CP-43: Back to Basics with Revenue: Revenue Recognition in …€¦ · » The Revenue Recognition...

CP-43:Back to Basics with Revenue:Revenue Recognition in Costpoint

Andy Unwin, Deltek

Course Description

CONFIDENTIAL © Deltek, Inc. All Rights Reserved. 2

Description: If you're new to revenue

setup or looking for a refresher, this

session is for you. We'll review Orgs,

Ceilings, Rates Schedules, Rates and

more. At the end of this session you'll:

Have a better understanding of what

makes up the revenue calculation. Know

how to troubleshoot revenue issues

ObjectivesBy the conclusion of this session, you will be able to :

» Name the key tables used in Revenue Calculations.

» Identify the steps to clean the Project Ledger of erroneous revenue.

» Describe the protocol for properly recalculating revenue.

» Document the “before” and “after” views of the Project Ledger.


Agenda» Introduction.

» Part 1: Where Do I Begin?

» Part 2: Revenue Roadmap.

» Part 3: The Process.


Part 1

» Introduction


What is “PROJ_SUM”…


» PROJ_SUM: the key table underlying the Project Ledger.

» It stores data by Project, Account, and Organization for Fiscal Year,

Period, and Sub-Period.

» It is a compressed view of transaction data from the General Ledger.

» Burden is stored at “Actual” and “Target” by Pool in the companion table

known as PROJ_BURD_SUM.

» PROJ_SUM is the basis for the computation of revenue.

» The Project Ledger is always reconciled back to the General Ledger.

PROJ_SUM

What is “LAB_HS”…


» LAB_HS: the key “hours-based” table underlyingthe Project Ledger.

» It stores Hours and Cost data by Labor Category [GLC, PLC], Employee/Vendor, Project, Account, and Organization for Fiscal Year, Period, and Sub-Period.

» It is the repository of all Hours based information regardless of the Journal Type. [AJE, LD, APV]

» It is the basis for “Loaded Labor” [T&M] revenue computations.

» It ties back to the detailed transactions in the General Ledger.

LAB_HS

Revenue Computations


» For most Revenue Formulas, the

calculation originates in

PROJ_SUM.

» Revenue can be reviewed on the

PSR and Revenue Summary prior

to posting.

» Revenue should only be posted to

the General Ledger when its

accuracy has been validated.

PROJ_SUM

GL_POST_

SUMPost

Revenue Setup


The Revenue Formula is associated with a Project at a specific level.

Generally, this is at the same level as Billing and Funding. [Exceptions exist.]

Revenue is either posting to the Owning Org of the Project or the Performing

Orgs where the transactions occurred.

Revenue Setup


Revenue troubles can begin when:

» The Revenue Recognition formula is modified.

» The level associated with the formula is changed.

» The Owning Org of the Project is changed.

» Revenue Journal Entries are recorded.

» Revenue ceilings are established at the inappropriate levels of the Project.

» On T&M Projects, the Rate Sequence Table is omitted.

Where Do I Begin…


» Troubleshooting Revenue is a complex situation.

» Consider “where” your first “experience” should occur.

» Best to do in “Test” versus “Production”.

» Document every step; otherwise, replicating your results is unlikely.

» Tackle a “single top level Project” within confines of a “single year”.

» Capture “Before” and “After” snapshots of key Project data.

» Don’t touch the General Ledger until you’re satisfied with the results in the Project Ledger.

What’s Wrong with the Revenue…


» The calculation makes no sense. It’s illogical.

» It’s too high; it’s too low.

» It does not tie to the General Ledger.

» The system is “backing out” some or all of the revenue.

What Have I Done to Worsen the Situation…


» Modified “Revenue Info” without following proper protocols.

» Changed the level of “Revenue Info” setup.

» Recorded “Journal Entries” to “straighten” things out.

» Created “Revenue Adjustments” to compensate for system entries.

» Intervened with external scripts to fix the Project Ledger.

Part 2

» Revenue Reprocessing Roadmap



Document the

“Before” View

PSR

Revenue

Worksheet

Revenue

Summary

PROJ_SUM

Rows

Change

Revenue

Formula*

* = Must be to any formula other than “Do Not Compute/NONE”

Designate

Current Fiscal

Year

PROJ_SUM

Cleared

Reset Revenue

Formula to

Appropriate

Designate

Current Fiscal

Year

Recalculate

Revenue:

Period 1 to

Current

Regenerate

Project Reports

PSR

Revenue

Worksheet

Revenue

Summary

PROJ_SUM

Rows

Reconcile

Results

Post Revenue

in Current

Period

Validate

Setup

1 2 3 4 5 6

7

What You Need To Know…


» This approach does not utilize “Back Door” magic or scripts.

» We use standard techniques and processing to “clean and re-do”.

» All revenue fixes occur within the boundaries of a fiscal year.

» Always work through revenue in the Project Ledger first.

» Only post to the General Ledger when revenue is satisfactory.

Validation of Project Setup


Prior to redoing any revenue

computations…

Examine all elements of

Project Setup.

Exercise caution: Setup at

the inappropriate Project

level is a common error.

Validate proper usage of

“BARN” codes on ceiling

screens.

Part 3

» The Revenue Re-Do Protocol


1: Documenting “Before”…


» Before making changes to setup or processing, document existing results.

» Save PDFs of key reports: PSR, Revenue Summary, and Revenue

Worksheet.

» Export to Excel rows from the PROJ_SUM table

[Available by accessing View Project Ledger Activity].

» From the General Ledger… print out Project Ledger Detail for the Project

to be “reprocessed”.


Retain Copies of Key Project Reports…


Capture the PROJ_SUM Table Rows for a “Before & After Look”

Views of

PROJ_SUM are

best seen via

“View Project

Ledger Activity”

Cut and paste

the rows into

Excel for

analysis.

2: Change the Revenue Formula


Why am I changing the revenue formula if its correct?

» This is the most natural way of clearing the PROJ_SUM table.

» Costpoint will prompt for the Fiscal Year.

» It will clear all revenue-related columns in the PROJ_SUM,

PROJ_BURD_SUM, and LAB_HS tables.

» Failure to complete this step will cause unreliable results in the Project

Ledger.

» Provides a “fresh slate” for redoing revenue computations.

Before


PROJ_SUM

prior to

making

changes to

the revenue

formula.

After


PROJ_SUM

after making

changes to

the revenue

formula.

Key

columns are

cleared.

What else happens to the PROJ_SUM table…


» Direct expense remains untouched.

» Columns labeled “Allowable” change because the manner in which these

columns are populated vary based on the revenue formula.

» Caution! If revenue formula level was shifted downward, you will have to

temporarily reset back in order to clear “Plug Lines”.

» Use the setting of Project Level = “0” to see all rows and levels of the

Project. All LEVELS MUST BE CLEARED!

When activity in PROJ_SUM goes astray…


Level 1

has a

trapped

Revenue

plug. It

will

distort

revenue.

What is a “Revenue Plug”?


» Occur at the revenue formula level; not the transaction level.

» Naturally occurs when there is a revenue adjustment or an over total

ceiling amount.

» On non-transaction based formulas, this is typically the portion of revenue

– usually profit – that cannot be correlated with cost.

» Revenue plugs can become orphaned when revenue formulas are simply

deleted without following the protocol to clear PROJ_SUM

3: Reset Revenue to the Appropriate Formula..


» If there was nothing wrong with the original formula, reset to what it was

in order to do the recalculation.

» However, if there are “revenue plugs” above the formula level, then it will

be necessary to set the formula at the higher level temporarily, change it

to get the prompt to clear, and then delete the setup.

» Always validate that the PROJ_SUM table is completely clear before you

do the final setup using the appropriate formula at the proper level.

4: Revenue Recalculation


Load Labor Rates

[T&M Projects]

Start with

Period 1Compute Revenue

Current

Accounting

Period?

Update & Create

Project Report

Tables

No.

Repeat Cyclefor next period

Proceed to

Reconciliation

Yes.

Options & Alternatives…


Can I simply calculate revenue in the Current Accounting Period and skip

the period-by-period processing?

» Sure, most revenue formulas are year-to-date, BUT…

» The PROJ_SUM table will plug everything into one column.

» The Revenue Worksheet loses is relevance as the adjustment is

displayed as a “plug”.

» Does not provide clear picture of the calculations month-by-month.

5: Regenerate Reports


Should I regenerate reports for each Accounting Period?

» Might be more time consuming to do.

» More accurately reflect the updated Project Ledger.

» General Ledger will only tie to Project Ledger reports on a Year-To-Date

in the current Accounting Period.

6: Reconcile Revenue Results


» Do the PSR, Revenue Summary, and Revenue Worksheet all tie out to

each other?

» Do the numbers appear reasonable?

» Does the Revenue Worksheet make sense?

» Look at PROJ_SUM: Are there any “revenue plugs” at or above the

revenue formula level.

7: Post to the General Ledger


» No one wants sloppy General Ledger with multiple postings to the

Revenue Account.

» Do a “print preview” to determine whether the proposed posting will get

the ledgers in sync.

» Remember: Journal Entries should rarely occur. One exception: Revenue

Level changes. Back out the Revenue and Unbilled for the former level

ONLY!

» After posting…

Is revenue in the Project Ledger in sync with the General Ledger?


Reconciliation: YTD-Basis

All reports

tie.

What if the Ledgers still don’t tie?


» Once again, take a closer look at the PROJ_SUM table for anomalous

conditions like “revenue plugs” and revenue appearing at more than two

levels of the Project.

» In the General Ledger, validate that revenue postings are STRICTLY at

one level of the Project. Look for extraneous postings from journals that

are not marked as “SJ”.

» Go through the cycle again, and don’t panic.

In Summary


» Revenue issues can be frustrating; sometimes the results appear baffling and unexplainable.

» Refrain from making journal entries and revenue adjustments for a “quick fix”.

» Review all aspects of setup first.

» Using the protocols defined in this presentation, clear the Project Ledger and rerun the revenue computation process for each month in the fiscal year.

» Review the results and reconcile.

Questions & Answers


For further discussion or questions, schedule an appointment at”

“Meet the Experts”

CP-43: Back to Basics with Revenue: Revenue Recognition in …€¦ · » The Revenue Recognition...

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