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Hello all,

We are a general contractor about to go live with Acumatica soon and I was wondering how people are handling revenue and cost recognition and accrual at the end of the period. 

  • Our current process for cost is issue POs/Commitments and “receive” them (even though there is no stock).  These receipts are three-way matched to AP bill.  We then accrue open receipts and the end of period and reverse the accrual automatically. The incurred cost is AP bill + Open Receipt.  Our current ERP lets us receive stuff without managing inventory. 
  • Then the process for revenue is to calculate Earned Revenue as (actual incurred expense/budgeted expense * budgeted revenue).  We accrue (Earned Revenue - Billed Revenue) and reverse automatically, either as Revenue or Billings in Excess of Revenue.  This process is in-line with GAAP and is approved by our auditors.

The above is mostly done via manual entries except accruing open receipts.

We are trying to figure how to implement this in Acumatica.  It doesn’t have to be the exact same process but should arrive at same results. 

  • For Revenue, it looks like we can use Allocations based on completion % and revenue budget.  We don’t have to do reversals since project billing moves it from Accrual to AR when billed.  We are not sure if Billings in Excess can be handled automatically.
  • We understand that we can’t really use “receipts” in Acumatica for non-stock items, which is what we will use to issue commitments to subcontractors.  So, we are not sure what to do on cost side.  We can’t wait for AP bill to recognize costs.  How is everyone handling this?  We see that we can use Cost Projections and WIP Detail to see cost to completion, but it doesn’t look like it books anything to GL.  Do we have to do this manually?

Any thoughts/comments/insight on how others are handling this are much appreciated.

 

Thanks

Sarat

 

(PS: got the help of several AI tools when generating this answer)

In Acumatica, managing revenue and cost recognition for a general contractor can be handled through a combination of project accounting and purchasing modules, but you may need to adjust some processes to match your current setup.

1. Revenue Recognition: Through Revenue Budget Allocations and Project Allocations, Acumatica provides revenue recognition based on a percentage of completion. This enables you to configure revenue recognition according to planned quantities and progress.

Allocating Revenue: Earned revenue can be determined by applying allocations that take into account the difference between actual and budgeted expenses. This approach, which calculates earned income as (actual cost / budgeted cost) * budgeted revenue, is comparable to what you're already doing.

Managing Billings in Excess: Acumatica can use unbilled revenue and deferred revenue accounts to manage Billings in Excess. Nevertheless, Acumatica does not support the automatic reversal of excessive billings out of the box. For this, you might have to manually enter data or set up a special procedure to deal with reversals.
 

2. Cost Recognition: Managing cost recognition for non-stock products like subcontractor services necessitates a slightly different strategy because Acumatica does not support receiving non-stock items like your present system does.

Purchase Order Commitments: Although Acumatica won't produce a receipt for non-stock commodities like subcontractor services, you can still utilize Purchase Orders (Commitments) for these types of purchases.

Accruing charges: You can manually make journal entries to accrue for open commitments in order to identify charges prior to receiving an AP bill. The expenses incurred for non-stock products will be recorded in these entries, which you can automatically reverse in the following period.


Procedure for Configuring Revenue Allocations:

Set up rules for earned revenue based on completion % in the Project Allocations section.
As soon as earned money is billed, make sure the system transfers it from deferred or unbilled revenue accounts to AR.
Control Non-Stock Expenses:
For subcontracted services, use Commitments (POs) and make Accrual Journal Entries to record these expenses at period's end.
Set these entries to reverse automatically in the next period to coincide with actual expenses when AP bills come in.

Keep an eye on excess billings:
Utilize deferred revenue accounts to monitor overage billing. Once billings are identified, if necessary, build up a manual or custom process to reverse the entries.
Bill matching for AP:
The committed costs recorded in the PO will be matched by the AP invoices upon receipt, completing the cost recognition process.

 

@saratvemuri for your subcontract agreements, are they broken out by hours or is it just by amount?

@saratvemuri you could in theory create your subcontract agreements as purchase orders (you can update the non-stock ID to allow receipt).  you could “receive” the hours on a weekly basis.  i tested this out on my local and i did see it update my project with the costs of the “received” hours.  the only potential issue i found was if your bill amount didn’t match the received amount.  the discrepancy goes to a purchase price variance account.  if that scenario doesn’t happen, then you could switch to using purchase orders

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