Deltek Insight 2012: Breaking the Code of Unbilled Accounts Receivable

Breaking the Code of Unbilled Accounts Receivable

Tony Bowser, Sr. Systems ConsultantSam Heman-Ackah, Sr. Systems ConsultantWJ Technologies L.L.C.GC-254

Understanding Unbilled and its components Unbilled calculation Business drivers for Unbilled Components of Unbilled Accounts

Costpoint and Unbilled Unbilled Setup Unbilled Analysis Correcting Unbilled Amounts One of the ten critical month end reconciliations of Costpoint

Agenda

A. Revenue - Billings

B. Revenue generator for your consultants

C. Place to store exaggerated earnings

D. Conversation stopper at social gatherings

E. All of the above

What is Unbilled?

Costpoint is unique in that billing and revenue are separate calculations

Unbilled is simply revenue – billings

It is known by a couple of names outside of Costpoint – Including Contracts In Process, Deferred Revenue

Created as the offsets of: Revenue entry

(DR Unbilled ,CR Revenue) and Billing entry

(DR Accounts Receivable , CR Unbilled)

What is Unbilled?

Contract types such as scheduled and milestone contracts Difference between revenue and billing formulas, particularly estimate

to/at complete Timing of month end close for revenue recognition and billing cycle Transactions not billed Differences in provisional rates for billing and target or actual rates for

revenue Fee reserves recognized at contract end

Why Do GovCons Have Unbilled?

What are the best business practices for managing Unbilleds from a business perspective?

Careful attention to the two sides of the equation – Monitoring and properly recording expected revenue Making sure that bills are sent on a timely basis

Closing out contracts timely

Unbilled: Best Business Practices

STAY ON TOP OF UNBILLED

IT CAN REALLY ADD UP

Graphical Unbilled Change by Month

Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8

(5,000)

(4,000)

(3,000)

(2,000)

(1,000)

-

1,000

2,000

3,000

4,000

5,000

Revenue

Billing

Unbilled

Any billing posted adjusts the unbilled balance on the G/L Subsequent billings typically bill the transaction cost from a

prior period or sub period that had been used in revenue calculations

In an ideal world, subsequent bills would bill all costs from the prior month, at the same rate calculated for revenue, leaving unbilled at zero

Unbilled Drivers: Subsequent Billings

Current Year and Prior Year Rate Variances can affect the unbilled in a couple of ways: Fee may be calculated at a different rate than billing Contracts may have specific provisional billing rates Prior year rates might not be approved, where revenue has

been recorded at actual rate, and billing at a provisional rate awaiting approval

Unbilled Drivers:Rate Variances

Retainage amounts can be included in current revenue formulas even if they are not billable until milestones are met

Unbilled Drivers:Retainage

Transactions Not Billed (Hours and Cost) If cost or hours have not billed:

Costs or hours on hold Costs or hours over ceiling if billing and revenue have different ceilings Costs or hours written off in billing (requires revenue adjustment)

Unbilled Drivers:Transactions Not Billed

Revenue adjustments are manual changes in Costpoint calculated revenue

Revenue adjustments will be included in any revenue posting, thus updating unbilled

Revenue adjustments by definition, are not driven specifically by transactions, and thus are not included in transactions that are used for billing calculations

Often used at contract closeout where unbilled is removed from books

Unbilled Drivers:Revenue Adjustments

Unbilled Account– General Ledger Unbilled is a project required account

Unbilled Account- Projects The unbilled account should always be connected to a Project Account

Group with the Function Code of “UNBILLED-GENERL”

Costpoint Account Perspective

The following types of Bills and Revenue Calculations may lead to unbilled amounts that need to be carefully monitored:

Bills: Scheduled Bills Milestone Bills

Revenue: Estimate at Complete (EAC) Estimate to Complete (ETC) Percent Complete

Unbilled – Costpoint Formula Impacts

Timing – Unbilled Reconciliation

Timing After calculating revenue and billing for a given period but

before calculating revenue for the subsequent period

Note that the unbilled analysis is Step 22 in the recommended closing the month end process

Subperiod End

Revenue

Next Subperiod

Calculate Bills

Post Calc Billings

Calculate Unbilled

UNBILLED RECEIVABLES

REPORT

Unbilled Receivable Analysis Summary Report Purpose: Validation of Unbilled Balances from Project Ledger to

General Ledger Balance

Unbilled Receivable Analysis Detail Report Purpose: Provide components of the Unbilled Balance

Revenue worksheet Purpose: Highlight possible causes of Unbilled

Tools – Unbilled Reconciliation

Using Costpoint’s Unbilled Tools

Costpoint provides an entire menu section under Billing to assist in analyzing unbilled balances.

CP 6

Create Unbilled Analysis Report Tables

1. Range of Projects

2. Ending Subperiod

3. Subsequent Billing Subperiod

4. Unbilled Analysis Report

5. And/Or Unbilled Reason Code Table

The Unbilled Analysis Report – Summary

The Summary Unbilled Analysis Report contains the basic unbilled equation, and a comparison to the G/L

ITD Revenue – ITD Billings = Unbilled Unbilled from G/L Should be no difference between two columns

In practice, when it is not zero typical reasons are…

The Unbilled Analysis Report - Summary

Revenue in Prior Year Cost and Revenue not properly initialized during implementation

Affects ITD Revenue Column

Billings in Project Bill Summary not properly initialized during implementation

Affects ITD Billings Column

Journal Entries to Unbilled, Billing, or Revenue Affects General Ledger

Misidentification of the Unbilled account in the Project Account Group Affects General Ledger

Reasons Why Unbilled Variance Would be different GL to Projects

The Detailed Unbilled Analysis Report contains the data for the most probable causes of unbilled variance.

The report is very wide and small. It requires legal paper to print out

Note that the report is not a straight mathematical equation. Unbilled hours, which are used in T&M contracts, print on the report as a column as well

The Unbilled Analysis Report - Detail

The Unbilled Analysis Report – Detailed

Unbilled Detailed Breakdown

Unbilled Balance

Transactions Not Billed

Subsequent Billings

Rate Variances

Unbilled per GL – General Ledger Balance

Subsequent Billings – Costpoint looks at the month after the report to determine what has been billed

Warning - the subsequent bill may contain current month costs

Current Year Rate Variance

Project Ledger Burden vs. Billing Amounts

Prior Year Rate Variance

Project Ledger Prior year History Burden vs. Billing Amounts

Transactions not Billed Cost and Hours (2 columns)

Amounts remaining in open billing detail for prior months

Understanding Components of the Unbilled Analysis Report

Costpoint allows customization of the Unbilled analysis. Unbilled Reason Codes can be added, which then show on the Unbilled Reason Codes report which combines both the system and customized columns.

Customization of theUnbilled Report

Adding Unbilled Reason Codes –Costpoint 6

Add Amounts to Unbilled Reason Codes – Costpoint 7

Unbilled Reason Codes Sample Report – Costpoint 6

The revenue worksheet is useful for a few reasons in unbilled analysis

Details components of how Costpoint is calculating revenue Details effects of ceilings on calculations which is important if revenue

and billing ceilings are not the same Contains details of revenue adjustments and other fees which may or

may not be included in your billings

Revenue Worksheet

The Revenue Worksheet

There are two primary areas for correcting unbilled amounts, if all the transactions have been entered into the appropriate ledgers

Revenue Adjustments Revenue adjustments must be entered into the Revenue Setup screen Typically used when known adjustments are required, such as closeout

Billing Adjustments Bills which are deemed to be uncollectable, should be written off through

accounts receivable, adjust A/R underpayments

Correcting Unbilled Amounts and Closing Contracts

Do

Do run the unbilled analysis monthly after your billing cycle is complete, but before you compute revenue

Do post invoices on a timely basis

Reconcile revenue monthly

Don’t

Do not post AJEs to revenue accounts. Revenue adjustments must be run through revenue setup.

Do not post AJE billing adjustments. Run any bills, or adjustments through the billing module.

Do not post AJEs to the unbilled account, ever…

What to Do and What Not to Do

Questions

Visit WJ Technologies at our booth in the Expo Hall

and

Join us during our Partner Showcase

GC-500 GCS Premier Partner Showcase: October 16th, 4:30 to 5:30 pm

GC-501 Costpoint Partner Showcase: October 16th, 3:15 to 4:15 pm

Sam Heman-Ackah II, CPA

703-885-8164

samuel.heman-ackah@wjtechnologies.com

Tony Bowser

703-885-8165

tony.bowser@wjtechnologies.com

WJ Technologies L.L.C.

www.wjtechnologies.com

Learn More…

Thank You!