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Continuous Project Revenue Recognition in AX R3 CU8

  • Article

One of the requests that we have gotten over the last several years in Dynamics AX Project Accounting is for better visibility into project revenue, especially for fixed-price projects. Unlike time and materials projects (where revenue is recognized upon invoicing), revenue for fixed-price projects is recognized using the estimate system. The word estimate is a bit confusing; in this context it refers to the estimation of fixed-price project completion during project execution rather than the initial estimates of cost and duration that are made during the project planning phase. When using the "completed percentage" revenue recognition rule (specified on the project group), the amount to be recognized is calculated using the formula: Amount to Recognized = Project Contract Value * Percent Complete. The contract value is expressed as the total of the on-account transactions (milestones). For an overview of the estimate system, take a look at the e-learning courses we released a few months ago.

Although it was certainly possible to get revenue recognition working in previous versions of Dynamics AX, there were several limitations. First, the estimate process was very slow for projects with a large number of transactions. We addressed this issue in the R3 release by making some optimization in the estimate creation code. Here are some representative numbers from our improvements to the estimate creation process.  

Hour Transactions

AX 2012 CU7 Time (seconds)

AX 2012 R3 Time (seconds)

500

3

3

1000

5

3

5000

19

5

10000

41

6

25000

107

9

50000

215

17

100000

431

26

250000

1198

68

500000

2935

99

As you can see, even estimates for projects with a large number (500K) of transactions can now be created or recalculated in a few minutes.

The second limitation was the difficulty in setting up a periodic batch process for the estimate system. You are only allowed to create a single estimate per project per period and any transactions that are posted after an estimate is created are not reflected in the estimate unless you use the Recalculate estimates periodic process or delete the estimate and recreate it .  In the upcoming cumulative update 8 (CU8) release, we are making some changes in the periodic Create estimates form to support running the estimate system as an automated process for all fixed price projects.

First, we have made the Period code field optional. This means it will run for every project in the system, even if they are using different revenue recognition period codes (monthly, bi-monthly, etc.). Second, we have made the Estimate date field optional so you do not have to create a batch job each period. For example, if you are recognizing revenue on a monthly basis, you can set up a single batch job that runs all year long instead of different jobs for January, February, etc.

Finally, we have added the behavior that if the estimate for the period has already been created, then it will simply recalculate the percentage complete based on any new transactions (or an update on the WBS effort tracking form). This means you should never need to run the Calculate estimate process again. Note that the system will not create a new estimate for a period until the estimate for the project in the previous period has been posted.

In general, I would recommend that you set the batch job recurrence at most for once or twice per day. Recalculating the estimates for medium to large projects takes a reasonable amount of processing time (all of the transactions are copied into a temp table) so running the batch too often may impact your system performance.

These changes would not be useful if you couldn't see the results. Therefore we have enhanced the Estimate form in CU8 as well. You can now access it from Project management and accounting > Inquiries > Estimates > Estimates. Here is a picture of the form:

A couple of things to notice. First, you can see all active fixed-price projects in the same form. Previously, you would have to go to the project list page, select a single project and click the Estimates button to get values for the project.

Next, we promoted the following columns to the Overview grid:

  • Percentage complete
  • Contract value
  • invoiced revenue (per-period or accumulated)
  • Accrued revenue (per-period or accumulated)
  • Total cost (per-period or accumulated)
  • Gross margin (per-period or accumulated)

These columns make it easy to see whether you are over-billed (billings in excess of revenue) or under-billed (revenue in excess of billings) and spot any anomalies before the end of the month. 

We also added some filters to the form. For example, you can select the period for the estimates that are displayed in the form. It will default to the current period but you can select a different period to see previously posted values. We also have a Columns selector that lets you choose whether you are seeing the period to date (estimate) or project to date (accumulated) values in the grid.

Finally, you can multi-select projects on the form to post once you are satisfied with the numbers.

I hope that these changes will make it easier for you to manage your revenue in fixed-price projects.

Comments

  • Anonymous
    September 15, 2014
    The comment has been removed

  • Anonymous
    September 18, 2014
    Hi, Karen. There is a information about Dynamics AX 2012 R3 support for International Financial Reporting Standards (IFRS) at community.dynamics.com/.../ax-content-microsoft-dynamics-ax-2012-r3-support-for-international-financial-reporting-standards-ifrs.aspx. However, it does not cover the additions coming for projects in CU8, which would handle tech industry bundling scenarios.

  • Anonymous
    October 24, 2014
    Hi Brian,It is indeed a welcome change to be able to see and post many projects at once.Kindly advise:1.How difficult it would be to also promote the Manual % complete column as well.2.Whether the WBS Effort tracking %, which I assume can override the calculated %, applies to Hours only or also Items and Expenses.Rgds

  • Anonymous
    October 28, 2014
    Hi, Jag. The "Percent complete" column in the form above is the same as the "Manual % complete" column from the estimate. We just put a different label on it.The percentage complete automatically calculated in the WBS effort tracking view can be overriden by the project manager. It is calculated by dividing the actual hours by the estimated hours at the task level. It is not based on items and expenses. However, the "% of cost consumed" on the cost tracking view is driven by all transaction types.

  • Anonymous
    October 31, 2014
    Hi Brian,Thanks for the feedback. I understand CU8 will be out in a "few months". Would it be possible to advise if there is a tentative date when it will be out.Please also advise if it would be possible for our company (an MS Partner) to somehow have access to an environment where I could do some testing to see if it will meet out clients requirements.In the event that the version will not be out in time, we may need to consider a mod. If we choose to take this route would it be possible to get some feedback from you to do the mod in a similar way, as it seems to meet most of our needs ?RgdsJag

  • Anonymous
    November 06, 2014
    Hi, Jag. As development schedules may change, I can't promise when CU8 will be released. However, we are finalizing the release and I would be very surprised if it wasn't released before the end of the year. At this point, I don't think there are any more feedback opportunities before release. If you would like to be included in future pre-release testing, send me a private message on the Dynamics Community site (community.dynamics.com) and I will put you in touch with the TAP administrator.

  • Anonymous
    November 13, 2014
    Thanks Brian,Excuse my ignorance, but I cannot seem to figure out what I need to do to send you a private message on the above site. I have joined the community.Thanks & Rgds

  • Anonymous
    November 19, 2014
    Jag, if you join the community and click on the e-mail icon at the top of the page, you can send a private message to anyone registered on the site. BTW, CU8 was released and can be downloaded from LCS.

  • Anonymous
    June 25, 2015
    Hi Brian, While going through whats new in project management in AX2012R3 on Technet, I came acrooss "Set up recurring revenue recognition for fixed price projects". Is the Technet referring to what you have described above of running FP estimates in a batch or is it a different feature all together?

  • Anonymous
    July 14, 2015
    Mansoor, I'm answering this for Brian as he no longer works at Microsoft.  You are correct, "Set up recurring revenue recognition for fixed price projects" is the setting up of estimates to run in batch that we enhanced in R3 that the post above details out.