On-account Invoicing Method for Fixed Price and Time & Material Projects in AX2012

Hope all of you are doing good. I’m back with yet another interesting billing scenario in project accounting. It is On-account invoicing in Microsoft Dynamics AX 2012.

Most of us while working with project transactions wonder what is On-account transaction for project, how different it is from other transaction types available for the project and finally how this transaction can be presented for customer invoicing. Some of us even get confused with its exact usage in billing.

So let us find out what exactly it does:

An On-account transaction is a milestone for fixed-price project which determines the contract value where as for time and material project it is a prepayment transaction or the deduction line to offset the actual project expenditure. It is applicable to only external projects (T&M, FP) and same basic procedure is used to enter these transactions for both the project types. However conceptually it differs a little bit. We can also post this on-account transaction through beginning balances journal for the projects.

To simplify and make you guys understand the concept better, I have divided this topic into 2 sections.

1. On-account invoicing for fixed-price projects:

The billing on fixed-price project goes by agreed upon milestones as per the contract. On-account transactions provide the mechanism to define such pre-scheduled milestones and bill the customer based on the completion of these milestones. These transactions can be setup either at project contract level or the project level as needed and can be viewed from any of these levels.

• To setup on-account transaction on the project contract, simply navigate to Project management and accounting=> Common=> Projects=> Project contracts list page. Choose your project contract, switch to Maintain tab and click on On-account transactions button under Bill section.

• To setup on-account transaction on the project, navigate to Project management and accounting=> Common=> Projects=> All projects list page. Choose your project, switch to theManage tab and click on On-account transactions button under Bill section.

• Let us define some pre-scheduled milestones here. To do this: In the opened On-account form use New button and specify the milestone information like Project date, Project ID, Descriptionand Sales price.

Note: The field Transaction origin will be defaulted with type Milestone for fixed-price projects and will not available for selection.

• As soon as we define these on-account transactions, they will be available for invoicing the customer in Create invoice proposal form. Make sure to choose appropriate criteria to view these transactions.

• Once we create the invoice proposal for these on-account transactions and post the invoice, the postings will happen to Invoiced revenue – on account (OR) WIP invoiced – on account revenue accounts based on project group ledger posting principle setup.

• The invoice amounts will be captured in the On-account and Milestone buckets in project statements.

2. On-account invoicing for time and material projects:

On-account transactions for time and material projects serve as prepayments or milestone payments that can be offset after the actual expenditures on the project incur. These prepayments can also be deducted from the future invoices raised against the actual project expenditures.

For example let us suppose that one of the customer wants to setup a billing schedule for a time & material project to maintain the consistent cash flow and wants to see the expenses that relate to these payments in an invoice as they incur. So here the expectation of customer is to have on-account invoicing against time & material project. Let us configure this into the system by following below steps:

• Navigate to Project management and accounting=> Common=> Projects=> All projects list page. Create a time & material project and define the billing schedule for the project using On-account transactions button located in the Manage tab under Bill section.

Note: The field Transaction origin will be defaulted with type Prepayment journal voucher for time & material projects and can be editable to select for type Deduction also. Here the other type Milestone is not allowed for T&M projects and Beginning balances not allowed for manual selection.

• As soon as we define the on-account transaction line, it will be available for invoicing to the customer in the Create invoice proposal form similarly as we have seen for fixed-price projects.

• And also once we create invoice proposal for this prepayment transaction line and post it, the postings will happen to Invoiced revenue – on account (OR) WIP invoiced – on accountrevenue accounts based on to the project group ledger posting principle setup.

• The invoice amounts will be captured in the On-account and Prepayment journal voucher buckets in the project statements.

• Now once we incur the actual expenditures against the project and recorded them, we can create a deduction line in on-account transactions form and offset the previous prepayment transaction that we had invoiced. To do this, post some transaction against the project with non-zero cost and sales prices.

• Back on On-account transactions form, create a line with transaction origin as Deduction and specify the amount (in negative sign) to be deducted from previous on account invoice. UseOffset check-box to view this deduction line when re-opening the On-account form in future.

• Now if we check the Create invoice proposal form to raise an invoice to the customer we can observe that the deduction line appears to settle against the actual project expenditure.

• What more? We can actually show the customer the expenses related to the prepayment or scheduled payment to maintain the consistent cash flow and show in the invoice.

• Once we create and post the invoice proposal with on-account deduction line, the amounts will be settled against previously posted on-account invoice keeping the only appropriate amount to be debited for customer balance.

• Also if we check project statements, the invoice amount will be reduced from On-account bucket and included in the Deduction bucket under On-account invoicing.