All our projects are set up identically but on some projects the revenue % is recognized correct but the expense is rounded up which is causing too much expense to be recognized each month. Does anyone know why this happens please?

Hi Alpha

You left quite a bit out of your question. What method of revenue recognition are you using? What version of JobCost are you using? Do you allocated overhead or burden? Are your jobs using the simple tracking method?

Assuming you are using some sort of percentage revenue recognition method, the recognized expenses will almost always be close to the incurred expenses.

They may be off by up to a half-percentage point, because the percentage to apply against the estimates is rounded to the nearest whole number. To take an example, say the total cost estimates are $1,000 and the total incurred costs are $333. The calculated percentage is 33%, which when applied against the $1,000 of cost estimates results in recognized expense of $330, not $333.

The other reason they may be off is if the incurred costs exceed the estimated costs. In this case, the recognized costs will equal the incurred costs. It is a good idea to increase the estimated costs to prevent this from happening.

Steve

Good Morning Steve

Thank you for your reply. We are using version 8.1D. We recognize revenue on % completion total cost. Allocation of labour burden. We do not use simple tracking method.

An example of a project that is not expensing the correct amount (in our opinion):

Project value $207,453 Total budget $187,290 Total costs incurred $35,176 Total costs expensed $36,820. Total cost represent .1878% and the project is being expensed at .1966.

This is the smaller of 3 projects that the expense is rounding up on, the other 2 projects are valued at $15million and $3 million which are a substantial number that is rounded up and causing our financials to show losses each month.

We would very much appreciate any help understanding this.

Thank you.

Hi Alpha

Based on the facts above, the percent complete is 19% (rounding to the nearest whole number), and I would expect the total cost expensed to be $187,290 * 19% = $35,585. I don't know why you get $36,820. Try running the Recognize Revenue and Expense function again for that job and see if that does the trick.

If it doesn't, check to make sure that the Total Estimates are $187,290. You used the words Total budget, but that isn't the Adagio terminology, so I want to make sure we are talking about the same thing. (Project value is also not the Adagio terminology, I assume you mean Revised Contract Price, but you are not asking about recognized revenue, so that doesn't really matter).

Steve

Hi Alpha,

We have seen lots of situations as you and Steve have discussed where the method for revenue recognition struggles to work properly. You could say we are experts to install, configure, train and support client sites using Adagio Job Cost. Job Costing revenue/cost recognition struggled in Accpac Plus and even in Adagio Job Cost, the situation is much the same.

If you are lucky enough to get the stars to align, with estimates, billings, overhead setups, then you might be able to make the WIP entries work but not with enough reliability that myself as a professional accountant would want to interface and produce financial statements. I have seen situations where it is close for some jobs but for other jobs, no one can figure out why the numbers are what they are.

And if you are looking for support for this opinion, you might ask why there is no WIP report in Adagio Job Costing (or in ACCPAC Plus) that supports the calculations of the revenue recognition? And why many JC users basically create another month end job just to do the WIP and Deferred Revenue Analysis on spreadsheets, to attempt to support the WIP and Deferred amounts in the GL.

And for that very reason, we developed Link2SimpleCosting that relies on the date sensitive data in Job Costing which is usually very good, and then that lets you choose your revenue recognition method (outside of Adagio). Your choice of revenue recognition method is used by Link2SimpleCosting that creates accrual entries to calculate your WIP and your deferred revenue entries by job. And this add-on Link2 module will calculate correctly your WIP, your Deferred revenue, and is completely based upon the date of the transactions posted in your Job Costing database without having to wait for some magic date when all data for the previous month has been entered and posted (while holding out all job data from being posted until the WIP is calculated). The current Adagio Job Costing method of holding out the next month's entries from being posted is so reminiscent of ACCPAC Plus 6.0 when you kept your next month's entries in piles waiting to be entered after month end was complete.

So you can get these results using the Link2SimpleCosting (from Link2Systems) or you can get your Adagio consultant to create a series of Gridviews to calculate the month end values for WIP and Deferred Revenue using the transaction date of each entry, but to use what is really limited reporting within Job Costing is really playing with fire by hoping to get the right answer by choosing one of the revenue recognition methods and reporting in the existing module.

So this answers your question, why does this happen? Sorry, it is the reality but there is a resolution.

Best,
Brian