Project Types in Dynamics GP- Not Always What They Seem

My entry point to Dynamics GP, about 14 years ago, was Project Accounting.  It was the first I learned, and I lived the lessons of how hard it is change course once you have something set up.  In my career as a consultant, I have witness many a Project Accounting implementation gone awry.  And in my naive younger days I would judge the prior consultants, thinking how they must not have understood how Project works.  But over time, I have come to understand that the issue often is a matter of definitions and communication.

When I sit down and ask a client to describe their projects, they will often use terms like "time and materials" or "fixed price" or "cost plus".  And it can be tempting in those moments to immediately correlate that to the GP terms.  I mean, they are identical, right?  GP has Fixed Price, Cost Plus, and Time and Materials projects.  But, hold up...

When clients/users describe their projects, they often are talking in terms of how they bill the project (and the corresponding contract terms).  While in GP, the difference in project types is more about revenue recognition and how billing amounts are calculated.  So it is important to dive deeper in to the project type discussion to avoid setting up unnecessarily complicated projects. 

Let's break it down by the attributes of each project type, starting with most complicated to least (in my humble opinion)...

Cost Plus

• Fee plus allowable (billable) expenses
• Can include project fee (lump amount), retainer fee (amount paid in advance) or retention (amount withheld from billing)
• Billing calculated as percent complete (Forecaster vs Actual) based on profit type of budget items
• Revenue Recognition calculated per accounting method (Based on percent complete, or when project completed).  Will not recognize when billed.

Fixed Price

• Fixed fee only
• Can include project fee (lump amount), retainer fee (amount paid in advance) or retention (amount withheld from billing)
• Billing calculated as percent complete (Forecaster vs Actual) based on profit type of budget items
• Revenue Recognition calculated per accounting method (Based on percent complete, or when project completed). Will not recognize when billed.

Time and Materials

• Can include both fees allowable (billable) expenses
• Can include project fee (lump amount), retainer fee (amount paid in advance) or service fee (fee amount recognized over time)
• Billing is calculated based on profit type of budget items and scheduled fee dates (not percent complete)
• Revenue is recognized on expenses and project fees based on the accounting method, either when the expense is posted or when it is billed (not percent complete)
• Service fees are the only feature of Time and Materials projects to require revenue recognition, and they recognize based on duration (you enter a start and end date for the fee)

As you read through the list, I want you to note specifically the impact of revenue recognition and billing on the project type.  If you do NOT recognize revenue on a percent complete, if you do it when you bill...then your projects may be Time and Materials by GP standards.  If you bill specific amounts at specific times, rather than progress bill based on percent complete, then your projects may be Time and Materials by GP standards.  Perhaps you need to recognize revenue over time, not based on budget -vs- actual, then you may be a Service Fee on Time and Materials in GP.

The lesson here is to not take the terms at face value, and to make sure you understand the impact of the choice in GP (not just what you call it internally, or per the contract terms).

Christina Phillips is a Microsoft Certified Trainer and Dynamics GP Certified Professional. She is a senior managing consultant with BKD Technologies, providing training, support, and project management services to new and existing Microsoft Dynamics customers. This blog represents her views only, not those of her employer.