by Region
  2. Customer Service SLA Compliance
  3. Inventory Turns by Product Line

IMPACT ASSESSMENT:
───────────────────────────────────────────────────────────────
Resource            Hours    Rate       Amount
───────────────────────────────────────────────────────────────
David Kim (Tech)      40    $250.00    $10,000.00
Mike Rodriguez        16    $200.00     $3,200.00
───────────────────────────────────────────────────────────────
TOTAL ESTIMATED                        $13,200.00

Timeline Impact: +1 week to Phase 2

APPROVAL:
───────────────────────────────────────────────────────────────
Client Approved: February 22, 2025
Authorized By:   Sarah Johnson, VP Operations (Client)
PO Reference:    GRC-PO-2025-0092

GL Impact - Change Order Recognition

The change order increases the contract value. Revenue recognized as work is performed:

Dr: Unbilled Accounts Receivable $13,200.00

Cr: Service Revenue - Change Orders $13,200.00

Note: CR revenue often tracked separately for margin analysis and to distinguish from original contract performance.

💡 Change Management Best Practices

Document everything: Get written approval before starting work
Track separately: Use custom fields or project tasks to identify CR work
Update EAC: Revise Estimate at Completion for accurate % complete calculations
Communicate impact: Clearly explain timeline and budget implications to stakeholders

Section O.9

Time & Materials Billing

Billing Phase 3 training on a T&M basis.

Phase 3 T&M Invoice - Week 10

INVOICE: INV-2025-0042-003
═══════════════════════════════════════════════════════════════

Customer:        Global Retail Corp
Invoice Date:    March 14, 2025
Due Date:        April 13, 2025 (Net 30)
Project:         PRJ-2025-0042 - Phase 3 Training

TIME & MATERIALS - WEEK 10-11:
───────────────────────────────────────────────────────────────
Resource              Hours    Rate      Amount
───────────────────────────────────────────────────────────────
Sarah Chen (PM)         8    $225.00    $1,800.00
Mike Rodriguez         24    $200.00    $4,800.00
Jennifer Park          28    $175.00    $4,900.00
David Kim              20    $250.00    $5,000.00
───────────────────────────────────────────────────────────────
                              SUBTOTAL  $16,500.00

EXPENSES:
───────────────────────────────────────────────────────────────
Training Room Rental (2 days)            $1,200.00
Catering - Training Sessions               $450.00
───────────────────────────────────────────────────────────────
                              SUBTOTAL   $1,650.00

═══════════════════════════════════════════════════════════════
                              TOTAL DUE $18,150.00
═══════════════════════════════════════════════════════════════

💡 T&M Revenue Recognition

For Time & Materials billing, revenue is recognized using the "right to invoice" practical expedient under ASC 606:

Revenue = Amount billed (hours x rate)
No deferred revenue or unbilled A/R timing differences
Cost of revenue recorded when time is incurred

T&M Revenue Recognition

GL Impact - T&M Invoice

Dr: Accounts Receivable $18,150.00

Cr: Revenue - Professional Services (T&M) $16,500.00

Cr: Revenue - Expense Reimbursement $1,650.00

T&M Profitability - Week 10-11

Resource	Bill	Cost	Margin	Margin %
Sarah Chen	$1,800	$760	$1,040	57.8%
Mike Rodriguez	$4,800	$2,040	$2,760	57.5%
Jennifer Park	$4,900	$1,960	$2,940	60.0%
David Kim	$5,000	$2,200	$2,800	56.0%
Total	$16,500	$6,960	$9,540	57.8%

Section O.10

Payment Processing

Receiving and applying customer payments.

Customer Payment - Phase 1

Transactions › Customers › Accept Customer Payments

CUSTOMER PAYMENT: PMT-2025-0042-001
═══════════════════════════════════════════════════════════════

Customer:        Global Retail Corp
Payment Date:    February 20, 2025
Payment Method:  ACH / Wire Transfer

PAYMENT APPLICATION:
───────────────────────────────────────────────────────────────
Invoice              Original      Payment      Balance
INV-2025-0042-001    $26,774.00   $26,774.00   $0.00
───────────────────────────────────────────────────────────────
TOTAL PAYMENT                     $26,774.00

Bank Reference:  WF-20250220-89421
Deposit To:      1000 - Operating Account

GL Impact - Customer Payment

Dr: Cash - Operating Account $26,774.00

Cr: Accounts Receivable $26,774.00

A/R Aging Summary

A/R AGING - PRJ-2025-0042 (as of March 15, 2025)
═══════════════════════════════════════════════════════════════

Invoice              Date        Amount      Age      Status
───────────────────────────────────────────────────────────────
INV-2025-0042-001    Jan 27     $26,774     PAID     Closed
INV-2025-0042-002    Feb 28     $76,774     15 days  Current
INV-2025-0042-003    Mar 14     $18,150     1 day    Current
───────────────────────────────────────────────────────────────
Total Billed:                   $121,698
Total Paid:                      $26,774
Outstanding A/R:                 $94,924

Section O.11

Project Profitability Analysis

Analyzing margins and variances across the project.

Final Project Summary

PROJECT PROFITABILITY REPORT - PRJ-2025-0042
═══════════════════════════════════════════════════════════════
Global Retail CRM Implementation
Report Date: March 28, 2025 (Project Complete)

REVENUE SUMMARY:
───────────────────────────────────────────────────────────────
                        Contract    Recognized    Variance
Fixed Fee (Ph 1+2):     $100,000    $100,000      $0
T&M (Phase 3):           $50,000     $38,500      -$11,500
Expense Reimburse:       $25,000      $8,674      -$16,326
───────────────────────────────────────────────────────────────
TOTAL REVENUE:          $175,000    $147,174      -$27,826

COST SUMMARY:
───────────────────────────────────────────────────────────────
                        Budget      Actual        Variance
Labor Cost:             $65,600     $80,880       +$15,280
Expense Cost:           $20,000      $8,674       -$11,326
───────────────────────────────────────────────────────────────
TOTAL COST:             $85,600     $89,554       +$3,954

PROFITABILITY:
───────────────────────────────────────────────────────────────
                        Budget      Actual        Variance
Gross Profit:           $89,400     $57,620       -$31,780
Gross Margin %:         51.1%       39.2%         -11.9 pts

BY PHASE:
───────────────────────────────────────────────────────────────
Phase           Revenue     Cost       Margin      Margin%
Phase 1 (FF):   $25,000    $16,174     $8,826      35.3%
Phase 2 (FF):   $75,000    $56,600    $18,400      24.5%
Phase 3 (T&M):  $38,500    $16,780    $21,720      56.4%
Expenses:        $8,674     $0          $8,674     100.0%
───────────────────────────────────────────────────────────────
TOTAL:         $147,174    $89,554    $57,620      39.2%

Variance Analysis

🎯 Consultant Analysis: What Went Wrong?

Phase 2 overrun was the primary margin killer:

Budget: 460 hours @ $87.39 avg = $40,200
Actual: 576 hours @ $98.26 avg = $56,600
Impact: -$16,400 margin compression

Root causes identified:

Data migration scope creep (+$6,200)
Integration complexity underestimated (+$5,400)
Client change requests not charged separately (+$4,800)

T&M phase performed well at 56.4% margin - should have negotiated more T&M vs fixed fee.

Resource Utilization Analysis

Resource	Planned	Actual	Variance	Utilization
Sarah Chen	120 hrs	122 hrs	+2 hrs	102%
Mike Rodriguez	280 hrs	354 hrs	+74 hrs	126%
Jennifer Park	200 hrs	262 hrs	+62 hrs	131%
David Kim	160 hrs	180 hrs	+20 hrs	113%
Total	760 hrs	918 hrs	+158 hrs	121%

Project Exception: Write-Down of Unbillable Hours

Sometimes consultants log hours that cannot be billed to the client. These hours must be written down from WIP:

UNBILLABLE HOURS DECISION FLOW

flowchart TB
    A["Time Entry
Logged"] --> B{"Billable?"}
    B -->|"Yes"| C["Bill to
Client"]
    B -->|"No - Admin"| D["G&A
Expense"]
    B -->|"No - Rework"| E["Cost
Overrun"]
    B -->|"No - Training"| F["Internal
Investment"]
    D --> G["Write-Down
from WIP"]
    E --> G
    F --> G

    style A fill:#dbeafe,stroke:#3b82f6,color:#1a1a1a
    style B fill:#fef3c7,stroke:#f59e0b,color:#1a1a1a
    style C fill:#dcfce7,stroke:#22c55e,color:#1a1a1a
    style D fill:#e0e7ff,stroke:#6366f1,color:#1a1a1a
    style E fill:#fed7aa,stroke:#f97316,color:#1a1a1a
    style F fill:#ddd6fe,stroke:#8b5cf6,color:#1a1a1a
    style G fill:#fee2e2,stroke:#ef4444,color:#1a1a1a

UNBILLABLE TIME WRITE-DOWN - PRJ-2025-0042
═══════════════════════════════════════════════════════════════

Date: March 20, 2025
Reviewed By: Sarah Chen, Project Manager

UNBILLABLE HOURS IDENTIFIED:
───────────────────────────────────────────────────────────────
Description              Hours    Cost Rate   Amount
───────────────────────────────────────────────────────────────
Internal meetings          8.0      $88.00      $704.00
Rework - data issues      12.5      $85.00    $1,062.50
Training on new tool       4.0      $70.00      $280.00
Admin - timesheet fixes    2.0      $95.00      $190.00
───────────────────────────────────────────────────────────────
TOTAL UNBILLABLE                              $2,236.50

Reason Codes:
  ADMIN - Internal administrative time
  REWORK - Fixing our own errors (not client's changes)
  TRAIN - Internal skill development

GL Impact - Write-Down Entry

Dr: Project Write-Down Expense $2,236.50

Cr: Work in Progress - Labor $2,236.50

Note: This removes unbillable costs from WIP without recording revenue. Impacts project margin and should be tracked for future estimates.

⚠️ Margin Impact of Write-Downs

The $2,236.50 write-down reduces project margin:

Before write-down: $57,620 margin (39.2%)
After write-down: $55,384 margin (37.6%)

Track write-downs by reason code to identify patterns and improve future project estimates.

Project Exception: Retainage / Holdback

Some contracts include retainage - a percentage of each invoice held back until project completion. Common in construction and large consulting projects:

RETAINAGE BILLING FLOW

flowchart LR
    A["Invoice
$100,000"] --> B["Client Pays
90%"]
    B --> C["Retainage
10% Held"]
    C --> D["Project
Work Continues"]
    D --> E["Project
Complete"]
    E --> F["Retainage
Invoice"]
    F --> G["Final
Payment"]

    style A fill:#dbeafe,stroke:#3b82f6,color:#1a1a1a
    style B fill:#22c55e,stroke:#16a34a,color:#fff
    style C fill:#fef3c7,stroke:#f59e0b,color:#1a1a1a
    style D fill:#8b5cf6,stroke:#7c3aed,color:#fff
    style E fill:#10b981,stroke:#059669,color:#fff
    style F fill:#3b82f6,stroke:#2563eb,color:#fff
    style G fill:#dcfce7,stroke:#22c55e,color:#1a1a1a

RETAINAGE TRACKING - PRJ-2025-0042 (Example with 10% Holdback)
═══════════════════════════════════════════════════════════════

Contract Terms: 10% retainage held until final acceptance

BILLING SUMMARY WITH RETAINAGE:
───────────────────────────────────────────────────────────────
Invoice          Gross      Retainage    Net Billed    Received
───────────────────────────────────────────────────────────────
INV-001 (Ph1)   $26,774     $2,677.40    $24,096.60   $24,096.60
INV-002 (Ph2)   $76,774     $7,677.40    $69,096.60   $69,096.60
INV-003 (T&M)   $18,150     $1,815.00    $16,335.00   $16,335.00
───────────────────────────────────────────────────────────────
Subtotal       $121,698    $12,169.80   $109,528.20  $109,528.20

RETAINAGE RELEASE INVOICE:
───────────────────────────────────────────────────────────────
Invoice          Amount        Status
───────────────────────────────────────────────────────────────
INV-004 (Ret)   $12,169.80    Pending Final Acceptance

Final Acceptance Date: March 28, 2025
Retainage Due: April 27, 2025 (Net 30)

GL Impact - Retainage Entries

At Initial Invoice (e.g., INV-001):

Dr: Accounts Receivable $24,096.60

Dr: Retainage Receivable $2,677.40

Cr: Revenue $26,774.00

At Retainage Release Invoice:

Dr: Accounts Receivable $12,169.80

Cr: Retainage Receivable $12,169.80

🎯 Consultant Tip: Retainage Setup

Create a Retainage Receivable account (current asset, separate from A/R)
Set up invoice terms with retainage percentage
Use custom transaction or separate invoice line for retainage tracking
Monitor retainage aging to ensure timely collection after project acceptance
Consider ASC 606 implications: Revenue is recognized in full; only cash collection timing differs

Section O.12

Project Close-Out

Final accounting entries and project closure.

Final GL Summary

GL IMPACT SUMMARY - PROJECT PRJ-2025-0042
═══════════════════════════════════════════════════════════════

REVENUE ACCOUNTS:
───────────────────────────────────────────────────────────────
4100 Revenue - Professional Services (FF)      $100,000.00 CR
4110 Revenue - Professional Services (T&M)      $38,500.00 CR
4200 Revenue - Expense Reimbursement             $8,674.00 CR
───────────────────────────────────────────────────────────────
TOTAL REVENUE                                  $147,174.00 CR

COST OF REVENUE ACCOUNTS:
───────────────────────────────────────────────────────────────
5100 Cost of Revenue - Labor                    $80,880.00 DR
5200 Cost of Revenue - Project Expenses          $8,674.00 DR
───────────────────────────────────────────────────────────────
TOTAL COST OF REVENUE                           $89,554.00 DR

BALANCE SHEET IMPACT:
───────────────────────────────────────────────────────────────
1100 Cash (payments received)                  $121,698.00 DR
1150 Accounts Receivable                        $25,476.00 DR
1400 WIP - Projects                                 $0.00
2300 Deferred Revenue                               $0.00

═══════════════════════════════════════════════════════════════
NET INCOME IMPACT:                              $57,620.00
═══════════════════════════════════════════════════════════════

Project Close Checklist

ℹ️ Project Close-Out Steps

✓ All time entries submitted and approved
✓ All expense reports submitted and approved
✓ Final milestone invoice sent
✓ WIP balance = $0
✓ Deferred revenue fully recognized
✓ Project profitability report generated
✓ Lessons learned documented
✓ Project status changed to "Closed"

Final Deferred Revenue Release

Dr: Deferred Revenue $6,100.00

Cr: Revenue - Professional Services $6,100.00

Final recognition of Phase 1 billing that exceeded % complete at time of invoice.

Key Metrics Dashboard

Metric	Target	Actual	Status
Gross Margin %	51.1%	39.2%	Below Target
Revenue Achievement	$175,000	$147,174	84% of Contract
Hours Efficiency	760 hrs	918 hrs	21% Over
On-Time Delivery	Mar 28	Mar 28	On Target
Customer Satisfaction	4.0/5.0	4.5/5.0	Above Target

💡 Lessons Learned

Scope definition: Build more contingency into Phase 2 estimates for complex integrations
Change management: Implement formal CR process with client sign-off and billing impact
Contract structure: Consider hybrid billing (fixed for discovery, T&M for config) for future similar projects
Resource planning: Account for knowledge transfer time when bringing in technical specialists