Fixed-price Revenue Recognition in D365: A Guide to Success Part 2
If you’ve tuned in to Part 1 of this blog series, we discussed how we can configure the Project management and accounting module in D365 to perform project estimation and fixed-price revenue recognition. In Part 2, we will review the tools provided to perform the estimation itself and how the system will post the revenue accrual.
Using the Fixed-price project group configured to recognize revenue by competed percentage that we configured in Part 1, we will measure how much of the project is completed at a given point in time using the Revenue recognition functionality based on posted project transactions and contract value. Pay close attention to the Project group when creating a new project, as it controls everything related to how revenue is recognized.
As your project progresses, and transactions are continuously posted against it, D365 begins to track the cost percent based on either comparing actuals to budget or though physical progress. This can be found on the Control tab of the project > Project tracking > Tracking Views.
At the end of the period (established in the project group), you are ready to run the revenue recognition process. Navigate to the Manage tab of the project > Process > Revenue recognition. When creating the revenue recognition entry, the Period code will default from the Project group, and you will select the Revenue recognition date (likely the last date of the period). The Cost to complete method and the Completion method also default from the Project group but can be changed on the parameters dialog.
Click OK to run the revenue recognition. Based on the Contract value and Total cost, D365 will automatically calculate the Percent complete; however, at the end of the day, you always have the freedom to enter the Percent complete manually.
The Cost recognition will breakdown the Cost lines so you can visualize the steps the system took to reach the percentage of completion.
Posting the Revenue recognition will create the entries from WIP to recording actual labor cost AND then it also accrues revenue based on the percentage of completion. Pretty neat!
If you haven’t already, read part 1 of this blog here – https://ellipsesolutions.com/fixed-price-revenue-recognition-in-dynamics-365-a-guide-to-success-part-1/