Fixed-price Revenue Recognition in Dynamics 365: A Guide to Success-Part 1

Revenue recognition is a fundamental aspect in the project management realm, and this holds true in the Project management and accounting module in Dynamics 365 Project Operations as well. In this two-part blog series, we will explore key factors to consider and best practices to follow when recognizing revenue within D365.

To begin, it must be noted that the revenue recognition functionality is available for Fixed-price and Investment projects only. There is a separate process for Time and material project types. By and large, when you perform the revenue recognition, not only will you be given a snapshot of the project’s performance for a given time, but based on designated criteria, the system will perform the WIP calculation and accrue revenue for you.

There is quite a bit of setup involved when you first delve into the recognizing revenue, which is where your friendly, neighborhood consultant comes in!

Firstly, estimate periods must be created. The frequency at which the system will accrue revenue is determined by the Period type code provided, and the table is shared with Timesheet periods. Below is an example of a monthly Period type:

The next required setup component is the Cost template. In the Project management and accounting module, Cost templates define how costs are accumulated and used during the revenue recognition process. You can even create multiple Cost templates to cater to different project types or cost methods. When creating a new Cost template, you can select a Manual or Automatic Completion method and then also choose whether the percent complete is based on Cost amount, Quantity, Straight line, or based on WBS percentages.

Additionally, they can be modified by adding or modifying Cost categories…

Or selecting a different system-defined Cost to complete method per Expense category.

Lastly, and in my opinion, the trickiest part, is the Sales value category. This is a Fee category created specifically for recognizing revenue for Fixed-price projects that aids in shifting revenue during the revenue recognition and elimination processes. This is often overlooked!

Tune in to part two of this series to see the functionality in action!