How to Recognize & Post unbilled Revenue
Post Unbilled Revenue provides the ability to recognize revenue on project charges that are not billed. With this option, one can select time charges, external charges or internal charges or any combination of the three for a selected Company. In the case of external charges, direct expenses (cost of sales) is recorded in conjunction with the journal entry posting.
Include charges for all clients by default or select from a list of clients. Optionally include or exclude charges with a status of HOLD or jobs with a status of QUOTE.
Revenue recognition entries created through this procedure are reclassified as part of the normal billing process.
Prior to running this procedure, you must set up an Earned but Unbilled revenue account in the general ledger and then enter the account in the GL > Setup > Company > Tax & GL Control Accounts section. An error message will appear if any necessary control accounts are missing when posting unbilled revenue.
Define the company’s EBU posting preferences under the GL > Setup > Company > Options > EBU/PRR window.
Additionally, you need to set up one or more Accrual accounts in the GL to record the asset side of the transaction. These accounts will be specified in individual item setup.
Detailed below are the entries that would typically be recorded for external charges when this procedure is run. This assumes a 20% mark up on the outside cost.
In such instances involving time charges or internal charges, there is no vendor invoice entry and thus, no Cost of Sales transaction. The following example assumes one charge for a bill amount of $200.
Other aspects of the Earned but Unbilled procedure:
- Select Clients: Run for all clients or select those clients who have jobs with unbilled charges for the selected fiscal period. Optionally include inactive clients.
- Transfers of job charges: Job charge transfers are NOT restricted to jobs belonging to the same client, division and team. If a charge is transferred to a different client, division and/or team, then a journal entry is created identifying the ‘from and to’ aspects of the posting. The transfer will flow into the appropriate client, division and/or team income statement.
- Deletions: Unlike AP charges, once time or internal charges are posted to unbilled revenue, they cannot be deleted. Instead, they must be offset by credits such as with negative time or negative internal charges. However, reversing AP invoices are automatically created when posted AP vendor invoices are deleted.
- Effect of Estimate or Advance billing: Estimate or advance billings have no impact on unbilled revenue since this procedure only considers job charges.
- Cost Only Invoicing: When posting bills generated as cost only invoices that include charges posted to EBU under this procedure, then reversing entries that debit Earned but Unbilled Revenue and credit the Item Accrual are posted. Any external AP charges remain booked as a Cost of Sales. Additionally, any external AP charges that were not posted as EBU will debit Cost of Sales and credit Work in Process at cost.
- Write-offs: As in the case of Cost Only Invoicing, if charges have been posted under this EBU procedure, then reversing entries debiting Earned but Unbilled Revenue and crediting the Item Accrual are posted. Any external AP charges remain booked as a dCost of Sales. Additionally, any external AP charges that were not posted as EBU will debit Cost of Sales and credit Work in Process at cost.
- Management Income Statements: All of the Management Income Statement formats (such as by Client, AE, Division, Team etc.) are impacted by the Earned but Unbilled Revenue procedure. These income statements are also affected by the journal entries resulting from cost only invoicing and writing off charges that were posted under this procedure.