About Order Entry Integration with Project and Job Costing

Overview

Order Entry provides sales order integration with Project and Job Costing.

You can create an order and specify the job (contract, project, category, and resource, if applicable) to which each order detail applies.

  • If an order is job-related, all detail lines on the order must be job-related.
  • Orders can list material details—items from inventory used on the job—and they can list miscellaneous charges, which can be labor, subcontracting charges, or charges such as shipping and handling.

Project Invoicing

Order Entry lets you handle the complete order-processing cycle in Order Entry, or create the order in Order Entry and manage the billing and invoicing in Project and Job Costing (called Project Invoicing).

  • Invoicing directly from Order Entry

    • Service providers normally invoice directly from Order Entry.

    A series of service calls can apply to a single project, or you can create new projects for each call. Order Entry lets you create new contracts "on the fly" when you create new quotes. The details for each new contract can be copied from an existing template.

  • Using Project Invoicing

    • Companies with more lengthy or complex projects, such as construction companies, normally use project invoicing, and will likely process additional costs through Accounts Payable.

    Posting the shipment in Order Entry completes the transactions for O/E. The transaction is sent to Project and Job Costing, which calculates the extended billing amount and the cost portion of the order.

    You can then process the billings for the transaction in Project and Job Costing, using the Create Billing Worksheet.

Note: If you create an order or shipment for a customer for which no record exists in Accounts Receivable and you select the Project Invoicing option, you will not be able to add order or shipment details unless the default template includes a tax group. (The tax group is not editable if you choose project invoicing, and it will be blank unless it is specified in the template.)

Contract and Project Types Invoiced in Order Entry
Project Type and Accounting Method Invoicing Notes

Time and Materials project, Billings and Costs or Accrual-Basis accounting method

Fixed Price project, Billings and Costs or Accrual-Basis accounting method

Can choose to invoice in Order Entry or in Project and Job Costing

If invoicing in Order Entry, the costs and revenue are sent to Project and Job Costing (PJC) from Accounts Receivable when the invoice is posted in A/R. Costs and revenue are recognized during A/R posting. You can process orders, shipments, invoices, debit notes, and credit notes in Order Entry.

If invoicing in PJC, the order is completed at shipment posting, and costs are sent to PJC for invoicing, using the Create Billing Worksheet. For Time and Materials projects, the billing type, billing rate, and extended billing amount are also sent to PJC when you post a shipment. You cannot process invoices, debit notes, or credit notes in Order Entry. Costs and revenue are recognized in PJC during revenue recognition.

Time and Materials project, Completed Project accounting method

Fixed Price project, Project Percent Complete or Completed Project accounting method

Cost Plus project, Total Costs Percentage Complete, Completed Project, Labor Hours Percentage Complete, Billings and Costs, Category Percentage Complete, or Accrual-basis accounting method

Invoicing is done by Project and Job Costing

The order is completed at shipment posting, and costs are sent to Project and Job Costing (PJC) for invoicing, using the Create Billing Worksheet.

For Time and Materials projects, the billing type, billing rate, and extended billing amount are also sent to PJC when you post a shipment.

You cannot process invoices, debit notes, or credit notes in Order Entry. Costs and revenue are recognized in PJC during revenue recognition.

One of the most important processing decisions is how you are going to invoice orders (jobs).

  • If the invoice needs to be created in Project and Job Costing, Order Entry will complete the order when you post the shipment, and prevent you from invoicing in Order Entry.
  • If you delay invoicing in Order Entry, the transaction will be sent to Project and Job Costing as unbilled, and you will have to create the invoice in Project and Job Costing or bill from Accounts Receivable.

If you create the invoice in Order Entry, you can select retainage accounting.

If you create the invoice in Project and Job Costing, you cannot select retainage accounting in Order Entry because you will determine all invoice amounts in Project and Job Costing.

Quotes and Estimates

Contracts created from Order Entry quotes start as estimates in Project and Job Costing. Detail lines that you add to an Order Entry quote update contract estimate amounts when you post the quote in Order Entry. (The contract can have an Open status, but the project status must be Estimate.)

When you change the order type to Active and post the order, Order Entry changes the project status to Open for each project to which you posted a detail.

Order Detail Lines

Each detail line on a job-related order must be applied to an existing cost category in an open contract and project.

In Project and Job Costing, each category is assigned a cost type with a cost class that can be labor, material, equipment, subcontractor, overhead, or miscellaneous.

  • Item details assign inventory items to jobs, so the category to which they apply must use a material cost class.
  • Miscellaneous charge details let you assign costs for all other cost classes—labor, equipment, subcontractor, overhead, and miscellaneous cost.

Setting up the Project and Job Costing side includes:

  • Deciding how you are going to invoice customers—in Order Entry or in Project and Job Costing.
  • Setting up contracts and projects. You can: Set up template jobs that you can copy for each new order using the New Contract Wizard in Order Entry. For more information, see Using the New Contract Wizard.Set up jobs that are used by groups of orders.
  • For each project: Choosing whether the default cost for miscellaneous charges comes from the miscellaneous charge record or from the contract. For accrual-basis or billings and costs projects, choosing whether the billing rate comes from the contract billing rate, from the customer price list, or from a price list specified for the project.
  • Adding the cost categories and the employee resources, equipment, subcontractors, overhead, miscellaneous costs, and materials.

Setting up Order Entry includes:

  • Adding miscellaneous charges for employee resources, equipment, subcontractors, and miscellaneous costs that you want to include on job-related orders.
  • Selecting the Allow For Jobs option on job-related miscellaneous charges.

Miscellaneous Charges

Miscellaneous charges perform several functions on job-related orders:

  • They let you record internal non-material transactions such as equipment, subcontractors, and labor.
  • They let you add charges to customer orders for invoicing external charges such as freight (UPS or FedEx).

To create miscellaneous charges for job-related orders, you must select the Allow For Jobs option on the O/E Miscellaneous Charges screen, and then specify:

  • An extended cost. For each project in PJC, you can choose to use this cost by default or use the contract cost.
  • A miscellaneous charge expense account.
  • A miscellaneous charge clearing account.

Miscellaneous charges can be assigned to categories with any cost type except material. You must use item detail lines on orders for material cost types.

Note: In Project and Job Costing, you can choose for each project whether to use the amount specified in Order Entry for the miscellaneous charge, or use a default billing rate specified for the contract in PJC.

Taxes

Although Project and Job Costing allows tax groups to be specified by project, if you are producing the invoice in Order Entry, the tax group specified for the order applies to all contracts and projects listed in the Order Entry document details. If you require different tax groups for different contracts and projects, you must enter these details on separate orders.

Note that this condition does not apply if the document uses project invoicing—the tax group of the project will be used to calculate the tax because the invoice will be generated in Project and Job Costing.

Note: If you create an order or shipment for a non-existent customer (a customer for whom no record exists in Accounts Receivable) and you select the Project Invoicing option, you will not be able to add order or shipment details unless the default template includes a tax group. (The tax group is not editable if you choose project invoicing, and it will be blank unless it is specified in the template.)

Prepayments

When you record job-related prepayments, you also distribute the payment amount to the details on the order.

Order Entry lets you automatically prorate payment amounts to individual details or do a "top-down" distribution, starting at the first job-related detail. If you prefer, you can edit the payment distribution amounts yourself.

Accounts Receivable Integration

If you are invoicing orders in Order Entry, Day End Processing will send Order Entry invoices to Accounts Receivable, where the costs and revenue are posted together in Accounts Receivable.

When Order Entry creates the invoice, it does not use the Work in Progress account and Billings accounts to post the costs and revenue; instead, it uses the Cost of Sales and Revenue accounts defined in the project or the category.

The Order Entry invoices posted in Accounts Receivable are treated like a billing worksheet in PJC, where the cost transactions are marked as billed and will not appear on the Aged WIP Report.

For more information, see Journal Entries Generated for Posted Order Entry Transactions .

Purchase Orders Created from Job-Related Sales Orders

If you are creating purchase orders from orders entered in Order Entry and the details are job-related, Purchase Orders removes the job-related fields when it creates the purchase order. It does this to prevent Receipt Entry from using the Work In Progress account and overstating WIP, which has already been debited with the order.

The entry for the receipt posted by Purchase Orders looks like this:

G/L Account Debit Credit
Inventory Control X  
     Payables Control   X

Double-Counting Item Costs or Miscellaneous Charges

Processing errors can arise when you bill customers for external charges (services or goods that are provided by a third party and that you receive in Purchase Orders or record in Accounts Payable).

If you are using several accounting programs to process goods or services for a job, you must decide which programs are going to record the costs and assign them to jobs.

For example, if you enter a job-related PO in Purchase Orders; assign items to a specific contract, project, category, and resource (if applicable); and then create a customer order in Order Entry and assign the same items to the same contract, project, category, and resource, the work in progress account will be overstated (costs recorded twice), and so will Contract Maintenance.

Similarly, if you enter a job-related order in Order Entry that includes a shipping miscellaneous charge, and then process an Accounts Payable invoice for the same charge and treat it as a job-related invoice, you will record charges twice for the job.

If you are invoicing in Project and Job Costing, it might make more sense to omit the miscellaneous charge on the order in Order Entry and record the transaction in Accounts Payable. The shipping charge for the job will then be picked up on the billing worksheet and included on the invoice created in Accounts Receivable.

In any case, you must decide when and how you want to transfer costs to jobs, and then set up the procedures for processing those costs.

Determining Prices

How prices are determined depends on the project style, project type, and accounting method.

For the following projects and accounting methods, you set the default source for the price using the Default Billing Rate field on the Project tab in Contract Maintenance:

  • Time and Materials projects using the Billings and Costs or Accrual-Basis accounting methods
  • Time and Materials projects using the Completed Project accounting method
  • Fixed Price projects using the Billings and Costs or Accrual-Basis accounting methods

To set the default source for the price:

  • Select Use Customer Price List to use the price list assigned to the customer.
  • Select Use Specified Price List to use a price list assigned to the project.

  • Select Billing Rate to use the price specified in the contract:

    • If the project is a standard project, the billing rate assigned to the item (material) resource (and customer) will be used as the default unit price.

    • If the project is a basic project, the billing rate assigned to the material category (and customer) will be used as the default unit price.

      If you are entering job-related orders or shipments where both:

      • Default Order UOM = Pricing Unit (specified on the O/E Options screen).
      • Default Billing Rate = Billing Rate (set for the project in Project and Job Costing).

      Order Entry uses the unit of measure from the current price list as the default, and then re-calculates the unit price based on the billing rate specified in PJC Contract Maintenance.

  • For Time and Materials projects using the Billings and Costs or Accrual-Basis accounting methods, the project is billed at the category and resource level for standard projects and the category level for basic projects. You can create the invoice in Order Entry or in Project and Job Costing.
  • For Time and Materials projects using the Completed Project accounting method, you cannot invoice from Order Entry. Posting the shipment in Order Entry completes the transactions for O/E, and the transaction is sent to Project and Job Costing.
  • For Fixed Price projects using the Billings and Costs or Accrual-Basis accounting methods, invoices may be created in Order Entry or billing may be deferred to Project and Job Costing to process using the Create Billing Worksheet.

For All Other Fixed Price and Cost Plus Projects:

  • Posting the shipment completes the transactions for Order Entry and sends the transaction to Project and Job Costing. Once the project is set to Complete, the PJC Billing Worksheet will process all the transactions and create an invoice for the accumulated costs.

  • You can process the billings for the transaction using the Create Billing Worksheet in Project and Job Costing, or you can manually enter invoices in Accounts Receivable.

  • The unit price is set to zero and only the costs are processed because:

    • For Fixed Price projects, the price is set to a fixed price amount for the project.

    • For Cost Plus projects, the cost is calculated when you post a shipment and perform inventory costing using the costing method assigned to the inventory items in Inventory Control.

For Fixed Price projects using the Completed Project accounting method

  • Once the project is set to Complete, the PJC Billing Worksheet can process all the transactions and create an invoice for the accumulated costs up to the Fixed Price Amount.

For Fixed Price projects using the Project Percentage Complete accounting method

  • Billing is determined on a project completion basis using the current estimated costs and the actual costs, not on the purchase of individual items.

For Cost Plus projects using Billings and Costs or Accrual-Basis accounting method

  • The unit price is set to zero and only the cost portion of the order is processed. The price is determined for billing in PJC using the actual cost of items according to the costing methods assigned in Inventory Control (and calculated by shipping and Day End Processing).

For Cost Plus projects using Total Cost Percentage Complete and Category Percentage Complete accounting methods

  • The percentage of completion calculation is done during the Create Billing Worksheet process in Project and Job Costing. The amount to be billed is determined on a project or category percentage completion basis using the current estimated costs and the actual costs, not on the purchase of individual items.

For Cost Plus projects using Labor Hours Percentage Complete accounting methods

  • The customer is billed at the project level. The percentage complete is determined using the current estimated and actual quantity (labor hours) for each category within the project, as well as the cost plus percentage for the category.

For Cost Plus projects using Completed Project accounting methods

  • Billing occurs when the project status is set to Completed and is calculated using the Create Billing Worksheet in Project and Job Costing.

Cost of Kitting Items in Job-Related Orders

Kitting items are treated differently in Project and Job Costing than they are in Order Entry.

In Order Entry, a kitting item is a collection of separate items, where revenue is recognized at the master level, but costs are recognized for each item in the kit.

In Project and Job Costing, however, a kitting item is treated as a single item for both revenues and costs.

This means that for job-related orders:

  • Order entry adds the cost of all kit components to create a single cost for Project and Job Costing, so PJC can recognize one revenue amount and one cost amount.
  • If you match transactions from Inventory Control with those from Project and Job Costing, I/C will provide G/L with a string of component cost entries, whereas PJC will provide G/L with a single master cost.