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Title: Considerations in setting "Transactions Require Project" 

Brief description:

Unanet Financials customers will want to evaluate various considerations as they decide whether or not to check the "Transactions Require Project" box in the Admin > Set Up > Accounts screen. The content below typically will apply only to customers using Unanet Financials.


What’s covered in this document:

Description

All Timesheets and Expense Reports as well as any related systematic posting (Billing and Revenue Post, Invoice Completion, Labor Cost Post, Expense Cost Post) will inherently be associated with a project.  Therefore, the "Transactions Require Project" box only applies to transactions entered in the details grids of the Financials transaction entry screens (e.g. Vendor Invoice, Journal Entry, Vendor Payment, Customer Payment, Deposit).  

Best Practice for Checking the "Transactions Require Project" Setting

  1. Direct Expense Accounts – all charges to these accounts must be charged to a project
  2. Indirect Expense Accounts – typically indirect expenses are reported on via the General Ledger using the organizational hierarchy, so there's typically no requirement to check the "Transactions Require Project"  
  3. Revenue Accounts – no requirement to check the "Transactions Require Project"
  4. Asset/Liability Accounts –  no requirement to check the "Transactions Require Project"

Asset/Liability Accounts

Typically there's no requirement to check the "Transactions Require Project" on these accounts.  However, in some cases, you may want to have capitalized asset accounts flow through to projects if you want to be able to monitor individual assets or projects via the project reports.

Revenue Accounts

Project revenue is generated by the Invoicing & Posting systematic posting processes will always be associated with a Project, so there's no requirement to check the "Transactions Require Project."  See Quick Topic below for more information on using journal entries for recoding revenue.     Quick Topic - Can I adjust project revenue with a Journal Entry?

Direct Expense Accounts

Unanet recommends that "Direct" General Ledger expense accounts (direct materials, direct subcontractor costs, etc) accounts should be marked to require projects. 

By selecting the option for a General Ledger account to require a project, you can ensure that the results of the project subledger (in the Project Accounting reports) tie to the general ledger (in the Financial reports). See the Knowledge Center Entry for more information: Reconcile Revenue and Project Costs from the JSR to the Income Statement

If an entry to a DIRECT account should only be made via systematic posting processes (and never via a Journal entry or an AP voucher), then the account should be marked as inactive so that manual entries cannot inadvertently be entered via a financial document. Examples of these types of accounts include: Labor cost accounts, Project revenue accounts, Accounts Receivable, Unbilled, Deferred Revenue. If manual adjustments to these accounts are required, best practice is to create another non-project-related account to post the financial transactions make it as easy as possible to reconcile the Project Ledger to the General Ledger.  

Indirect Expense Accounts

Indirect General Ledger expense accounts, on the other hand, are typically not managed at the project level. A budget vs actual view from the General Ledger is usually an appropriate level to manage results of these costs. By creating cost centers and marking them as "Financial Organizations," most companies are able to track actual vs budget comparisons via General Ledger budgets in order to meet their needs.  

In some cases, Unanet recommends marking a subsection of indirect accounts to require a project. Examples of where this might be appropriate include:

  1. The need to keep track of the costs in separate projects due to government reporting requirements.  Examples might include tracking details of B&P or IR&D costs
  2. The need to track specific company initiatives and:
    • The initiatives/campaigns are within an organization and are not significant enough to warrant setting up a separate Financial Organization to track them in the General Ledger
    • People responsible for the initiatives/campaigns vary within the organization and you want to give them access to actual costs related to the initiative/campaigns
    • People responsible for the initiatives/campaigns should not have access to the general ledger (which could allow visibility into employee cost rates), then you would want to create a Project (and requiring projects on the related GL accounts) for that internal topic. 
    • The initiative/campaigns spans fiscal years and you want to be able to monitor the inception to date values for the initiative/campaigns

Note: These financial transactions will show in ALL of the Project Accounting reports, but not in all of the Project Expense reports. 

Considerations in Marking all Indirect Expense Accounts to Require a Project

This is not typically recommended. In most instances, the additional administrative burden of requiring a project (and expense type) for every transaction outweighs the potential value. 

Below is a pros/cons table of setting up all accounts, even indirect accounts, to have the "Transactions Require Project" box checked.

PROS

 
PROS
of setting up all Expense accounts, even indirect accounts, to have the "Transactions Require Project" box checked.
1

By requiring a project on the GL account, an indirect budget owner (OH, G&A, etc.) is able to see any and all expenses associated with their projects in the Project Accounting reports. 

Some organizations have individuals that own a budget for a group of GL accounts. For example, Marketing, or OH, or G&A. Requiring projects on these types of accounts will allow the budget owner to run the Project Accounting reports and see all of the actuals and budgets.

You can set up a project for Marketing, or G&A or OH, restrict it to the desired expense types, and assign a project approver. If all expenses went through an expense report, this would suffice, but expenses may also be associated with the account through Financial transactions (e.g., through AP and/or JE’s). In this case, the budget owner would never see AP or JE entries in the Project Accounting reports.

Alternatively, you could set up a financial organization for Marketing instead of requiring Projects for these accounts.

2

Your project ledger will be in balance with GL even for indirect projects, and you can use the Project Accounting reports for indirect projects.

Requiring a project for even indirect expenses will ensure that you can have access to all expenditures in the project reports.

3 By giving people who oversee those indirect efforts access to Project Accounting Reports, you do not have to give them access to the GL. (Since those with access to the GL can more easily see cost/pay information via timesheet Labor Cost Posts.)
4

Tracking Bid & Proposal and Research & Development efforts may worth the considerations below. By requiring projects on those accounts:

  • B&P: you can roll up B&P with Billable projects to get a valuable margin metric. 
  • R&D: you probably have a PM that has a project budget and is tracking performance.

For OH and G&A projects the only benefit may be having a budget owner without access to financials. (see above)

5

You will have the ability to provide a breakdown of indirect transactions below those available based on the Financial Org/Account level. A typical example of this might be where the marketing department might want to keep track of the cost of individual campaigns. In that case, you might want to make the marketing-specific accounts require projects.

6

You can see overhead projects burdened with fringe in an alternate cost structure 


CONSIDERATIONS

 
CONS
of setting up all Expense accounts, even indirect accounts, to have the "Transactions Require Project" box checked.

1

You will be assuming significant additional maintenance on your Expense Types.

For example:

  • Your Expense Type list will need to become longer than otherwise needed, since you will need to have an Expense Type for every non-direct type of account (e.g., liability insurance, bank processing fees, excise tax, postage, dues/subscriptions, mobile phones, etc.) This list can be quite long.
  • Each new indirect Expense Type must be associated and mapped to the appropriate General Ledger account.
  • Each new indirect Expense Type will then need to be associated with a cost structure and mapped appropriately to a cost element.
  • Each new indirect Expense Type may also need to be associated with Employee Types, Projects, etc.

Customers who have been successful with this method are extremely detailed accounting organizations with very strong staff. 

*Note this is not only initial setup, but on an ongoing basis if there is any need to add new expense types or accounts (you would repeat all the steps above).


2

Even though some will say they want the information for all projects, the value add may not be worth the extra effort. 

The additional administrative burden of requiring a project and expense type for every transaction in the system may well outweigh the potential value this option provides in terms of control and reporting.


3

You will need to maintain additional cost structures.

This is because if you are going to run a Project Accounting report for an indirect effort, the appropriate burdens should be applied. For example, if the project relates to an Overhead effort, you need a special Cost Structure with the Indirect Costs and Indirect Cost Rates tabs set appropriately (overhead likely burdened with fringe).

Otherwise, you would be double counting on costs (adding an OH rate to OH projects, etc.).


4

Because of the need to maintain additional cost structures, when assigning people to the indirect project you will need to override assignment Cost Elements to make sure burdens are applied properly


5

If the goal is budgeting, you would need to create annual indirect projects each year for the JSRs to be meaningful


Proper Testing

Note: If you do choose to require any indirect expense accounts to have a project, the process should be tested thoroughly prior to usage and not on an ad hoc basis after go-live without testing.

In particular, it is critical to test format of Project Accounting Cost Reports in order to confirm that these will be used for indirect projects. (Otherwise the effort in managing expenses would be unnecessary effort.)

Legacy systems

The question about connecting indirect accounts to projects may come from users that have legacy system that work differently for posting the transactions. 

    • Some CostPoint configurations might have all income statement accounts set as requiring projects so that activities using projects may be tracked. Specifically, B&P or IRD would need to be capitalized and amortized based on the product or a long term order, and accumulating the in house developed fixed assets cost. Using projects for B&P may be essential as there may be a budget for B&P for various kind of B&P efforts as well as reporting was required on the money invested to bid and win jobs over a certain threshold. Costpoint populates the project ledger from the GL ledger and thus needs a project to identify which project to post the transaction. Unanet can post to non-project required accounts if it is being posted by the system. Making the indirect accounts project required in Unanet helps to post AP and JEs to an indirect project to accumulate expense in separate buckets within an Organization. 

    • Procas is another system that uses the GL transactions table for project reporting. The client may be used to seeing projects in the GL detail (on balance sheet and income statement accounts). Also, legacy financial reporting to management and budget owners may be in spreadsheets and based on the PROCAS GL transactions. While we generally recommend setting up new Unanet reports, clients comfortable with the legacy formatting may prefer to change the Unanet GL to mimic PROCAS so in order to repurpose existing excel reports.

    • Dynamics SL is another system that uses the GL transactions table for project reporting. The client may be used to seeing projects in the GL detail (on balance sheet and income statement accounts). 


Additional Information

Help Docs - Account Setup ("Transactions Require Project" setting)

KC - Chart of Accounts Setup

Help Docs - Expense Type Setup

Help Docs - Setup Accounts

Help Docs - Cost Structures


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