Evaluation of Work in Progress Workspace
Use this workspace to re-evaluate the work in progress (WIP) of a job, based on the sum of open entries on the job.
You can specify a fixed amount or a percentage of the WIP to be recognized as revenue for the job.
The process of reevaluating the WIP of a job is similar to the revenue recognition process that you perform in the Job Revenue Recognition workspace. However, whereas Maconomy calculates revenue recognition using a completion percentage that is based on a job budget, the evaluation that you perform in this workspace does not require the presence of a job budget. The evaluation is based solely on the sum of open entries for the job.
The WIP of a job that uses capitalization at billing price is equal to the open billing price of the job—that is, the sum of entries made that have not yet been invoiced. However, out of caution, you might want to recognize only a part of the WIP as revenue.
You can use this workspace to specify a fixed amount or a percentage of the WIP that should be recognized as revenue. When new entries are made on the job, you can adjust the revenue recognition here. When you close the job, Maconomy creates a revenue recognition journal that ensures that the amount that has been recognized as revenue equals the amount that you actually invoiced.
When you approve the evaluation, Maconomy creates a revenue recognition journal that is ready for posting in the General Ledger module. The journal contains entries to the accounts for open billing price and for work in progress.
You can report on WIP at the employee level, in addition to the project level. You can set the employee as a detail on the revenue recognition job parameter. When you calculate revenue recognition, Maconomy creates a job revenue journal entry for each relevant job / employee combination.
If you specify additional details (D), Maconomy creates a job revenue journal entry for each relevant job / employee / additional detail combination when you evaluate WIP.
However, because the WIP evaluation is specified at the project level, you cannot enter a different WIP amount or WIP percentage for different employees.
Job Selection
Only jobs that you set up correctly for WIP evaluation can be displayed in this workspace.
You can enter selection criteria to choose the jobs that you want to see. After you have done this once, Maconomy saves your selection criteria from session to session. Each time that you open this workspace, Maconomy displays the last selection criteria that you used.
The Jobs sub-tab displays information about the selected jobs, one line per job.
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Capitalization Method — At Billing Price
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Evaluate Work in Progress — Yes
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Revenue Recognition By Completion Percentage — No
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Handling of Overrun — No
Also, the Invoicing Method job parameter attribute of the Pricing Principle job parameter type must have the value Time and Material.
Maconomy only evaluates entries that are part of the fixed price of a job. In this context, "fixed price" means all job entries that are not explicitly specified as being excluded from the fixed price, and should not be confused with the term "fixed-price job," which cannot be evaluated in this workspace. You can specify which entries are included in fixed price or not by using the Fixed-Price Inclusion Setup job parameter in the System Parameters workspace in the Setup module.
You can also control inclusion in fixed price in tasks and activities by using the Included in Fixed Price field in tasks, and the Included in Fixed Price Default For Tasks field in activities.
You can use the following methods to adjust WIP:
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By Percentage — Assume that you created a job and entered a total of $10,000 on it. The open billing price and the WIP are now both $10,000. If you use this workspace to specify that the job's revenue should be recognized at recognized at 85%, and you approve the adjustment, the open billing price is still $10,000, but Maconomy adjusts the WIP to 85% of that or $8,500.
Next you make another entry of $10,000 on the job, which still has not been invoiced. The open billing price is now $20,000 and the WIP is $18,500—that is, 92.5% of the open billing price. When you open this workspace and use the Calculate action, the amount that Maconomy suggests for revenue recognition still corresponds to 85% of the open billing price, or $17,000.
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By Amount — Assume that you created a job and entered a total of $10,000 on it. The open billing price and the WIP are now both $10,000. When you open this workspace and use the
Calculate action, Maconomy suggests that you recognize the full amount as revenue. However, you change the amount to $8,000 and approve the adjustment. The open billing price is still $10,000, but Maconomy adjusts the WIP to $8,000.
Next you make another entry of $10,000 on the job, which still has not been invoiced. The open billing price is now $20,000, and the WIP is $18,000. When you open this workspace and use the Calculate action, the amount that Maconomy suggests for revenue recognition is equal to the work in progress, or $18,000.
When you adjust by amount, you must perform the evaluation manually every time. When you adjust by percentage, Maconomy suggests the same, relative amount automatically.