WIP Policy Rule Types

There are three rule types for revenue recognition:

  1. Time and Materials rule
  2. Fixed Price with Average Rate rule
  3. Percent Complete rule

This article explains the three rule types for revenue recognition and outlines key rule dynamics such as currency use and update restrictions.

Rule Dynamics:

Some important rule dynamics are followed in recognizing revenue. These include:

  • All revenue within the rules is referred to in the Client Currency.
  • The Rule Type cannot be updated if there are any Accrual Batches created for the Project.
  • The WIP Account and Revenue Account can be updated.

Time and Materials Rule

With this rule, revenue is recognized as (and when) work is performed (when a billable entry is approved) for the project. For example, if Employee X goes on-site for 10 hours and their billable rate is 100$/hour, then $1000 is recognized as revenue.

  • Recognize approved entries of type: Option to select the type of entries (Time, Expense, Charge, Product) to include in the WIP accrual.
  • The status of the selection boxes is inherited from the Company Time and Material Defaults.
  • WIP Account: Specify a different WIP account for each type of entry. This account is set to the WIP account specified for this type of entry at the company Time and Material Defaults level, by default. If no value is defined at the company level, the account field remains empty.
  • Revenue Account: Specify a different Revenue account for each type of entry. This account is set to the Revenue account specified for this type of entry at the company Time and Material Defaults level, by default. If no value is defined at the company level, the account field remains empty.
  • The entry types available are based on licensing.
  • The WIP Policy Rule Options are set based on the Company Time and Material Defaults. The user can override these options.
  • The account browser is disabled when the entry type is not selected.
  • If you specify an account for an entry type and then deselected the entry, the account number remains displayed.
  • All approved billable entries for all Tasks in the Project within the Start Date of the Project and the Accrual Batch date are considered for processing.
  • If no accounts are specified for the entry types, the project accounts are used.
  • There are no constraints on the billing rules to disallow modification or deletion of a billing rule associated to an entry that is part of the accrual batch.
  • There are no constraints on the user/billing rule association disallow modification or deletion of an association linked to an entry, which is part of the accrual batch.
  • For more detailed information on Time and Materials rule, refer toDetails for Time and Materials Rule.

Fixed Price with Average Rate Rule

With this rule, revenue recognition is based on the percentage of completion between the time budget defined and the actual time using an average rate.

This rule only accounts for approved billable entries of type Time for all the Project's Tasks (including suspended and decommissioned tasks).

For example, Employee X defines an average rate of 100$ and a time budget of 100 hours. Come accrual time, if Employee X has done 80 hours of billable work, then their percent complete is 80% and the revenue to recognize is 8,000$ (80 hours * 100$ average rate)

  • Budgeted Hours: This is set to the Project Current Time Budget by default (the first time you create the rule). If there are multiple budgets for the project, they are summed up.
  • Average Rate (in client currency): The hourly rate used to calculate the revenue.
  • Can override Percent to Recognize: This option overrides the percentage to recognize, calculated by the system. This option is unselected by default. When selected, you can change the percentage to recognize in the Accrual batch.
  • You can update any options (budgeted hours or average rate) on this page while a project is included in an accrual batch. The entries in the batch not be updated unless you update the batch.
  • Changing the Client currency does not re-rate the already defined Average Rate. For a more detailed information on Fixed Price with Average Rate rule, see "Details for Fixed Price with Average Rate Rule".

Percent Complete Rule

With this rule, you recognize an amount of the project milestone billing rule based on the Milestone percentage of completion (specified on the Milestone Edit page.

  • Total Revenue: This field is set to the sum of all Amounts specified for the project milestone billing rules (converted to the Client currency using the exchange rate of the current date), and is read-only.
  • Can override Percent Complete: This option allows overriding the percentage complete specified on the Milestone Edit page. This option is unselected by default. When selected, you can change the percentage complete in the Accrual batch.
  • Changing the Client currency recalculates the Total Revenue, based on the new currency value.
  • When you delete a milestone billing rule associated to a revenue recognition rule not yet included in an accrual batch, the Total Revenue field on the Revenue Recognition Policy page is updated.
  • For a more detailed information on Percent Complete rule, see "Details for Percent Complete Rule".

WIP Accrual Batch Exclusions

This feature prevents including entries that have an associated Revenue Recognition Schedule from being included in the WIP Accrual Batch.

When a policy of type Time and Materials exists on the Project, the WIP Accrual Batch excludes:

  • Approved billable Charge entries that have an associated Revenue Recognition Schedule.
  • Approved billable Product entries that have an associated Revenue Recognition Schedule.
  • Approved billable Time, Expense, Charge or Product entries that are included in a Project level Revenue Recognition Schedule (through the Apply toTime/Expense/Charge/Product entries between Project start/Custom and Project end/Custom option).

When a policy of type Time and Materials exists on the Project, the WIP Accrual Batch is flagged for an update when:

  • A Charge entry included in the Batch has a Revenue Recognition Schedule associated to it.
  • The Revenue Recognition Schedule of a Charge entry, that was not included in the WIP Batch because it had a Revenue Recognition Schedule associated, is deleted.
  • A Product entry included in the Batch has a Revenue Recognition Schedule associated to it.
  • The Revenue Recognition Schedule of a Product entry, that was not included in the WIP Batch because it had a Revenue Recognition Schedule associated, is deleted.
  • A Time, Expense, Charge or Product entry that is included in a WIP Accrual Batch becomes included in the Project's Revenue Recognition Schedule (through the Apply toTime/Expense/Charge/Product entries between Project start/Custom and Project end/Custom option).
  • A Time, Expense, Charge or Product entry that was not included in a WIP Accrual Batch because it was included in the Project's Revenue Recognition Schedule (through the Apply toTime/Expense/Charge/Product entries between Project start/Custom and Project end/Custom option) gets excluded from the Project's Revenue Recognition Schedule (either through the entry type change or through the date change).

When a policy of type Time and Materials exist on the Project, the WIP Accrual Batch will not be flagged for an update when:

  • A Charge entry is updated and that entry has an associated Revenue Recognition Schedule.
  • A Product entry is updated and that entry has an associated Revenue Recognition Schedule.
  • A Time, Expense, Charge or Product entry is updated and that entry is included in the Project's Revenue Recognition Schedule (through the Apply to Time/Expense/Charge/Product entries between Project start/Custom and Project end/Custom option).

There will be no changes made to the functionality of the WIP Accrual Batch when a WIP Policy of type Percent Complete or Fixed Price with Average Rate is defined.