Added project-based accounting

Yes please. That would be better.Overhead is a bit nebulous as it could refer to many different things. Also it is not clear what I would be doing if I put in say 15% for overheads in each project. I don’t quite follow what actually happens as a result. What people want to know is the profit margin, obviously taking into account operational expenses I guess.

Will the Project P&L be a different report to the standard P&L? I think that carry forward amounts for income and costs will be required when, say producing a current year project P&L.

The other question is how to account for projects amounts in starting balances? Will it be a requirement to create pre-start date transactions to record these? instead of
recording a starting balance at account create/edit?

When creating a Receipt transaction to a project it is incorrectly recording it as negative direct costs. I think it should show as income.

PS. Also, a journal credit is recording as negative direct costs instead of income.

Further more I have noticed that:

  1. Cost of equipment and services sold for the project are not shown
  2. In the Income column, VAT of the sales invoice is added and VAT of the direct cost is deducted and in Direct cost column VAT is ignored. Profit is Income (included VAT of sales) - VAT of Direct Cost - Direct cost. Is this right? I think Profit should be Income - Sales VAT - Direct Cost - Cost of goods and services
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I can replicate this. Only entries coming from Sales Invoices are taken into account as Income.

can you please consider below for project tab improvement and reports

  1. can we have an option to transfer divisions to projects
  2. adding Ref no to Project
  3. we should be able to extract profit and loss and Balance sheet project wise
    3.1 in profit and loss statement it is clear to show profit margin and net profit
    3.2 in balance sheet to show out standing balance, provisions, late cost, and other balance sheet items payments receipt project wise this will help in accruals, provision, late cost, WIP and other
  4. possibility to set divisions for project
  5. ability to link Sales and Purchase for easy report
  6. extend report capability to get it project wise where possible
  7. adding project to payslips

above points could be repeated or useless but it will help to strength the feature for WIP, Late cost, Accruals, Provisions and the link between PO and Sales Order and other to calculate required risk

Yes. Thinking this through. I think it will be different. It’s not exactly P&L because projects can have income or costs assigned to balance sheet accounts but from management point of view, you still want to see them as income / direct costs to see profit.

In the latest version (21.9.30) when you click View button on project, you will see this statement summarizing income / direct costs by account regardless whether the account is P&L or balance sheet.

Yes. If you want to establish “starting balances” for project, create pre-start transactions just like it can be done for anything else in Manager.

Previously, receipt not attached to customer would show as direct cost but I’ve changed that in the latest version and every receipt unless attached to a supplier will show as income. I think this better reflects expectations.

I will need to think this through so journal entries can adjust both income or direct costs.

I’m not sure this will be the right approach. I think I will need to add new tab called Timesheets which can be used to generate payslips but also can record time employees are spending between projects and add the cost of it to the project too.

This way direct costs can show up under Projects tab as soon as timesheet entry is made rather than waiting for employee to have their payslip issued. Not to mention, if employee was working across 10 projects, you’d need at least 10 payslip earnings line items (one for each project) which I think would not be practical.

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Great addition @lubos I’m very happy to see this model finally implemented. It is still early days but these are my suggestions for now.

Track Project Production Costs

When you use inventory for a job/project through the Production Orders, the system should be able to record the consumption of the inventory for the related project.

To consume inventory to create another inventory item (Customised finished or WIP item) for a project, I would use the Production Orders to transfer the value of the input inventory items and other non-inventory costs to the Project inventory item(s) (finished/WIP item). There is therefore the need to select Projects for Production Orders to link production costs with the associated projects (finished or WIP item).

Project Estimate

Can we track project costs for the following cost categories?

  • Direct materials: Tracked from Inventory Items consumed in production charged to the project
  • Direct Labour: Tracked from Payslip/Timesheets (Earning/Contribution items charged to the project)
  • Direct expenses and Overhead: All other costs consumed in production or charged to the project from (receipt, invoices, expense claims and others)
    Drill down the categories to see a list of transactions.

Can a user enter a Project estimate for the above cost categories and check the estimate with actual figures? That would be great for planning projects and also see where improvements could be made for efficiency the next time.

Display amounts $ and percentage % for the variance (estimate vs Actuals). For e.g., Variance is $ 500.00 (2%) Display both the amount and Percentage under one column. See inserted screenshot below

image

Link Projects to Customers

You can create a custom field to capture customer names but a default field that displays a list of customers to select from would be a better option. This would enable the display of a column in the Customers tab to show the number of projects for every customer which can be drilled down to see projects summary for the customer. See inserted screenshot for the Idea.

image

The customer name will also show as a column in the project tab. We may also have a field to link projects to Sales orders just for the purpose of tracking the number of projects being executed for a Sales Order.

Also, automatically create a control account named Projects In progress which is made up of accounts for customers to hold all the expenses and consumed inventory for service projects/jobs. Balances of these accounts will be moved to the income statements after billing the customer.

Finally, I request for the display of profit margin to also have the % profit, for example, $ 684.00 (12%).

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But production orders are just converting input inventory items into output inventory item. To consume it, you need write off inventory item into the project.

So I wonder why even bother with production orders only to write them off. Why not write-off input inventory items in the first place and skip production altogether.

I’m not sure about this. Maybe some would find this useful but for most businesses, they want to recognize expenses on P&L as soon as possible. They do not want to capitalize them until project is complete. On longer projects, there are usually progress/milestone payments to make sure business is not accruing project expenses without getting at least some income.

Dear @lubos, can you please consider enabling Custom Fields also for Projects?

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I believe it will be added and possibly with Reference Number and Date fields.

That is true, but there will be nothing to show that the production activity is related to a project. I would want to see the cost of the consumed inventory so far in Production in the Project tab.

I could easily use a journal entry to debit the output item and credit the input Item(s) and select the Project to get what I want

but it feels wrong to use the journal entry module for that, it would feel right to do this with a Production Order.

This will work only if the end product is not tangible in nature. If the project is about manufacturing a product, the consumption will not be expensed until the finished item is sold to the customer.

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@lubos will you check the problem with cost of goods?

its Still very confusing.

For testing i create Project XYZ ( simple trading example)
Bought 1 simple product in 100 USDand sell it in 110USD. profit should be 10 USD

i did
Created new invoice , marked as related ro project XYZ (110USD)
Created payment against invoice and marked as Project XYZ (110USD)
Created new Purchase invoice for same products and marked as project XYZ (100USD)

project tab is showing profit = 120USD
it is showing details as
invoice 110 + payment received 110 - purchase 100

it is wrong, if a payment is made against invoice, it should not add it into again.
so it should be

Sale invoice - purchase invoice - any additional cost = profit

@lubos Please check into it.

for while, what i can do is to mark only payments and expenses and leave invoices unmarked for projects
or Sales invoices and Purchase invoice against any specific project and leave payments unmarked

but its confusing.

the payment should not be marked with the project, you have already mark the invoice. I believe that @lubos should remove project field from payments

I believe that this is wrong, project should not be mark Purchase invoice, the cost of goods should be calculated from the inventory and deduct the profit accordingly. What if the good sold for the specific project are already in your inventory, or if you buy more than you sold in the project? I believe that @lubos should remove project field from purchase invoice when refers to inventory items.

Also VAT should not count as profit!!!

This is correct. For some accounts (e.g. Accounts receivable), project field is not relevant. I will need to conditionally hide it for such accounts. Customer paying off their invoice is not a project income. Income has been already captured on invoice itself.

I will think this through but my initial impression is that purchasing inventory item is not a project expense as you say. Project expense is only when the item is either sold to customer on invoice/receipt or written-off into a project. So this appears the same case as with Accounts receivables. Some accounts are simply not project-related income or expenses.

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Is there anyway both project and division can be tracked in, for example, sales invoices ? Or is it addressed another way? Thank you.

@ATMCAssociates projects and divisions can be used side-by-side. They are not mutually exclusive.

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@lubos what about VAT?

The next version will exclude taxes from project income / expenses.

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