What is WIP?
- Do you have Resources working on projects and hours will not be billed in the month worked?
- When do you recognize revenue for a Milestone based project?
- When are project expenses recorded on the financials?
Most businesses have large projects where resources are working and paid in one month but the client is not invoiced until the next month. In result, you incur the expenses in one month and revenue in another month, thus not properly reflecting true net income in either month. Resolving this issue by properly accounting for the revenue and expenses in each month will allow you to have accurate financials which will in turn allow you to make proper business decisions.
For example, if you have a month where your expenses are overstated and you show a loss, you might make changes to correct the issue. Likewise, if you have a month where you have overstated revenue and you show a large net income, you may make a business decision to make an investment in something, only to find out later that you really were not that profitable and the investment should not have been made. Understanding the project reporting and accounting and reflecting the expenses and revenue accurately can have a huge impact to your overall health and success of the business.
How can CFS help?
The key to attaining accurate reports is to capture the necessary information, have time entered weekly and approved each month, have an accurate estimate of the Project % of Completion and track all Project activity. We have leveraged Autotask's Project module to store the required information and have developed LiveReports in order to generate the reports. The LiveReports use formulas in order to provide the amount of Revenue that should be recognized at month end for the active project as well as profitability, actual vs estimates and other essential information.
*Remember, WIP may not only apply to Project work in your organization. If your Tickets are billed upon Completion and they take months to complete, this too can be considered WIP!
Who is CFS?
CFS is one of our three divisions that is solely focused on the IT industry. Our Virtual Sourcing division provides clients with Back-office Outsourcing solutions in Accounting, Financial Reporting & Analysis along with Strategic Financial Management. The RES division is a Professional Employer Organization that offers a full range of admin solutions, including HR, Payroll, Tax Compliance, and Benefit Plans to small and mid-sized companies.