In the dynamic landscape of modern business, organizations often find themselves managing projects that span across departments, locations, and even international borders. Efficiently tracking and managing these projects is crucial for success, and this is where Project Accounting plays a pivotal role. Microsoft Dynamics 365 Finance & Operations, Supply Chain Management (D365 F&O SCM) is a robust solution that empowers businesses to achieve project accounting excellence. In this blog, we'll explore the key features and benefits of Project Accounting in Dynamics 365 F&O SCM.
The project management and accounting module was designed to be used in multiple industry verticals to provide a service or produce a product. To understand the benefits of the D365 Project Management and Accounting Module for the service industry, let’s look at all three phases of this module.
This is the first phase of a project wherein Microsoft Dynamics offers features that allow a smooth beginning. This feature which helps with creating project contracts is especially effective in communicating transactions with the customers.
Let’s say, you are working with a customer that you have established a lot of contracts with; then, with the help of this feature, you will be able to easily communicate with your customer on every single invoice that you send in relation to the specific contract that both of you parties are in knowledge of. This means, now each of the parties can readily track activity against this contract, as it relates to the budget as well as the timeline.
Now comes the phase wherein the ability of a user to procure various products and services, as well as to process the project invoices to the customers comes to use. This is the ability that allows the user to essentially track every expense and revenue against any given project contract with a customer. These are the features that allow the user to track both external and internal customer budgets for the services that were performed for them.
As an example, users can readily track purchases from the vendors against the given. contract and then pass along the expense through the invoice to the customer. Moreover, the ability to track all the invoices to the customers can allow one to do better internal tracking of the amounts that were spent on the contracts. Furthermore, this allows for better visibility or transparency of the budgets vs. Actuals.
In the final analysis phase, this Dynamics 365 tool makes it easy to track all the activity against a given contract. This, in return, ensures that the analysis of cash flows is more organized and more accurate.
If every purchase and every customer invoice is tracked against each individual project contract, then the users would have an easy and accessible way to see as well as report on all sales and costs. It then becomes simpler to analyze the whole project’s profitability. In case the sales end up being less than the costs for a project, then it becomes easy to make certain decisions regarding how to proceed to ensure the current or future projects are more profitable.
There are two distinct ways in which we can manage as well as control our projects.
One is project forecast, and the other is project budget.
Cost accounting in Microsoft Dynamics 365 Finance equips you to collect data from multiple sources, like the budgets, general ledger, sub-ledgers, as well as statistical information. You are then able to analyze, summarize, and further evaluate cost data to help the management make better decisions for cost control, price updates, budgets, and so on.
In cost accounting, the source data used for cost analysis is treated independently. Hence, updates in cost accounting do not have any effect on the source data. But, when you collect cost information from multiple sources, there’s data redundancy, especially if you decide to import the main accounts from the General ledger as cost elements. This is because the same information exists in General ledger as well as Cost accounting, both. Data redundancy is needed; after all, you use Cost accounting for internal reporting, just as for external reporting, you require financial management.
Deciding which type of project, one wants to create for a project contract is what determines the method that they would be using to invoice their project customers. A project contract as well as the related project can be changed, but not the project type.
By making use of a project contract, one can invoice one or even multiple projects, simultaneously. The project contract also helps in guaranteeing a consistent procedure for invoicing for each and every subproject that one has in a project structure.
Time and material and Fixed-price are the only external project types that can be invoiced. Which invoicing procedure should be used, depends on which project type one goes for.
These are the three ways that one can attach the Fixed-price as well as Time and material projects to the invoice projects:
The Cost control form helps you monitor all the costs that your company must have incurred during a project. Comparing a project’s original budgeted costs with its current actual costs and the committed costs, you should be able to determine if the project is over budget, under budget, or on track. When it comes to the parameters of Project management and accounting, you can configure some of the options, while default the values which appear in the Cost control form.
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Project Type Internal is used by organization to track costs by product/activity.
Work breakdown structure is where scope of project is defined, and estimation of cost are made.
WBS estimates are used to create project budgets.
Once above estimate are made, project delivery start wherein different transactions are posted:
Timesheets used for hour transactions:
At regular intervals, responsible person monitor and analyze project performance with different use of reports and statements. If required, management decide to Adjust plans and budgets if cost estimates change.
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Clients manage customer contracts through projects.
For Each new contract creates a "Fixed-price" project wherein we define milestones, funding source and funding rules.
For project planning, Work breakdown structure is used where we plan project schedule and estimates.
Then with WBS estimates project budget and forecast is created.
Once estimation is done, Project delivery involves various transactions:
Item Requirements: Item required in project for which Production or purchase orders are created.
At every fixed interval, project estimates are run which helps to recognize the accrued revenue in proportion to cost incurred for that period.
Whenever and wherever required as per change order adjustments to the plans and budget with approval of management can be incorporated to the existing project. Top management tracks progress with reports and cost control. Monitor and analyze project performance. Evaluate project profitability with reports upon completing transactions.
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Integration of Project Orders and Project Contract from CRM for Project type Time & Material and Fixed Price.
Order Lines moves from CRM to F&O in BOQ lines.
BOQ lines transfer from BOQ form to WBS and further the Project Budget is created and submitted for approval.
After Project Budget Approval Item forecast and Item requirement is created in system.
Back-to-back PO is created based on Item Requirement, and after that Item is delivered.
Expense journal is posted for the expenses related to Projects.
Project Invoices are Posted for both the Project types.
For Fixed Price Projects we run the Revenue Recognition to recognize the revenue.
If you’re interested in understanding more about the brilliant Project Management and Accounting feature for MS Dynamics 365 or wish to connect with us regarding a project, contact us at sales@dynatechconsultancy.com.