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Title: Invoicing a Fixed Priced contract based on hours worked (via TM Billing type)

Brief description:

Unanet's FP Invoicing process typically involves identifying a fixed dollar amount and invoicing that total by period. Unanet can support invoicing FP (FP LOE) contracts based on hours worked, or level of effort, using our T&M Invoicing process. This document outlines the process and considerations for utilizing this feature.

This would typically address contracts where you have a fixed ceiling. You might even refer to it as “Fixed Priced,” but it differs since you bill as hours are worked up to that ceiling. It is not truly based on a % complete in the traditional sense (i.e., manufacturing).

What’s covered in this document:

Project Setup

Although the contract may be Fixed Priced, in order to bill the project based on hours worked, Unanet must designate the Project or Task where the labor is recorded with the Billing Type TM. Customers may choose between designating the entire project as T&M, or may designate the project as FP and create a labor task that has the Billing Type of "TM."  

Setting up the Bill Rate

All hours must be associated with a Bill Rate to reflect the billable amount to include on the Invoice. Bill Rates can be set up using multiple methodologies. Please see the Quick Video - How do you determine the source of a Bill Rate?  for assistance with establishing the appropriate Bill Rate.

Posting Labor Hours

As with any T&M billing in Unanet, all hours worked must be in a LOCKED or EXTRACTED timesheet status in order to be included in the Billing Post process. Unanet does not provide a mechanism to Invoice labor hours on TM billing types if the hours are not fully approved and locked.


Revenue Recognition

Revenue recognition for the hours worked will be posted during the Billing-Post process based on work date or posted date (whichever is set for "Labor Posting" in Admin > Setup > Posting Options).

Enforcing the Ceiling Limit

As hours worked are included on the Invoice you will work up to the total Fixed priced amount over time. Once that amount is exceeded, an Additional Item may be added to the Invoice to reverse the excess amount over the limit, or the excess will be posted to the General Ledger based on the setup of your posting groups. This is enforced in the project setup screens, Accounting tab (Total Value $ and Funded Value $ fields).

In this example, the project has a fixed priced value of $10,000. This value should be included in the Total Value $ field on the Project Profile > Accounting tab. In addition, you will need to check the boxes to Limit Billing To Funded Value Less Fixed Fee and Limit Revenue To Funded Value Less Fixed Fee as noted below.

Please note that any funding cap adjustments (amounts over the total/funded value) will be recorded in the account specified in your posting groups. If you do not wish to have the overage recorded there, you can uncheck the "Limit Billing" and "Limit Revenue" boxes above and adjust it manually. For a manual adjustment on the invoice, you would add an additional item to the draft invoice to remove the excess. In this case, (1,428.50) was added to the Invoice total to reduce the Billed amount to $10,000.

Capping Further Billed Amounts

In order to ensure that further hours are not billed against the project, but to allow for additional hours to be worked and costs to be incurred, Unanet recommends that the Project Type for the Project and all associated Tasks is changed to a non-billable project type.  Unanet administrators can see which Project Types are considered Billable or Non-Billable by reviewing the Project Type list in the Admin - Setup menu.  

Expense Considerations

If your project is setup for T&M Billing, all labor and expenses will be included in the final Invoice.  If your intention is to only bill the labor based on hours worked and not include any expenses in the Invoice, you will need to setup an alternate location for these expenses to be recorded.  Unanet recommends creating a Task specifically for the collection of Expenses that has a Project Type of "FP" or "NB".  Use "FP" if there is a fixed fee amount that you do need to bill to cover the costs of any expenses.  Use "NB" if the ODCs and Expenses are recorded as costs on the project and should not be included in the Invoice at all.

If the Project should not have any expenses recorded against it for any purposes, deselect the "Allow Expenses" checkbox on the Expense tab of the Project profile.

Additional Information

KC - Quick Video - How do you determine the source of a Bill Rate?

KC - Video - Set up for Billing, Invoicing, and Revenue Recognition

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