Back to P200: Project Accounting Extended Scenarios

Lesson 11: Configuring Labor Cost Rates

Part 5: Time and Expenses

This lesson describes how to create a labor non-stock item that will be used in projects and how to define the labor cost rates to be used for billing projects.

Labor Items: General Information

Among other items your company sells, it may sell the labor of its employees. In Acumatica ERP, you can define a certain type of labor available for sale (that is, a type performed regularly by your company) by creating a labor item. A labor item is a non-stock item containing information that includes the default price and the sales account to be used for transactions. Labor items are used in projects for recording information on the hourly rates of the applicable employees, the GL accounts used for tracking labor in projects, and the taxes that apply to this labor.

Learning Objectives

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

Prepare the system for the configuration of labor items
Create a new labor item
Assign a labor item to an employee
Configure labor cost rates for an employee

Applicable Scenarios

You may need to create a labor item in any of the following cases:

When you are going to track the cost of employees' labor in a particular project
When you need to sell the same type of labor at diﬀerent prices
When you are going to add a new type of expenses to projects

Labor Item Settings

Non-stock items of the Labor type are used as a source of general ledger accounts for transactions that the system generates in the process of project billing. You create labor items and maintain information about their settings by using the Non-Stock Items (IN202000) form. On this form, you can enter and maintain a variety of settings for a labor item, including the following:

The identifier: You assign every labor item a unique identifier (in the Inventory ID box of the Summary area) based on the INVENTORY segmented key. If you need to change the ID of an existing non-stock item (that is, one that has already been saved), you can click Change ID on the More menu of the Non-Stock Items form.
The item type: The item type is selected in the Type box of the General tab (Item Defaults section). When creating a labor item, you select the Labor item type.
The valuation method: When you select the Labor type for the item, Standard Cost is inserted in the Cost Based On box of the Price/Cost tab (Cost Accrual section).

Units of measure (UOMs): For each labor item, in the Unit of Measure section of the General tab, you can select the unit of measure used as the base unit for the item.

               The system must be able to convert the base unit of measure of the labor item into minutes.
               That is, the conversion rule from a minute to the base unit of measure selected for the labor
               item must be specified in the table. For more information about how the system selects the
               unit conversion rules, see Project Transactions: Update of the Project Budget Structure.

General ledger accounts: Each labor item must have the expense account specified on the GL Accounts tab; the expense account must be mapped to the appropriate account group. If needed, you can also specify sales and expense accrual accounts.
Price information: On the Price/Cost tab, you can specify settings related to the price and cost of the item, including the default price defined for a labor item (in the Default Price box of the Price Management section), which is used as the unit rate in the revenue budget lines.
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               Make sure that Purchases is selected in the Post Cost to Expenses box on the Price/Cost tab;
               otherwise, the expenses related to the non-stock item will not be recorded to the cost budget
               of the applicable project.
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To ensure that the system will be able to obtain the required settings from each labor item when an invoice is generated, you need to associate this labor item with the appropriate entity (that is, an employee, a case, a project, or a contract), which may depend on the type of the billing process that you use. If no labor items are specified for the entities associated with the invoice, the system will not generate the invoice.

Labor Items in Time Cards

You can use time tracking for your activities to facilitate the process of labor tracking and costing. For instance, with time activities, you can bill projects based on the billable time spent on related activities. In Acumatica ERP, to account for work hours and overtime hours spent on projects, employees use time cards. To calculate the cost of labor, the system uses the labor cost rates defined for each employee on the Labor Rates (PM209900) form. The cost of overtime labor is calculated based on the employee work hour rates multiplied by the factor specified in the Multiplier column of the Overtime earning type on the Earning Types (EP102000) form. For more information, see Employee Time Billing: General Information.

Labor Items: To Configure a Labor Item

This activity will walk you through the process of configuring a labor non-stock item that will then be used for billing employee labor within projects.

Story

Suppose that you, as an implementation manager, are updating the system configuration for the SweetLife Fruits & Jams company. To be able to bill the customers for the provided labor within the projects, you need to create a labor item that will represent the repair service for juicers provided by a particular employee, Eric Killian, for SweetLife customers who have purchased juicers.

Process Overview

You will create a non-stock item representing the repair labor on the Non-Stock Items (IN202000) form and specify the item’s settings, including the expense account that has been mapped to an appropriate account group. You will also specify the default price for the item. Then on the Employees (EP203000) form, you will assign this labor item to the employee who will perform the repair work.

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 Chart of Accounts (GL202500) form, the 54600 – Repair Expense account has been defined and mapped to the MAINTSERV account group, which has been defined on the Account Groups (PM201000) form.
On the Posting Classes (IN206000) form, the NONSTOCK posting class has been defined.
On the Employees (EP203000) form, the EP00000006 – Eric Killian employee record has been created.

System Preparation

To prepare to perform the instructions of the activity, sign in to the system as system administrator by using the gibbs username and the 123 password.

Step 1: Creating the Labor Item To create the labor item that will be used to represent repair services, perform the following instructions:

On the Non-Stock Items (IN202000) form, add a new record.
In the Summary area, specify the following settings:

Inventory ID: JUICERREPAIR
Description: Juicer repair (at the customer's place)

On the General tab, specify the following settings:

Type: Labor
Posting Class: NONSTOCK Based on the settings of the NONSTOCK posting class, the system will use the GL accounts specified for the inventory item.
Tax Category: EXEMPT
Base Unit: HOUR
Sales Unit: HOUR
Purchase Unit: HOUR

In the Default Price box on the Price/Cost tab, enter 80.
On the same tab, make sure Purchases is selected in the Post Cost to Expenses On box.
On the GL Accounts tab, specify the following accounts:

Expense Accrual Account: 11010 (AR Accrual Account)
Expense Account: 54600 (Repair Expenses)
Sales Account: 40000 (Sales Revenue)

On the form toolbar, click Save.

Step 2: Assigning the Labor Item to an Employee To assign the labor item you have created to the employee who will perform the labor, perform the following instructions:

On the Employees (EP203000) form, open the EP00000006 – Eric Killian employee record.
In the Labor Item box on the General tab, select JUICERREPAIR.
Save your changes to the employee record.
You have created the labor item to be used for repair service and specified an expense account that is mapped to a particular account group. You also have associated this labor item with the particular employee who will perform this work.

Labor Items: Labor Cost Rates

In Acumatica ERP, you can define labor rates, which are used to determine the cost of employee time spent on a particular project, and bill the customers based on this cost. The following sections explain how the labor cost rates are specified and retrieved in projects.

Creation of Labor Cost Rates

On the Labor Rates (PM209900) form, you can define labor cost rates that are specific to particular entities, such as the employee, project, project task, labor item, date, union local, certified job, and workers' compensation code. When you define a labor cost rate, you specify its type, the rate, and an optional description and external reference number of the rate. Based on the type you select, particular columns become available so you can specify the particular entity the rate applies to and other relevant details. In the Type column of the Labor Rates form, you select one of the following options:

Labor Item: If you select this type, in the row, you must also select the labor item and the rate.
Employee: If you select this type, in the row, you must select the employee and the rate; optionally, you can also select a particular labor item to which the rate applies.
Project: If you select this type, in the row, you must select the project and the rate. Optionally, you can select any of the following to which the rate applies: the project task, the employee, and the labor item.
Union Wage: If you select this type, in the row, you must select the applicable union local and labor item. You might define a rate of this type if an employee is a member of a local branch of a union; in this case, the union requires the company to pay the dictated union rate, which is usually higher than the prevailing wage rate.
Prevailing Wage: If you select this type, in the row, you must select the project and labor item. You might define a rate of this type if a government entity requires the construction companies to pay a non-union employee no less than the dictated prevailing wage rate. The prevailing wage is a government mechanism to equalize the wage rates that are paid by a construction company to non-union workers compared to labor union workers for the same type of work performed for a certified job. (A certified job is a job performed for government, such as a construction project of a municipal building.) For each labor cost rate, regardless of its type, you specify the eﬀective date. If there are multiple labor cost rates with the same settings, the system uses the rate with the most recent eﬀective date that precedes the current date. You can also create a labor cost rate with the same settings as an existing labor cost rate but with an eﬀective date that is later than the latest eﬀective date of the existing labor cost rate.

Units of Measure in Labor Cost Rates

When you specify the rate for a row with a labor item selected on the Labor Rates (PM209900) form, you specify the rate for the base unit of measure (UOM) of the labor item. The base UOM of the labor item should be convertible into minutes so that the system can convert the base UOM to a minute. That is, there should be conversion rules from a minute to the base UOM and from the base UOM to a minute on the Units of Measure (CS203500) form. When you create a labor cost rate for a labor item with a base UOM that is not an hour, make sure that you enter the rate for the base UOM of the labor item on the Labor Rates form so that the system calculates the correct amount when a time activity with this labor item is released. For example, suppose that you have the TRAINING labor item, whose base UOM is UNIT. According to the conversion rules specified on the Units of Measure (CS203500) form, one unit equals four hours. On the Labor Rates form, when you add a labor cost rate with an employee and the TRAINING labor item, you should specify the rate in the base UOM, which is UNIT. When the employee enters a time card on the Employee Time Cards (EP305000) form and selects the TRAINING labor item in a time activity on the Activity (CR306010) form, the time is reported in hours even though the base UOM of the selected item is not an hour. When the time card with the corresponding time activities is released, the system generates a project transaction with the TRAINING labor item in the base UOM of the item. If the employee has reported eight hours, the project transaction will contain two TRAINING units.

Time Card Population

When you create a time card on the Employee Time Cards (EP305000) form, for each line, you select the employee, project, project task, labor item, date, union local, certified job, and worker compensation code. In a time card, the system automatically populates the Union Local column with the union local copied from the settings of the employee specified on the General Info tab of the Employees (EP203000) form if the employee’s union local specified is one of the union locals of the project specified on the Union Locals tab of the Projects (PM301000) form, or if the project has no union local. Otherwise, the system leaves the column blank. The system automatically selects the Certified Job check box in the time card line if for the corresponding project, the Certified Job check box is selected in the Project Properties section on the Summary tab of the Projects form. In a time card, you can override the automatically selected Certified Job and Union Local settings, if needed.

Retrieval of Labor Cost Rates

For each time card line on the Employee Time Cards (EP305000) form, the system retrieves the cost rate from the labor cost rate table on the Labor Rates (PM209900) form as follows:

Among labor cost rates of the Project, Employee, and Labor Item rate types, the system selects the most specific existing labor cost rate among the defined labor cost rates that matches all the settings specified in the time card line and is eﬀective on the date of the document. The system looks for the following sets of settings that match the time card settings and uses the first set it finds:

The Project rate type, project, project task, employee, and labor item
The Project rate type, project, project task, and employee
The Project rate type, project, project task, and labor item
The Project rate type, project, and project task
The Project rate type, project, employee, and labor item
The Project rate type, project, and employee
The Project rate type, project, and labor item
The Project rate type, and project
The Employee rate type, employee, and labor item
The Employee rate type, and employee
The Labor Item rate type, and labor item

For the time card line, if the Certified Job check box is selected and a Union Local is specified, the system selects the Union Wage and Prevailing Wage rate types that match the settings specified in the time card line. Then the system compares the most specific labor cost rate that has been found in the previous step with the selected labor cost rates of the Union Wage and Prevailing Wage rate types. Based on the comparison, the system selects the higher labor cost rate.
If there are multiple labor cost rates with the same settings, the system uses the rate with the actual eﬀective date corresponding to the date of the time card line in the time zone in which the time card line was reported.

Labor Items: To Define Labor Cost Rates

In the following implementation activity, you will learn how to define labor cost rates.

Story

Suppose that in the SweetLife Fruits & Jams company, the price of the consulting services depends on the qualifications of the consultant who provides the service. Acting as SweetLife's project manager, you need to define the labor cost rates that will become eﬀective on January 1, 2025, for three of your company's consultants:

Pam Brawner, a project manager, whose work rate is $48 per hour
Jon Waite, a senior consultant, whose work rate is $44 per hour
Alberto Jimenez, a junior consultant, whose work rate is $40 per hour

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.
On the Non-Stock Items (IN202000) form, the CONSULTJR, CONSULTSR, and CONSULTPM labor items have been created; on the Employees (EP203000) form, these items have been assigned to the EP00000004 (Alberto Jimenez), EP00000003 (Jon Waite), and EP00000001 (Pam Brawner) employees, respectively. The base unit of all items is HOUR.

Process Overview

You will define labor cost rates that are based on the employee who performed the work on the Labor Rates (PM209900) form.

System Preparation

To prepare to perform the instructions of the activity, do the following:

Sign in to the system as project accountant by using the brawner username and the 123 password.
In the info area, in the upper-right corner of the top pane of the Acumatica ERP screen, make sure that the business date in your system is set to 1/1/2025. If a diﬀerent date is displayed, click the Business Date menu button, and select 1/1/2025 on the calendar.

Step: Defining Labor Cost Rates To define the needed labor cost rates, do the following:

On the Labor Rates (PM209900) form, to add a new labor cost rate for Alberto Jimenez, click Add Row on the table toolbar, and specify the following settings in the row:

Labor Rate Type: Employee
Employee: EP00000004 (Alberto Jimenez)
Labor Item: CONSULTJR (inserted automatically as the labor item associated with the employee)
Rate: 40
Eﬀective Date: 1/1/2025 (inserted automatically)

To add a labor cost rate for Jon Waite, click Add Row on the table toolbar, and specify the following settings in the row:

Labor Rate Type: Employee
Employee: EP00000003 (Jon Waite)
Labor Item: CONSULTSR (inserted automatically as the labor item associated with the employee)
Rate: 44
Eﬀective Date: 1/1/2025 (inserted automatically)

To add a labor cost rate for Pam Brawner, again click Add Row on the table toolbar, and specify the following settings in the row:

Labor Rate Type: Employee
Employee: EP00000001 (Pam Brawner)
Labor Item: CONSULTPM (inserted automatically as the labor item associated with the employee)
Rate: 48
Eﬀective Date: 1/1/2025 (inserted automatically)

Save your changes to the labor cost rates. The labor cost rates you have defined should look like those shown in the following screenshot. Figure: The added labor cost rates
You have completed configuring labor cost rates.