Labor Cross Charge

A cross charge is a sharing of labor resources between different organizations within your firm. For example, a cross charge occurs when an employee from your Northeast Office works on a project for your Southwest Office.

The cross charging process redistributes labor costs and associated revenue when an employee in one organization (the lender) works on a project for another organization (the borrower). The transfer of costs and revenue between organizations allows each organization to match costs with revenue and fairly assess profitability.

Considerations in Using Labor Cross Charging

Consider the following when you run the Labor Cross Charge feature in Vision:
  • Cross Charge Pricing — Before you use the Labor Cross Charge feature, the organizations in your firm should agree on an internal transfer price, which is the amount at which labor costs will be transferred between organizations.

    Internal transfer prices vary greatly from firm to firm. Some firms transfer the cost of labor only, while some firms transfer the cost of labor plus benefits to the organization that owns the project. Usually the transfer price falls somewhere between a break-even amount (labor plus overhead) and the average revenue multiplier. Most firms develop a transfer price that splits profit between the employee’s organization and the organization that owns the project.

  • Cross Charge Timing — You must also establish a timetable for which to run the Labor Cross Charge routine that takes into account any labor adjustments or billing labor transfers that you make after you post timesheets. As a basic rule of thumb, you should run the Labor Cross Charge routing after each timesheet period. This means, if you post timesheets biweekly, you would run the Labor Cross Charge routine biweekly.

    If you follow this rule, your project and employee reports will always be up to date. The Labor Cross Charge routine must be run after each labor adjustment or billing transfer run because these postings may also contain cross charges for your employees. After you run the Labor Cross Charge routine, you can use the Labor Cross Charge report to check that the labor charges were transferred correctly.

Related Topics:

  • Labor Cross Charge Approaches
    In Vision project accounting, labor and revenue follow the project's organization. When employees work on a project in an organization other than their own, your firm can use Labor Cross Charge in several different ways.
  • Transfer Price
    Before you use the Labor Cross Charge feature, you must establish an internal transfer price. For revenue-producing projects, the transfer price determines how the profit is allocated among organizations. For overhead projects, the transfer price determines how costs are allocated among organizations.
  • Alternative to Labor Cross Charge
    As an alternative to the Labor Cross Charge feature, you can use the Work Breakdown Structure to set up a labor cross charge arrangement.
Parent Topic: Labor and Accounting