Revenue Method M

Revenue Method M recognizes job-to-date earned revenue as job-to-date direct labor cost times a multiplier, plus job-to-date reimbursable expenses at cost rates. It is appropriate for projects billed on an hourly or percent complete basis.

Job-to-Date Revenue = (Job-to-Date Direct Labor x Multiplier) + Job-to-Date Reimbursable Expenses

Percentage of construction cost contracts base revenue recognition on an estimate of progress made, often linked to the completion of phases. This progress estimate is usually based on a percent complete that has been calculated and updated for each accrual (Method P) although it can also be based on an estimated multiplier (Method M). Method P generates the most accurate revenue figures, but only if the project's percent complete data is updated regularly. If your firm does not have time to update percent completes, consider Method M, which uses estimated multipliers. Although it provides less exact revenue amounts, it involves less maintenance.

If a project is using Method M, the multiplier is specified in Multiplier/Amount on the Accounting tab of the Project Info Center. The multiplier is a job-specific ratio based on estimates of Total Labor Revenue divided by Total Labor Cost:

Multiplier = (Estimated) Total Labor Revenue / (Estimated) Total Labor Cost

A breakeven multiplier for a project whose budgeted overhead rate is 175% would be 1.75 for overhead plus 1.00 for Labor, to equal 2.75. To arrive at the multiplier, add the profit margin percent to this amount.

Vision does not calculate the multiplier. Deltek recommends that a manager determine the multiplier to be entered, and evaluate it periodically for accuracy.