Back to V300: Project Accounting for Construction

Lesson 3: Processing Subcontracts

Part 1: Project Commitments

In this lesson, you will find information about the processing of subcontracts in the system.

Subcontracts: General Information

In Acumatica ERP Construction Edition, subcontract is a document that represents a commitment with a third- party vendor (subcontractor) to provide services for a project.

Learning Objectives

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

Create a subcontract
Add lines related to a particular project to a subcontract
Enter the accounts payable bill for the subcontract
Review the generated general ledger transactions and project transactions
Review how the processed subcontract aﬀects the project budget

Applicable Scenarios

You enter and process subcontracts for a project when your company hires another company to perform a part of the work for a project.

In general, the Subcontracts (SC301000) form is the starting point for creating a subcontract. In a newly created subcontract, you should first select the vendor (that is, the subcontractor who will provide the services). Then on the Details tab, you list the lines that represent the work and services that will be performed by the subcontractor. For each line, you specify the project budget key—that is, the project, the project task, and, optionally, the inventory ID and cost code—to record this commitment to the cost budget of the project. In a line, you can leave the Inventory ID box empty, or specify a non-stock item that does not require a receipt (that is, an item that has the Require Receipt check box cleared on the General tab of the Non-Stock Items (IN202000) form). You can also add lines from a particular project. To do this, you click the Add Project Items button on the table toolbar of this tab; in the Add Project Items dialog box, which opens, you select the project and the applicable cost budget lines of this project. Once the services have been provided by the subcontractor, you need to process an accounts payable bill. On release of the bill, the system increases the vendor's balance in the system in the amount to be paid for received goods and updates the project's actual amount and quantity. If all the lines in the subcontract have been billed in full, the system assigns the subcontract the Closed status.

          If the Internal Cost Commitment Tracking check box is selected on the General tab of the Projects
          Preferences (PM101000) form, the system tracks subcontracts as commitments to related projects.
          For more information, see Committed Costs: General Information and Change Orders for Commitments:
          General Information.

Workflow of the Processing of a Subcontract

The typical process of working with subcontracts involves the actions and generated documents shown in the following diagram. Subcontracts: Process Activity

This activity will walk you through the process of working with a subcontract.

Story

Suppose that on March 15, 2025, the ToadGreen company hires a subcontractor, Standard Hardware Company, to install windows and doors in the hotel that is being built by ToadGreen. Both parties agree that the Standard Hardware Company will perform the installation of windows, the installation of doors and frames, and the building an entrance. Normally, this subcontractor does not require the printing of documents, but for this subcontract, the construction project manager of the ToadGreen company has decided to create and print the subcontract. On March 25, 2025, when the subcontractor finishes its part of the work and sends an invoice to ToadGreen, ToadGreen’s project manager will create a bill and pay for the provided services. Acting as the construction project manager, you will process all the needed documents in the system.

Configuration Overview

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

On the Enable/Disable Features (CS100000) form, the Construction feature has been enabled.
On the Vendors (AP303000) form, the HARDCO (Standard Hardware Company) vendor has been created.
On the Projects (PM301000) form, the HOTEL project has been created.
On the Non-Stock Items (IN202000) form, the SUBCONTR non-stock item, which represents the work performed by subcontractors, has been created.

Process Overview

To record the work performed by a subcontractor for the project, you will create a subcontract document with the subcontractor (vendor) on the Subcontracts (SC301000) form. Then you will print the subcontract. Aer that, you will create a bill for the provided services on the Bills and Adjustments (AP301000) form, create a payment for the bill on the Checks and Payments (AP302000) form, prepare the check on the Process Payments / Print Checks (AP505000) form, and release it on the Release Payments (AP505200) form.

System Preparation

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

Sign in to the system as a construction project manager by using the ewatson 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 3/15/2025. If a diﬀerent date is displayed, click the Business Date menu button, and select 3/15/2025 on the calendar. For simplicity, in this activity, you will create and process all documents in the system on this business date.

Step 1: Creating a Subcontract To create a subcontract, do the following:

On the Subcontracts (SC301000) form, add a new record.
In the Summary area, specify the following settings:

Vendor: HARDCO (Standard Hardware Company)
Date: 3/15/2025
Start Date: 3/15/2025
Description: Installation of windows, doors, and building of an entrance

On the Details tab, add lines with the following settings.

     Inventory ID    Project         Project Task    Cost Code       Line De-       UOM       Ext. Cost
                                                                     scription

     SUBCONTR        HOTEL           08              08-510          Windows        EA        650000

     SUBCONTR        HOTEL           08              08-200          Doors          EA        442000
                                                                     and
                                                                     frames

     SUBCONTR        HOTEL           08              08-800          Entrance       EA        2000000

In the Summary area, in the Subcontract Total box, make sure that the total is 3,092,000.
On the Financial tab, clear the Do Not Print check box.
On the form toolbar, click Remove Hold to assign the subcontract the Pending Printing status.
On the Projects (PM301000) form, open the HOTEL project.
On the Cost Budget tab, make sure that the committed cost budget lines has been updated with the subcontract line amounts with the same project task and cost code, as shown in the following screenshot. The Original Committed Amount and Committed Open Amount has been increased by the amount in the corresponding subcontract lines.
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   Figure: Cost budget updated with the subcontract amount
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Step 2: Printing the Subcontract To prepare the printable version of the subcontract, do the following:

On the Subcontracts (SC301000) form, open the subcontract that you have created earlier in this activity, and click Print on the form toolbar. The system opens the printable version of the subcontract on the Subcontract (SF) (SC641000) report form.

Review the printable version of the subcontract, and close the browser tab with the printable subcontract to return to the subcontract on the Subcontracts form.

              For the purposes of this activity, you do not need to actually print the subcontract. In a
              production setting, you would click Print on the form toolbar to print the subcontract before
              closing the browser tab.

Press Esc to refresh the form. Notice that the system has changed the subcontract status to Open.

Step 3: Paying for the Performed Work To create the bill to pay for the subcontractor work, do the following:

In the info area, in the upper-right corner of the top pane of the Acumatica ERP screen, set the business date to 3/25/2025.
While you are still on the Subcontracts (SC301000) form, click Enter AP Bill on the form toolbar. The Bills and Adjustments (AP301000) form opens with the prepared accounts payable bill.
On the form toolbar, click Remove Hold to assign the bill the Balanced status, and then click Release to release the bill. On release of the bill for subcontract, the system transfers the billed amount from the Committed Open Amount to the Committed Invoiced Amount in the corresponding cost budget lines on the Cost Budget tab of the Projects (PM301000) form.
On the form toolbar, click Pay. The system prepares a payment and opens it on the Checks and Payments (AP302000) form.
On the form toolbar, click Remove Hold to assign the payment the Pending Print status, and then click Print/Process.

On the Process Payments / Print Checks (AP505000) form, which opens, click Process to process the only selected line, which corresponds to the prepared payment. The system opens a printable version of the check.

              For the purposes of this activity, you do not need to actually print the document. In a
              production setting, you would click Print on the form toolbar to print the check before closing
              the browser tab.

Close the tab with the printable check. The system returns you to the tab with the Release Payments (AP505200) form, which it has opened.
On the Release Payments form, make sure that the unlabeled check box is selected for the only line in the table, and on the form toolbar, click Process to release the AP payment. The system releases the payment and the payment application to the bill.
In the Processing dialog box, which opens, click Close. 10.On the Subcontracts form, again open the subcontract that you have created earlier in this activity, which is now assigned the Closed status. On the Billing tab, review the line that corresponds to the bill that you have prepared for the subcontract. The bill is also assigned the Closed status because it was paid in full.
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   Figure: The closed subcontract
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You have finished processing the subcontract.

Subcontracts: Generated Transactions

To record the services provided by a subcontractor for a particular project and update the balance of the vendor in the system, you create and process a subcontract and an AP bill. On release of the AP bill, the system generates GL transactions and project transactions described in the following sections.

General Ledger Transactions Generated on AP Bill Release

On release of a bill with one subcontract line, a batch of the following general ledger transactions is generated.

Account                           Project and Project Task      Debit Amount         Credit Amount

Accounts Payable account          X (Non-project code)          0.00                 Amount
Account                           Project and Project Task     Debit Amount           Credit Amount

Expense account                   Project and project task     Amount                 0.00
                                  in the subcontract line

The batch created on release of the accounts payable bill is numbered in accordance with the numbering sequence selected in the Batch Numbering Sequence box on the Accounts Payable Preferences (AP101000) form. The batch number is specified on the Financial tab of the Bills and Adjustments (AP301000) form.

Project Transaction Generated on AP Bill Release

On release of a batch created on release of the AP bill, the system generates the project transaction shown in the following table.

Project and Project      Account Group      Cost Code (if      Inventory ID      Debit Account      Amount
Task                                        applicable)

Project and project      Account group      Cost code in       Non-stock item    Expense ac-        Amount
task in the subcon-      mapped to Ex-      the subcon-        in the subcon-    count in the GL
tract line               pense account      tract line         tract line        transaction

You can review the created project transaction on the Project Transaction Details (PM401000) form. In the Selection area of this form, you select the corresponding project in the Project box. In the table, you can find the project transaction with the Bill type in the Orig. Doc. Type column and the reference number of the AP bill in the Orig. Doc. Nbr. column.

Update of the Project Budget Lines

On release of the accounts payable bill created for the subcontract, the system updates the corresponding project budget values as follows in the columns on the Cost Budget tab of the Projects (PM301000) form:

Committed Invoiced Quantity is increased by the quantity in the bill line.
Committed Invoiced Amount is increased by the amount in the bill line.
Committed Open Quantity is reduced by the quantity in the bill line.
Committed Open Amount is reduced by the quantity in the bill line.
Actual Quantity is increased by the quantity in the bill line.
Actual Amount is increased by the amount in the bill line.
Performance (%) is recalculated based on the updated amounts and quantities.