GC-254 Breaking the Code of Unbilled Accounts Receivable

Tony Bowser, Sr. Systems Consultant Sam Heman-Ackah, Sr. Systems Consultant WJ Technologies L.L.C.

•Understanding Unbilled and its Components

• Unbilled calculation • Business drivers for Unbilled • Components of Unbilled Accounts

•Costpoint and Unbilled

• Unbilled Setup • Unbilled Analysis • Correcting Unbilled Amounts • One of the ten critical month end reconciliations of Costpoint

Agenda

A. Revenue - Billings B. Revenue generator for your consultants C. Place to store exaggerated earnings D. Conversation stopper at social gatherings E. All of the above

What is Unbilled?

•Costpoint is unique in that billing and revenue are separate calculations •Unbilled is simply revenue – billings It is known by a couple of names outside of Costpoint – Including Contracts In Process, Deferred Revenue Created as the offsets of: Revenue entry (DR Unbilled ,CR Revenue)

and Billing entry (DR Accounts Receivable , CR Unbilled)

What is Unbilled?

Contract types such as scheduled and milestone contracts Difference between revenue and billing formulas,

particularly estimate to/at complete Timing of month end close for revenue recognition and

billing cycle Transactions not billed Differences in provisional rates for billing and target or

actual rates for revenue Fee reserves recognized at contract end

Why Do GovCon’s have Unbilled?

What are the best business practices for managing Unbilleds from a business perspective? Careful attention to the two sides of the equation – Monitoring and properly recording expected revenue Making sure that bills are sent on a timely basis

Closing out contracts timely

Unbilled: Best Business Practices

STAY ON TOP OF UNBILLED IT CAN REALLY ADD UP

Graphical Unbilled Change by Month

(5,000)

(4,000)

(3,000)

(2,000)

(1,000)

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1,000

2,000

3,000

4,000

5,000

Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8

Revenue

Billing

Unbilled

• Any billing posted adjusts the unbilled balance on the G/L • Subsequent billings typically bill the transaction cost from a

prior period or subperiod that had been used in revenue calculations

• In an ideal world, subsequent bills would bill all costs from the prior month, at the same rate calculated for revenue, leaving unbilled at zero

Unbilled Drivers: Subsequent Billings

Current Year and Prior Year Rate Variances can affect the unbilled in a couple of ways: • Fee may be calculated at a different rate than billing • Contracts may have specific provisional billing rates • Prior year rates might not be approved, where revenue has

been recorded at actual rate, and billing at a provisional rate awaiting approval

Unbilled Drivers: Rate Variances

Retainage amounts can be included in current revenue formulas even if they are not billable until milestones are met

Unbilled Drivers: Retainage

Transactions Not Billed (Hours and Cost) If cost or hours have not billed: Costs or hours on hold Costs or hours over ceiling if billing and revenue have different ceilings Costs or hours written off in billing (requires revenue adjustment)

Unbilled Drivers: Transactions Not Billed

Unbilled Drivers: Revenue Adjustments

• Revenue adjustments are manual changes in Costpoint calculated revenue

• Revenue adjustments will be included in any revenue posting, thus updating unbilled

• Revenue adjustments by definition, are not driven specifically by transactions, and thus are not included in transactions that are used for billing calculations

• Often used at contract closeout where unbilled is removed from books

Unbilled Account– General Ledger Unbilled is a project required account

Unbilled Account- Projects The unbilled account should always be connected to a Project Account

Group with the Function Code of “UNBILLED-GENERL”

Costpoint Account Perspective

Unbilled - Costpoint Formula Impacts

The following types of Bills and Revenue Calculations may lead to unbilled amounts that need to be carefully monitored: • Bills:

• Scheduled Bills • Milestone Bills

• Revenue: • Estimate at Complete (EAC) • Estimate to Complete (ETC) • Percent Complete

Timing – Unbilled Reconciliation

Timing After calculating revenue and billing for a given period but

before calculating revenue for the subsequent period

Note that the unbilled analysis is Step 22 in the recommended closing the month end process

Subperiod End

Revenue

Next Subperiod Calculate Bills

Post Calc Billings Calculate Unbilled

UNBILLED RECEIVABLES

REPORT

Tools – Unbilled Reconciliation

Unbilled Receivable Analysis Summary Report Purpose: Validation of Unbilled Balances from Project

Ledger to General Ledger Balance Unbilled Receivable Analysis Detail Report Purpose: Provide components of the Unbilled Balance Revenue worksheet Purpose: Highlight possible causes of Unbilled

Using Costpoint’s Unbilled Tools

Costpoint provides an entire menu section under Billing to assist in analyzing unbilled balances. CP 6

Create Unbilled Analysis Report Tables

1. Range of Projects 2. EndingSubperiod 3. Subsequent Billing Subperiod 4. Unbilled Analysis Report 5. And/Or Unbilled Reason Code Table

The Unbilled Analysis Report - Summary

The Unbilled Analysis Report - Summary

• The Summary Unbilled Analysis Report contains the basic unbilled equation, and a comparison to the G/L ITD Revenue – ITD Billings = Unbilled Unbilled from G/L Should be no difference between two columns

• In practice, when it is not zero typical reasons are…

Reasons Why Unbilled Variance Would be different GL to Projects

Revenue in Prior Year Cost and Revenue not properly initialized during implementation Affects ITD Revenue Column

Billings in Project Bill Summary not properly initialized during implementation Affects ITD Billings Column

Journal Entries to Unbilled, Billing, or Revenue Affects General Ledger

Misidentification of the Unbilled account in the Project Account Group Affects General Ledger

The Unbilled Analysis Report - Detail

• The Detailed Unbilled Analysis Report contains the data for the most probable causes of unbilled variance.

• The report is very wide and small. It requires legal paper to print out

• Note that the report is not a straight mathematical equation. Unbilled hours, which are used in T&M contracts, print on the report as a column as well

The Unbilled Analysis Report – Detailed

Unbilled Detailed Breakdown

Unbilled Balance

Transactions Not Billed

Subsequent Billings

Rate Variances

Understanding Components of the Unbilled Analysis Report

Unbilled per GL – General Ledger Balance Subsequent Billings – Costpoint looks at the month after the report to determine what has been billed

Warning - the subsequent bill may contain current month costs Current Year Rate Variance Project Ledger Burden vs. Billing Amounts Prior Year Rate Variance Project Ledger Prior year History Burden vs. Billing Amounts Transactions not Billed Cost and Hours (2 columns) Amounts remaining in open billing detail for prior months

Customization of the Unbilled Report

Costpoint allows customization of the Unbilled analysis. Unbilled Reason Codes can be added, which then show on the Unbilled Reason Codes report which combines both the system and customized columns.

Adding Unbilled Reason Codes –Costpoint 6

Add amounts to Unbilled Reason Codes – Costpoint 7

Unbilled Reason Codes – Sample Report - Costpoint 6

Revenue Worksheet

The revenue worksheet is useful for a few reasons in unbilled analysis Details components of how Costpoint is calculating revenue Details effects of ceilings on calculations which is important if

revenue and billing ceilings are not the same Contains details of revenue adjustments and other fees which may or

may not be included in your billings

The Revenue Worksheet

Correcting Unbilled Amounts and Closing Contracts

There are two primary areas for correcting unbilled amounts, if all the transactions have been entered into the appropriate ledgers. Revenue Adjustments Revenue adjustments must be entered into the Revenue Setup screen Typically used when known adjustments are required, such as closeout

Billing Adjustments Bills which are deemed to be uncollectable, should be written off through

accounts receivable, adjust A/R underpayments

What to Do and What Not to Do

1. Do run the unbilled analysis monthly after your billing cycle is complete, but before you compute revenue

2. Do post invoices on a timely basis 3. Reconcile revenue monthly

• Do not post AJEs to revenue accounts. Revenue adjustments must be run through revenue setup.

• Do not post AJE billing adjustments. Run any bills, or adjustments through the billing module.

• Do not post AJEs to the unbilled account, ever…

Questions

Visit WJ Technologies at our booth in the Expo Hall and

Join us during our Partner Showcase

GC-500 GCS Premier Partner Showcase: October 16th, 4:30 to 5:30 pm

GC-501 Costpoint Partner Showcase: October 16th, 3:15 to 4:15 pm Sam Heman-Ackah II, CPA 703-885-8164 samuel.heman-ackah@wjtechnologies.com Tony Bowser 703-885-8165 tony.bowser@wjtechnologies.com WJ Technologies L.L.C. www.wjtechnologies.com

Call to Action

Thank You!