Advanced BillingLesson 5

Using Prices and Rates in Billing

Back to P120: Project Accounting Basic Scenarios

Lesson 5: Using Prices and Rates in Billing

Part 2: Advanced Billing

This lesson explains how you can configure a billing rule to be used for billing customers for different services provided for the project with different billing rates.

Billing Rates: General Information

You must establish an adequate pricing model in the project that you are managing to ensure that business outcomes are met, the project budget is used effectively, and project revenues and costs are properly balanced. In Acumatica ERP, you can implement virtually any pricing model by using billing rates for configuring complex billing rules.

Learning Objectives

In this lesson, you will learn how to do the following:

  • Create a rate table code and rate type
  • Define a rate sequence
  • Define a rate table with particular rates
  • Use billing rates for billing projects with different billing rates

Applicable Scenarios

You configure and use billing rates if you need to perform project billing so that the system applies the appropriate rate based on the dates when the work has been performed, as well as any of the following factors:

  • Particular projects and project tasks
  • Specific account groups
  • Certain inventory items
  • Specific employees

Billing Rate Configuration

A billing rate is an exact value used for calculating the amount and quantity of the invoice lines that are created by the billing rule steps of the Time and Material type. The process of defining a billing rate includes the configuration of rate table codes, rate types, rate codes, and rate sequences. A rate table is a set of billing rates that the system uses in the formulas of the billing rules during the billing of a project. A billing rate is defined for a particular date range; a rate table may include multiple rates with different effective dates. You can create a single rate table with multiple rate sequences and rate codes to be used for all projects, or define multiple rate tables to maintain different pricing models for the projects based on different factors. For example, you can create different rate tables and select the rate table to be used for the project depending on whether a customer of a project is a local one or international one. In a rate table, for each rate type, you can define any number of rate sequences that include multiple factors that may affect the rates. These factors can include specific projects, project tasks, employees, account groups, and inventory items. You narrow the applicability of the rate based on the combination of factors you select. For example, you can configure a separate billing rate for particular tasks of specific projects if particular employees work on these project tasks. Also, in each rate table, you can add rate codes, which represent an additional dimension in a rate table that you use to simplify the configuration of the rate table. By using multiple rate codes with one sequence, you can reduce the number of sequences that need to be configured for each pair of a rate table and a rate type. For example, instead of creating multiple sequences, each including the applicable rates for a particular employee, you can create only one rate sequence with the Employee check box selected on the Rate Lookup Rules (PM205000) form and create separate rate codes for each employee. As another example, suppose that you want to use different rates for three projects. Instead of creating multiple sequences with the Project check box selected in the table on the Rate Lookup Rules form and specifying a rate for each sequence under one rate code, you can use only one sequence and three rate codes to define different rates for these three projects.

Workflow of Rate Table Configuration

You configure a rate table with rates by performing the following general steps:

  1. You create a rate table code on the Rate Table Codes (PM204200) form.
  2. You create a new rate type on the Rate Types (PM204100) form. Before creating the rate type, you need to plan how many and which rate types you will need in billing and allocation rules. (Typically, different rates are used for the billing of labor costs, revenues, and expenses.) When you configure billing or allocation rules, you will assign different rate types to different steps of these rules.
  3. On the Rate Lookup Rules (PM205000) form, you create rate sequences for each combination of rate table code and rate type. Each sequence defines a group of options based on which the system will select the billing rate. You can select any combination of the Project, Project task, Account group, Inventory item, and Employee options. The sequence number specified in the Sequence column in the table defines the order in which the system will search for the rate in that row (starting from the sequence with the lowest number in the table).
  4. On the Rate Tables (PM206000) form, for each combination of rate table code, rate type, and rate code, you select a rate sequence in the Sequence box. You select an existing rate code, or you create a new rate code by entering a new identifier in the Rate Code box. For the selected rate sequence, in the table on the Rate tab, you enter the exact values of billing rates with the date range during which the rates are effective. Also, on the tabs that appear for the types of factors that were defined in the rate sequence, you specify the specific factors that will define the applicability of the rates that you enter for the current rate sequence. These factors may include particular projects, project tasks, account groups, inventory items, and employees. Also, you specify the exact values of the billing rates with their date ranges in the Rate column on the Rate tab; the system will use these rates as the value of the @Rate parameter.
  5. On the Billing Rules (PM207000) form, you create a billing rule and assign particular rate types to billing steps. In the billing rule steps, you use the @Rate parameter to refer to a particular billing rate in the billing rule formulas. In each billing rule step, you can specify this parameter as a multiplier, addend, or constant in the Invoice Description Formula, Line Quantity Formula, Line Amount Formula, and Line Description Formula boxes on the Billing Rules form.
                   You can also assign rate types to allocation rules steps on the Allocation Rules (PM207500)
               form. Then you specify the @Rate parameter in the formulas of the allocation rule so that
               the system will use its value during transaction allocation. You can specify the parameter in
               the Quantity Formula, Billable Qty. Formula, Amount Formula, and Description Formula
               boxes on the Allocation Rules form.
  6. On the Projects (PM301000) form, you assign a particular rate table to each of the project tasks of the project.

Billing Rates: To Create a Billing Rule with Rates

In the following implementation activity, you will learn how to create a billing rule that uses rate tables for the calculation of the invoice amounts for different account groups.

Story

Suppose that you are Pam Brawner, the project accountant of the SweetLife Fruits & Jams company. You need to create a billing rule to be used for billing customers for the different services provided for the project with different billing rates based on the following requirements:

  • The billing amount of expenses for materials should be calculated based on the quantity of the materials and the price of the corresponding inventory item.
  • The billing amount of expenses for employee labor should be calculated based on the amount and the billing rate of the labor (which also depends on the project task for which the labor has been performed).
  • The billing amount of services provided by subcontractors should be calculated based on the amount of the project transaction with the fixed 1.25 margin coefficient.

Configuration Overview

In the U100 dataset, the following tasks have been performed to support this activity:

  • On the Enable/Disable Features (CS100000) form, the Project Accounting feature has been enabled to support the project accounting functionality.
  • On the Account Groups (PM201000) form, the MATERIAL, LABOR, and SUBCON account groups of the expense type have been configured. These account groups will aggregate the expenses posted to particular GL accounts.

Process Overview

You will create a billing rule on the Billing Rules (PM207000) form for billing a project by rates.

Step 1: Configuring a Billing Rule Step with Billing Based on the Item Price To configure a billing rule and add the first step to it, do the following:

  1. On the Billing Rules (PM207000) form, create a new record.
  2. In the Summary area, specify RATERULE as the Billing Rule ID and Billing for time and material with rates as the Description.
  3. In the Billing Steps table, add a row for the billing rule step, and specify the following settings in the row:
  • Active: Selected
  • Step ID: 10
  • Description: Billing for materials (cost with markup)
  1. In the right pane, specify the following settings for the step selected in the le pane:
  • Billing Type: Time and Material
  • Account Group: MATERIAL This step of the billing rule will be used for processing project transactions related to the account group, which includes expenses for materials.
  • Rate Type: Empty This step of billing rule does not use billing rates, so the rate type is not needed.
  • Invoice Description Formula: ='Invoice for '+PMProject.ContractCD The system uses this formula to define the description of any invoice that is created based on the billing rule. The PMProject.ContractCD data field stores the project identifier.
  • Line Quantity Formula: =PMTran.BillableQty
  • Line Amount Formula: =PMTran.BillableQty*@Price The invoiced amount is calculated as the quantity of the project transaction multiplied by the price of the related inventory item.
  • Line Description Formula: =PMTran.Description
  • Use Sales Account From: Inventory Item
  • Create Lines with Zero Amount and Quantity: Cleared
  1. Save your changes.

Step 2: Configuring a Billing Rule Step with Billing Based on the Billing Rate Add the second step to the billing rule as follows:

  1. While you are still reviewing the RATERULE billing rule on the Billing Rules (PM207000) form, in the Billing Steps table, add a row for the second billing rule step, and specify the following settings in the row:
  • Active: Selected
  • Step ID: 20
  • Description: Labor from non-stock price
  1. In the right pane, specify the following settings for the step selected in the le pane:
  • Billing Type: Time and Material
  • Account Group: LABOR This step of the billing rule will be used for processing project transactions related to the account group, which includes employee labor expenses.
  • Rate Type: LABOR This step of billing rule will receive the value of the @Rate parameter based on the selected rate type.
  • Invoice Description Formula: ='Invoice for '+PMProject.ContractCD The system uses this formula to define the description of any invoice that is created based on the billing rule. The PMProject.ContractCD data field stores the project identifier.
  • Line Quantity Formula: =PMTran.BillableQty
  • Line Amount Formula: =PMTran.Amount*@Rate The invoiced amount is calculated as the amount of the project transaction multiplied by the rate for the labor specified in the appropriate rate table assigned to the project task being billed.
  • Line Description Formula: =PMTran.Description
  • Use Sales Account From: Inventory Item
  • Create Lines with Zero Amount and Quantity: Cleared
  1. Save your changes.

Step 3: Configuring a Billing Rule Step with Fixed-Price Billing Add the third step to the billing rule, which is for billing expenses on services provided by subcontractors at a fixed rate as follows:

  1. While you are still reviewing the RATERULE billing rule on the Billing Rules (PM207000) form, in the Billing Steps table, add a row for the third billing rule step, and specify the following settings in the row:
  • Active: Selected
  • Step ID: 30
  • Description: Re-bill subcontractors
  1. In the right pane, specify the following settings for the step selected in the le pane:
  • Billing Type: Time and Material
  • Account Group: SUBCON This step of the billing rule will be used for processing project transactions related to the account group, which includes services provided by subcontractors.
  • Rate Type: Empty This step of billing rule does not use billing rates, so the rate type is not specified.
  • Invoice Description Formula: ='Invoice for '+PMProject.ContractCD The system uses this formula to define the description of any invoice created based on the billing rule. The PMProject.ContractCD data field stores the project identifier.
  • Line Quantity Formula: =PMTran.BillableQty
  • Line Amount Formula: =PMTran.Amount*1.25 The invoiced amount is calculated as the amount of the project transaction multiplied by the fixed 1.25 coefficient.
  • Line Description Formula: =PMTran.Description
  • Use Sales Account From: Inventory Item
  • Create Lines with Zero Amount and Quantity: Cleared
  1. Save your changes.
    You have configured a billing rule that can be used for billing a project by using different billing rates that apply to different provided work and services. To bill a project by using this rule, you need to assign the rule to the project tasks of the project.

Billing Rates: To Bill a Project with Different Billing Rates

In this activity, you will bill a project with different billing rates to be used for the billing of different services provided in the project.

Story

Suppose that the Thai Food Restaurant customer has bought a juicer from the SweetLife Fruits & Jams company and ordered employee training from the company on how to use the juicer. SweetLife's project accountant, Pam Brawner, has created a project to account for the provided services. The training has taken place. Acting as the project accountant, you need to bill the customer for the different services provided for the project with different billing rates.

Configuration Overview

In the U100 dataset, the following tasks have been performed to support this activity:

  • On the Enable/Disable Features (CS100000) form, the Project Accounting feature has been enabled to provide the project accounting functionality.
  • On the Rate Tables (PM206000) form, the STANDARD rate table, with rates for labor and materials, has been configured.
  • On the Billing Rules (PM207000) form, the TIMEMATERIAL billing rule has been created. The billing rule includes the steps that have been configured for billing project transactions related to different account groups. (For an example of billing rule configuration, see Billing Rates: To Create a Billing Rule with Rates.)
  • On the Customers (AR303000) form, the TOMYUM customer has been defined.
  • On the Non-Stock Items (IN202000) form, the INSTALL, JUICER15, SITEREVIEW and TRAINING non-stock items have been created.
  • On the Projects (PM301000) form, the TOMYUM3 project for the TOMYUM customer has been created. On the Tasks tab of this form, the PHASE1 and PHASE2 project tasks has been configured and the TIMEMATERIAL billing rule and the STANDARD rate table are assigned to these project tasks. In the project, the Create Pro Forma Invoice on Billing check box is selected to indicate that when project billing is run, pro forma invoices are generated to be sent to the customer for acceptance before the accounts receivable invoices are prepared.
  • On the Project Transactions (PM304000) form, the PM00000002 project transaction related to the project has been created and released in preparation for billing.

Process Overview

You will bill the project on the Projects (PM301000) form and review the pro forma invoice amounts on the Pro Forma Invoices (PM307000) form.

Step 1: Billing the Project and Processing the Related Documents To bill the project by using the time and material billing rule, do the following:

  1. Open the Project Transaction Details (PM401000) form.
  2. In the Selection area of the form, select TOMYUM3 as the Project, and make sure that the other boxes are cleared. The table lists the related project transactions:
  • The line with the INSTALL item in the amount of $320
  • The line with the JUICER15 item in the amount of $2000
  • The line with the SITEREVIEW item in the amount of $80
  • The line with the TRAINING item in the amount of $320 Notice that in all lines, the Billable check box is selected and the Billed check box is cleared, indicating that the project is pending billing.
  1. On the Projects (PM301000) form, open the TOMYUM3 project. Notice that the Actual Expenses box in the Summary area shows $2,720 (which is the total of the processed project transactions), while Actual Income box contains 0 because the project has not been billed yet.
  2. On the form toolbar, click Run Billing. The system creates a pro forma invoice and opens it on the Pro Forma Invoices (PM307000) form. On the Time and Material tab of this form, review the four lines of the pro forma invoice (which have been created based on unbilled transactions). In each line, the system calculates Billed Quantity and Billed Amount by using the formula specified in the corresponding step of the billing rule. The following lines have been added to the pro forma invoice:
  • The INSTALL and TRAINING lines have been billed by the 20 – Labor from non-stock price step, which has been configured for the LABOR account group; the billed amount for each line has been calculated based on the @Rate parameter defined in the STANDARD rate table for the LABOR rate type (which is 1.25). The calculated billing amount is $400 (320*1.25) for both lines.
  • The JUICER15 line has been billed by the 10 – Material cost plus markup step, which has been configured for the MATERIAL account group; the billed amount has been calculated based on the billable quantity (1) and the @Price parameter (which is the sales price of the JUICER15 item, $2500). The calculated billing amount is $2500.
  • The SITEREVIEW line has been billed by the 30 – Re-invoice subcontractors step, which has been configured for the SUBCON account group; the billed amount has been calculated by multiplying the transaction amount by the fixed coefficient (1.25). The calculated billing amount is $100 (1.25 * $80). The unit price in each pro forma invoice line is calculated as the billed amount divided by the billed quantity.
  1. On the form toolbar, click Remove Hold to assign the pro forma invoice the Open status, and then click Release to release the pro forma invoice. The system closes the pro forma invoice (which is now assigned the Closed status) and creates a corresponding accounts receivable invoice based on the pro forma invoice.
  2. On the Financial tab, click the AR Ref. Nbr. link to open the accounts receivable invoice that was created on the Invoices and Memos (AR301000) form.
  3. On the form toolbar of the Invoices and Memos form, click Remove Hold to assign the invoice the Balanced status, and then click Release to release the accounts receivable invoice.

Step 2: Reviewing the Project Transactions and the Updated Project Balance To review the project transactions and project balance, do the following:

  1. On the Project Transaction Details (PM401000) form, in the Summary area, select TOMYUM3 as the Project. In the table, review the project transactions that have been created based on the released accounts receivable invoice (these are the lines that have AR specified in the Module column and that have negative amounts). In the GL Batch Nbr. column, the reference number of the corresponding GL batch is shown. Also notice that the project transactions based on which you have performed billing now have the check box in the Billed column selected, indicating that these transactions have been billed.
  2. On the Projects (PM301000) form, open the TOMYUM3 project. Notice that in the Summary area, the Actual Income box now shows $3,400, which is the total amount of the invoice that you have processed. On the Revenue Budget tab, notice that the system has automatically created two revenue budget lines (one for each project task) and filled in the Actual Amount for the rows (3,000 and 400).
  3. On the Balances tab (see the following screenshot), review the project income and expenses aggregated by account groups.
    Figure: The project balances aer project billing

You have billed the project based on the different billing rates specified for different types of expenses. Part 3: Budgets and WIP Costs | 43