Back to P120: Project Accounting Basic Scenarios

Lesson 9: Tracking Changes to the Budget

Part 5: Single-Tier Change Management

This lesson explains how to turn on the change order workflow for a project and how to process a change order to

update the project budget based on a customer's request. You will also learn how to reflect these changes at the project budget level.

Single-Tier Change Management: General Information

Acumatica ERP provides change order functionality, which you can use to track changes to project's budgeted and committed values and to control the profitability of every change initiated by a customer. A change order is a document for profitability analysis and an audit of changes to the project revenue budget, commitments, and budgeted costs. Change orders do not alter the original figures of a project directly. They are tracked in separate project budget columns.

Learning Objectives

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

Configure a change order class
Create a change order for a project
Update the project budget with the change order
Review the changes made with change orders in the project budget
Prevent direct purchases for the project

Applicable Scenarios

You turn on the change order workflow for a project if you want to control changes made to the budgeted and committed values of the project budget and to track these changes at the budget level. To make changes to the project budget, you create change orders that do not alter the original budgeted and committed values. You prevent the direct creation of purchase orders for the project if you want to create new purchase orders only by means of change orders to track these purchases as changes to the project budget.

Change Order Classes

A change order class defines which project data—the revenue budget, the cost budget, or commitments—can be adjusted with a change order of this class. You must specify a change order class for each change order you create, so you first need to configure change order classes on the Change Order Classes (PM203000) form. To allow users to make changes to the project budget by using a change order of a particular class, on the Change Order Classes form, you select any combination of the following check boxes for the change order class:

Revenue Budget: To allow changes to the revenue budget
Cost Budget: To allow changes to the cost budget
Commitments: To allow changes to committed values. For more information, see Change Orders for Commitments: General Information. Change order classes also make it possible to group change orders by their impact on projects. For example, you can segregate changes by class in reports to analyze which types of changes have the greatest impact on project profitability. Once you have created change order classes, you specify the change order class to be used by default in newly created change orders in the Default Change Order Class box on the General tab of the Projects Preferences (PM101000) form. In a new change order, you can override the change order class that the system has inserted by default. If no default change order class has been specified on the Projects Preferences form, you must select the change order class manually on the Change Orders (PM308000) form.

Change Order Workflow

To make it possible for users to track changes for a project by using change orders, you select the Change Order Workflow check box on the Summary tab of the Projects (PM301000) form for the project. You need to select this check box for each project for which you want to turn on the change order workflow. Once you have selected this check box for a project, you create a change order for the project on the Projects form by clicking Create Change Order on the More menu. The system creates a change order with the On Hold status and the project selected and opens it on the Change Orders (PM308000) form. In a change order with the On Hold status, on the Revenue Budget and Cost Budget tabs of the Change Orders form, you can increase and decrease values in existing project budget lines as well as create new budget lines. When you edit a change order line, you can see the following values: the original budgeted amount in the Original Budgeted Amount column; the released and dra change order (CO) amounts in the Previously Approved CO Amount and Other Dra CO Amount columns, respectively; and the updated budgeted amount in the Revised Budgeted Amount column. When a change order is saved with the On Hold status, the Quantity and Amount values of a revenue budget line or cost budget line of the change order increase the Potential CO Quantity and Potential CO Amount of the corresponding revenue budget line or cost budget line of the project on the Projects form. A change order can be printed or emailed to the customer. To print the change order, on the More menu of the Change Orders form, you click Print. To email the change order, on the More menu of the same form, you click Email. When a change order is released, the Potential CO Quantity and Potential CO Amount of the corresponding budget lines are decreased and the Budgeted CO Quantity and Budgeted CO Amount are increased on the Projects form. The change order is assigned the Closed status.

          You can cancel a change order by clicking Cancel on the form toolbar of the Change Orders form to
          indicate that the changes will not be processed further. The system assigns the change order the
          Canceled status and decreases the potential CO values of the corresponding revenue budget lines and
          cost budget lines of the project on the Projects form.

Workflow of Managing Changes to the Project Budget

The following diagram illustrates the workflow of managing changes to the project budget.

Update of the Project Budget when a Change Order Is Released

When a change order is released, the budgeted values of the corresponding project on the Projects (PM301000) form are updated as follows:

If the project has a revenue budget line with the same project task, account group, and inventory item as a revenue budget line of the change order, the system updates the following columns of the revenue budget line of the project on the Revenue Budget tab, with the column values computed as noted:
Budgeted CO Quantity = The total quantity of released change orders
Budgeted CO Amount = The total amount of released change orders
Revised Budgeted Quantity = Original Budgeted Quantity + Budgeted CO Quantity
Revised Budgeted Amount = Original Budgeted Amount + Budgeted CO Amount

Pending Invoice Amount = Revised Budgeted Amount * Completed (%) / 100 – Actual Amount – Dra Invoice Amount

                   As the result of the update of the Pending Invoice Amount, the amount can be a rational
                   value, including a negative one.

If the project has a cost budget line with the same project task, account group, and inventory item as a cost budget line of the change order, the system updates the following columns of the cost budget line of the project on the Cost Budget tab, with the column values calculated as follows:
Budgeted CO Quantity = The total quantity of released change orders
Budgeted CO Amount = The total amount of released change orders
Revised Budgeted Quantity = Original Budgeted Quantity + Budgeted CO Quantity
Revised Budgeted Amount = Original Budgeted Amount + Budgeted CO Amount
If the project does not have a revenue or cost budget line with the same project task, account group, and inventory item as a revenue or cost budget line of the change order, the system creates a new revenue or cost budget line for the project based on the revenue or cost budget line of the change order. In this newly created budget line, the unit rate is copied from the corresponding change order line.

Single-Tier Change Management: To Track Changes to the Project Budget

In this activity, you will learn how you can turn on the change order workflow for a project and manage changes to the project’s budgeted values by creating change orders.

Story

Suppose that the Thai Food Restaurant customer has ordered two juicers, along with eight hours of the installation service from the SweetLife Fruits & Jams company. SweetLife's project accountant has created a project and configured the revenue and cost budgets based on the agreement reached with the customer. During project execution, the customer requests one more juicer, along with the installation, as a part of the same project. The project accountant has estimated that the installation of this additional juicer will require five hours of the installation service. Also, the project accountant has decided to track these changes to the project at the budget level because the installation of the third juicer was not planned initially. Acting as the project accountant, you will turn on the change order workflow for the project to be able to track changes to the project budget. Then you will create a change order to update the project budget according to the customer's request and to reflect these changes at the project budget level.

Configuration Overview

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

On the Enable/Disable Features (CS100000) form, the following features have been enabled:
Project Accounting, which provides support for the project accounting functionality
Change Orders, which gives you the ability to manage changes to the project’s budgeted and committed values
On the Projects (PM301000) form, the TOMYUM6 project has been created and the INSTALL project task has been created for the project.
On the Change Order Classes (PM203000) form, the DEFAULT change order class has been created.
On the Projects Preferences (PM101000) form, the DEFAULT change order class has been selected in the Default Change Order Class box on the General tab (General Settings section).

Process Overview

In this activity, you will turn on the change order workflow for the project on the Projects (PM301000) form. Then you will create and process a change order for the project on the Change Orders (PM308000) form. Finally, you will review how the changes have aﬀected the values in the project budget.

Step 1: Turning on the Change Order Workflow for the Project To turn on the change order workflow for the project, which makes it possible to create change orders for the project, do the following:

On the Projects (PM301000) form, open the TOMYUM6 project.
On the Summary tab, select the Change Order Workflow check box to turn on the change order workflow for the project.
Save your changes to the project. Since you turned on the change order workflow for the project, the Revised Budgeted Quantity and Revised Budgeted Amount columns on the Revenue Budget and Cost Budget tabs have become read- only. Now you can make changes to these values only by using the change orders.

Step 2: Creating a Change Order for the Project To make changes to the project budget by creating a change order, do the following:

While you are remaining on the Projects (PM301000) form with the TOMYUM6 project selected, on the More menu, click Create Change Order. The system creates a change order for the project and opens it on the Change Orders (PM308000) form. Notice that the system has automatically selected the DEFAULT change order class for the change order because this class is the default change order class specified on the Projects Preferences (PM101000) form.
In the Summary area of this form, in the Description box, enter One more juicer with installation requested by the customer.
On the Revenue Budget tab, click Add Row on the table toolbar and specify the following settings in the row:

Project Task: INSTALL
Account Group: REVENUE
Description: Additional juicer with installation
Amount: 2900 When you enter the Amount of the line, which represents the additional revenue, the system calculates the Revised Budgeted Amount as the sum of the Original Budgeted Amount and the Amount.

On the table toolbar of the Cost Budget tab, click Add Budget Lines.
In the Add Budget Lines dialog box, which opens, select the unlabeled check box for both cost budget lines, and click Add Lines & Close. The system closes the dialog box and adds the selected lines to the change order.
In the added budget line with the LABOR account group (which is the line for the INSTALL item), enter 5 in the Quantity column.
In the line with the MATERIAL account group (which is the line for the JUICER15 item), enter 1 in the Quantity column. The system automatically calculates the Amount value based on the Unit Rate value of the line, which is inherited from the project budget line. In the line, the system also calculates the Revised Budgeted Quantity value as the sum of the Original Budgeted Quantity and Quantity values, and it calculates the Revised Budgeted Amount value as the sum of the Original Budgeted Amount and Amount values. When you specify changes to the project budget, the revenue budget change total in the Summary area becomes $2,900 and the cost budget change total becomes $2,400. Until you release the change order, these changes will not aﬀect the project budget.
Save your changes to the change order.
On the More menu, click Print to print the change order. The system navigates to the Change Order (PM643000) report, which is a ready-to-print version of the change order. The printed form lists the revenue budget lines of the change order, which the customer might need to review and agree to. 10.Click Back in the browser tab to return to the change order on the Change Orders form. 11.On the form toolbar, click Remove Hold to assign the change order the Open status. Then click Release to release the change order. 12.On the Projects form, open the TOMYUM6 project. 13.On the Change Orders tab, make sure the change order you have created is shown. The change order has the Closed status. 14.On the Cost Budget tab, review the cost budget lines that have been updated by the change order you have processed (see the screenshot below). The system has calculated the Revised Budgeted Quantity as the sum of the Original Budgeted Quantity and the Budgeted CO Quantity, and it has calculated the Revised Budgeted Amount as the sum of the Original Budgeted Amount and the Budgeted CO Amount (see the following screenshot). The Budgeted CO Quantity and Budgeted CO Amount are the quantity and amount of the change order.
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   Figure: The cost budget updated with the change order
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You have processed a change order for the project.