Estimates serve different purposes depending on which of the following two accounting principles are applied:

  • Completed percentage - The estimate is used for calculating the revenue during the project. Revenue is accrued based on the completion percentage and the contract value in order to match cost and revenue during the project.

  • Completed contract - The estimate is used to capitalize expenses, items, and hours in order to match cost and revenue on the profit and loss account at the end of the project.

Setup prerequisites

Before you can calculate a percentage of completion on fixed-price projects, the following setup is required:

  • A cost template with a set of cost lines.

    An unlimited number of cost templates can be set up. However, usually one or two cost templates are sufficient. The cost template determines how WIP is presented in the estimate and how the completion percentage is calculated.

  • An estimate structure.

    The estimate structure includes an estimate project with a period code and a cost template defined. The estimate structure makes up a secondary tree structure that can be viewed by selecting the check box and then clicking the option on the list in the form.

  • A contract value, also referred to as a payment plan.

    WIP is calculated based on the contract amount. The contract value is set up as a payment plan on the estimate project.

    Print the report under , to view the payment plan on a project.

  • A period code definition.

    A period code is defined on the estimate project to indicate how frequently the estimate should be generated.

If you want to process estimates for a project, you must attach the project to an estimate project.

You can create estimates for individual projects and for a project hierarchy. If you create estimates for a project hierarchy, the consumption on all projects in the hierarchy is included in one estimate calculation.

  • If you want to process estimates for an individual project, the project itself must be defined as the estimate project.

  • If you want to process estimates for a project hierarchy, the parent project must be defined as the estimate project.

Often, the contract amount of a project is based on the parent project, so you have to select the parent project as an estimate project for all subprojects.

Note Note

The estimate project and related projects must be attached to the same project group.

Cost estimates are used for grouping categories.

Every transaction on a project references a category and every category references a cost line. Because of this referencing, the following estimate information can be outlined for fixed-price projects:

  • A degree of completion.

  • Estimates on individual cost lines. Expenses, hours, and items always reference three different cost lines. The benefit of this structure is that you can follow up on multiple transactions on a project by estimating the remaining work on a cost estimate.

If nothing has been modified in the form, all existing categories are attached to the three cost lines. That is:

  • All Hour-type categories are attached to the cost line.

  • All Expense-type categories are attached to the cost line.

  • All Item-type categories are attached to the cost line.

If you create additional cost lines, you have to redefine one or more of your categories to refer to the new cost lines.

See Also