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Title: Change a Fixed Price Item's Revenue Recognition Method

Brief description:

This entry will address different methods of changing the revenue recognition method on a fixed price item previously posted to an invoice.

What’s covered in this document:

Scenario 1 – Correct revenue recognition by Uncompleting invoices and creating new invoices

Five fixed price items were created with revenue recognition set to When Billed. After two of the fixed price items have been invoiced, it is determined that the revenue recognition should be either Percent Complete or Custom Schedule. In this example, we will Uncomplete and delete the original invoices, change the revenue recognition on the fixed price items to Percent Complete, and then prepare and post new invoices.


Existing fixed Price Items

8/31/18   FP Item 1 $10,000, When Billed, Has Been Completed.

9/30/18  FP Item 2 $10,000, When Billed, Has Been Completed.

--Recognize error in recognition method--

10/31/18  FP item 3 $10,000, When Billed, Not Completed Yet.

11/30/18   FP item 4 $10,000, When Billed, Not Completed Yet.

12/31/18   FP item 5 $10,000, When Billed, Not Completed Yet.


Steps to complete

  1. Uncomplete January and February Invoices. Do not void. Voiding will result in the inability to unpost your billing and revenue post.
  2. Unpost February and January Billing and Revenue posts for this project.
  3. In Project Profile > Billing > Fixed Price, change revenue recognition type on the first FP Item to Percent Complete or Custom Schedule.
  4. If Percent Complete, update Project Profile > Budget tab with percent complete for first invoice period.
  5. Post Billing and Revenue for first invoice period.
  6. Create and complete Invoice for first invoice period.
  7. Update Project Profile > Budget tab with percent complete for second invoice period.
  8. Post Billing and Revenue for second invoice period.
  9. Create and complete Invoice for second invoice period.
  10. Change the remaining FP items revenue recognition to the new method.

Scenario 2 – Create two offsetting Invoices to correct the Revenue in the current month

Multiple fixed price items were created with revenue recognition set to When Billed. At some point, it is determined that the revenue recognition should be changed, but there are too many completed invoices to make it practical to Void/Uncomplete all of them. An example of this would occur when customer payments have been received against the invoices already completed. In this example, we will create a negative invoice to reverse the revenue taken and then create a new invoice to recognize revenue based on percentage completed.


Existing fixed Price Items

1/1/16   FP Item 1 $10,000, When Billed, Has Been Completed.

2/1/16   FP Item 2 $10,000, When Billed, Has Been Completed.

3/1/16   FP item 3 $10,000, When Billed, Has Been Completed.

4/1/16   FP item 4 $10,000, When Billed, Has Been Completed.

5/1/16   FP item 5 $10,000, When Billed, Has Been Completed.

6/1/16   FP item 6 $10,000, When Billed, Has Been Completed.

7/1/16   FP item 7 $10,000, When Billed, Has Been Completed.

8/1/16   FP item 8 $10,000, When Billed, Has Been Completed.

9/1/16   FP item 9 $10,000, When Billed, Has Been Completed.

--Recognize error in recognition method--

10/1/16   FP item 10 $10,000, When Billed, Not Completed Yet.

11/1/16   FP item 11 $10,000, When Billed, Not Completed Yet.


Steps to complete

  1. Create negative when billed FP item in the current period for the total revenue recognized.
  2. Post Billing and Revenue for negative FP item.
  3. Create and complete Invoice for negative FP item.
  4. Change Revenue recognition type to Percent Complete.
  5. Update Project Profile > Budget tab with percent complete as of current period.
  6. Post Billing and Revenue through current period.
  7. Create and complete Invoice through current period.
  8. Change the remaining FP items to Percent Complete for revenue recognition.


Additional Information

KC - Quick Topic - Methods for Forecasting Fixed Price Revenue

Help Docs - Invoicing & Posting


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