Dynamics 365 For Operations Tip: Vendor Prepayments and Revenue Recognition for Fixed Price Projects

Hello, Good to be back here on the blog !!! Jumping straight into the topic here today about a new addition of a feature for vendor prepayments in relation with fixed price project revenue recognition !!

Issuing large amounts of prepayments to vendors is often a common business requirement for large scale, long-term fixed price projects, which involves a lot of sub-contracted work. Vendors often request prepayments for the subcontracting services they are contracted to deliver for these projects. These prepayments can sometimes be just a flat amount based on mutual decisions, or it can sometimes be a percentage of the total cost of the subcontracting service. There can be several months of gap between when the prepayments are issued and when the vendors actually deliver the services.

For such projects, customers usually recognize revenue on a percentage completion basis and need the ability to include these vendor prepayments in the project percentage completion calculation of the project for revenue recognition/revenue estimates calculations.

In this post, we will evaluate one of the new features of Dynamics 365 For Operations (Referred as D365 – Operations from here on), which allows us to consider these vendor prepayments automatically when running the monthly revenue recognition/estimates for fixed price projects for calculating the % completion of the project.

For this demonstration, I have setup a fixed price project and the associated contract already. This project is setup to recognize revenue on a % completion basis.

Contract Setup

Project Setup

The Project Manager has created and submitted the purchase requisition for approval so that the services can be procured from Rebar Supply Co. Ltd. See screenshot below.

PR Submitted

The purchase requisition gets approved by the designated manager and the Purchase order is automatically created. See screenshot below.

PR Approved

The Project procurement team/Project manager then sets up the prepayment details on the project purchase order that was automatically created upon approval of the requisition.

PrepaySetupOnPO

Finance and Accounting team now processes the prepayment invoice to initiate the prepayment to the vendor.

Prepay Invoice

Prepayment

Now that the finance team has processed the vendor prepayment for the subcontracting work, let us now go ahead and see what happens when they run the monthly revenue recognition process for this project.

Notice that system was able to consider the vendor prepayment cost for the project and was able to determine the percentage completion based on the total project budget/forecast defined. See screenshot below

PComp

When this revenue recognition entry is posted, the revenue amount (based on Percentage complete and the total contract value) will be posted to general ledger. We all know how it works from here 🙂

That’s it for today !!

Sandeep

Sandeep ChaudhurySandeep Chaudhury is a Dynamics 365 enthusiast with over 10 years of experience in functional consulting, Solutions architecture and systems integration, with expertise in the areas of Professional services automation(Project Management and accounting), Financials Management, Services Management, Sales and Marketing, Human resource management, Travel and Expenses Management and Procurement & Sourcing modules of Microsoft Dynamics 365 ERP. He has experience working with the Dynamics 365, AX 7, AX 2012 R3, AX 2012 R2, Dynamics 365 for Operations and more.

What is the Point of AXIO Core Financials with Dynamics 365 for Operations?

At first glance, it just doesn’t make sense that SBS Group (or anyone for that matter) would create a third-party solution to enhance financial management for one of the world’s most noted financial management solutions.  I’ve had several potential clients ask about this and my answer is always the same:  It is about helping our customers realize business value faster.

When a business invests in technology, they expect tangible results.  Whether they’re aspiring to enhance operational performance, improve the customer experience or capitalize on new opportunities, the goal is to provide genuine business value in the least amount of time.  The days of waiting for smart technologists to reverse engineer generalized solutions to the needs of individual companies over the course of months and years has been put to pasture by the advent of cloud computing.

We’ve implemented ERP solutions for thousands of companies and have learned a thing or two about the kind of configurations, enhancements and customizations that different types of buyers will need.  We put that knowledge to use with every engagement, and in the case of AXIO Core Financials, we start well in advance of the engagement.

After all, Microsoft did their part. They created Dynamics 365 for Operations which is arguably the most robust ERP platform on the market today.   It is an extremely flexible, scalable Cloud ERP platform that takes advantage of the entire Microsoft Office and server stack.  It is up to our team to bend, balance and bedazzle the solution so that it operates as if it were created exclusively for each customer…and to do it quickly and efficiently.

“Bedazzling Dynamics 365 for Operations” with AXIO Core Financials

So how exactly do you bedazzle financials?  Well, you begin by understanding who you’re bedazzling it for.  AXIO Core Financials is designed to help larger, enterprise-level organizations who require universal integration of finance across any number of countries, companies and other entities. We often work with professional services firms who have operations and projects around the world and distribution companies with complex ownership and revenue management structures.  Complex operations require special attention to the setup of even the most fundamental system components.  AXIO Core Financials includes:

  • Multi-company, multi-currency management.
  • Accounts Receivable
  • Accounts Payable
  • General Ledger
  • Fixed Assets
  • Procurement and Sourcing
  • Product, Inventory and Warehouse Management
  • Banking and Advanced Credit Management.
  • Regulatory support
  • Human Resource Management
  • Advanced commissions management.
  • Excel Budget Importing
  • Master Data Management Import Templates
  • Pre-Defined Business Process Flows w/ Swim-Lane Diagrams
  • On-Screen and In-App Task Guides
  • Content-Sensitive Help and Training Material

AXIO Core Financials enhances global scalability, compliance with GAAP, IFRS, Sarbanes-Oxley, and DCAA requirements and spans all the important back-office processes in your firm to give you unparalleled insight and control of all critical financial functions.

Sample Screen-Shot of Bank Management Workspace

AXIO Core Financials Bank Workspace with Dynamics 365 for Operations

Sample Screen-Shot of Credit and Collections Workspace

AXIO Core Financials Credit and Collection Workspace with Dynamics 365 for Operations

Faster Time to Value

By leveraging best practices and lessons learned over more than 30 years to create AXIO Core Financials, our team has been able to decrease the related Dynamics 365 for Operations implementation by an average 30-45%. And, our clients get a much-improved experience with fewer frustrations and confidence knowing that their solution has been vetted and approved by the Microsoft AppSource Team.

AXIO Core Financials on Microsoft AppSource

Learn more about AXIO Core Financials on our website or see it in Microsoft’s AppSource along with other SBS Group solutions like AXIO Professional Services for Project-Oriented firms.

Best regards,

Robbie Morrison
Chief Solution Strategist, SBS Group

About Robbie
Robbie Morrison has spent nearly 20 years helping customers build and deploy elegant technology and business solutions.  From start-ups to enterprise-class organizations worldwide, his knowledge of the Microsoft Dynamics ecosystem and products helps SBS Group customers maximize ROI on technology investments.  Robbie

Today, Robbie serves SBS Group customers in his role as Chief Solution Strategist where he provides thought leadership and manages the development of B2B solutions.  Robbie received his MBA from the University of Georgia, Terry College of Business.
https://www.linkedin.com/in/robbiemorrison

When is Dynamics 365 for Project Service Automation (PSA) the right fit?

SBS Group is well known for expertise in helping project-oriented companies to leverage Microsoft and other technologies to operate more efficiently and profitably.  Solutions like AXIO Professional Services enhance Dynamics 365 for Operations and Progressus for Professional Services provide PSA and ERP for Dynamics NAV.

Another solution, Dynamics 365 Project Service Automation (PSA), is available to project-oriented companies who wish to dive into the Dynamics 365 platform.  Instead of an ERP-based project management solution, Dynamics 365 PSA offers a more client centric based solution.

Each of these solutions provide customers with comprehensive feature sets nested in a full Microsoft customer experience.  The trick is understanding the short-term and long-term benefits of each solution to understand which best fits a specific customer environment.  In this post, we will explore Dynamics 365 for Project Service Automation (PSA) to better understand what types of companies it would serve the best.

Dynamics 365 for Project Service Automation

Key Features of Dynamics 365 Professional Services Automation (PSA)

Microsoft Dynamics 365 for Project Service Automation Enables project-based organizations to deliver every customer engagement on-time and within-budget through an end-to-end solution for sales, planning, resourcing, delivery, and billing.

OPPORTUNITY MANAGEMENT

Provide integrated sales dashboard with project-based opportunities to help forecast profitability and feasibility. Streamline sales manager experience to quickly create project contracts, track labor rates and generate SOWs. Collaborate real-time with customers on the quotes, project scope and resource requirements through customer portals.

PROJECT PLANNING

Make it easy for sales manager to visualize cost, effort, and sales value with project managers to estimate and define the work using standard project templates. Use robust project scheduling and management capabilities of Microsoft Project to complement the collaborative sales planning process.

RESOURCE MANAGEMENT

Optimize resource assignment through a consolidated scheduling engine across all modes of service to ensure right people on the right projects. Simplify engagement across project managers, resource managers and sub-contractors to forecast demand, talent management and resource allocation. Empower consultants to apply directly for relevant project roles, and update skills through mobile devices.

TEAM COLLABORATION

Provide powerful, easy-to-use, mobile-ready O365 productivity tools for project teams, customers, and partners to communicate and collaborate on project deliverables and tasks. Empower project managers by providing real-time status and performance indicators to mitigate project risks.

TIME AND EXPENSE MANAGEMENT

Simplify management, tracking and submission of estimated and billed project time by integrating the tasks and deliverables within calendars. Track all project and non-project schedules on their device or app of choice through integration between exchange and project calendars.

CUSTOMER BILLING

Provide project managers and customers a one-stop-shop dashboard to review, override, track overruns and approve all costs and time impacting their projects. Automate generation, approval, and distribution of accurate invoices in email and on the web. Enable integration with best-in-class back-office applications for financial accounting.

SERVICE ANALYTICS

Anticipate business opportunities, optimize solution offerings, and improve business performance through robust analytics, interactive dashboards, role-base templates, and data visualization for 360 visibility to project and portfolio metrics like resource utilization and practice profitability.

Features included with Dynamcs 365 for Project Service Automation

For additional insight into the features and capabilities of Dynamics 365 Project Service Automation, you might want to read this post written by Sandeep Chaudhury on the Dynamic Community blog.

What Companies are the Best Fit for Dynamics 365 Project Service Automation (PSA)?

This solution helps companies manage the entire project sales and delivery cycle, but shines more in earlier, front office, stages of the client engagement like sales and quoting.

Because it is based on a CRM platform, the solution is fairly flexible and many per-company customizations can be created without back-end programming.  Integration with Office 365 and other Microsoft tools is robust as well.  However, this flexibility comes with a price. While the solution provides strong collaboration benefits between sales and delivery resources, it is most effective for companies with smaller delivery teams and less complex projects.

For instance, the solution provides a very user-friendly scheduling function with Outlook calendar integrations that makes managing resources against a project work quite well.  But, for larger companies with hundreds or thousands of delivery resources, the solution is lacking the strong skills based scheduling that is available in AXIO for Professional Services.

When the team size is small and scheduling resources are familiar with individual skill-sets, this is less of a problem.  When teams get larger and projects become more complex, or when the scheduler is assigning resources across the globe having never meet or assessed the resources being scheduled, this can be a show-stopper.

Examples of companies that might benefit from Dynamics 365 for Project Service Automation are marketing and media firms, light management/consulting firms, smaller IT services firms, and many other white-collar consulting firms.  Although I’m calling out smaller companies, it could be a great fit for large companies as long as their project delivery is still fairly simple.  Think about a company that provides creative design for television ads vs. a consultancy that deploys large, integrated ERP systems.  The latter may take anywhere from 6 months to 3 years and require multiple milestones, different skill-sets and formal call-center or on-site support. Other business that may struggle with CRM-based PSA are Architecture and Engineering, Construction, Software Publishers or even specialty manufacturers.

Here are some example questions you might ask yourself when selecting a CRM-based vs ERP-based Dynamics 365 solution for a project-oriented firm:

  1. Do we manage inventory? 
  2. Do we require advanced revenue recognition processing?
  3. Are our projects complex or simple?  In other words, do you have multiple clauses? Do you bill based on Performance Milestones (ASC 606 and IFRS 2015)
  4. Do we need project accounting to be auditable?
  5. Do we require union payroll?
  6. Do we require T&E reporting audits for DCAA compliance?
  7. Do we need to staff/manage projects across multiple entities?
  8. Do we manage subscription revenue along with or post project completion?

In each of these cases, an ERP-Based PSA solution is likely the better option.  Some of these  issues can be dealt with in Dynamics CRM PSA, but it is unlikely that the amount of development or process configuration required to do so would be worth the effort when systems already exist that meet these challenges.

You only need to ask.

If you are researching your next solution, please feel free to reach out and we’ll help you dig into the details.  After all, selection of this nature can be one of the most important decisions your company will make.

Thanks,

Best regards,

Robbie Morrison
VP Enterprise Solutions and Services, SBS Group

About Robbie
Robbie Morrison has spent nearly 20 years helping customers build and deploy elegant technology and business solutions.  From start-ups to enterprise-class organizations worldwide, his knowledge of the Microsoft Dynamics ecosystem helps SBS Group customers maximize benefits from the ERP investments.  Robbie

Today, Robbie serves SBS Group customers in his role as Vice President, Enterprise Group where he provides thought leadership and manages the enterprise delivery team.  Robbie received his MBA from the University of Georgia, Terry College of Business.
https://www.linkedin.com/in/robbiemorrison

A Business System Platform for Professional Services Firms and Project-based Businesses

Professional services firms and project-based businesses invest in technology to improve employee productivity, streamline operations, improve sales, marketing, and customer engagement. Additionally, these firms invest in order to get better insights into their businesses to drive continued improvements. Over time, most organizations have invested in a number of stand-alone point solutions addressing different areas of need. However, the largest and most successful companies, go beyond point solutions by creating a unified solution, either through an extensive integration of best-of-breed technologies, or standardization on a technology platform such as Oracle or SAP.

Until recently, the cost and complexity of implementing such a comprehensive solution was beyond the reach of all but the largest global organizations. That is no longer the case! With the introduction of Microsoft Dynamics 365 — joining Microsoft Azure, Microsoft Power BI, and Microsoft Office 365 — any size professional services firm or project-based business can deploy a truly unified platform solution providing robust functionality for every business function and employee role.

microsoft dynamics 365 applications

Traditionally, enterprises achieved technology automation through the implementation of Enterprise Resource Planning (ERP). ERP is generally defined as an expanded effort to standardize record keeping to permit information sharing among different areas of an organization in an effort to manage the business more effectively and efficiently. A successful ERP implementation formalizes and integrates business processes across the organization, leveraging a single, integrated information system platform.

In the manufacturing sector, ERP has been the primary focus of business technology investment. However, professional services firms and project-based businesses have significant technology needs beyond the back office. The customer focus of services firms and the fluid, dynamic nature of services businesses has made Customer Relationship Management (CRM) an equally important part of the technology equation. CRM assists the sales, marketing and customer services departments in your firm by focusing their efforts on bringing the customer the best value possible.

erp crm success

Ideally, a firm’s ERP and CRM system would work hand-in-hand – creating a unified system. ERP puts the product at the center of the interaction while CRM focuses on the customer and their needs. With Microsoft Dynamics 365, professional services firms and project-based businesses can have both ERP and CRM in one unified platform. Even better, Dynamics 365 is built in the Microsoft Cloud giving users access to the data they need anywhere, at any time and costs less than deploying an on-premise ERP and CRM solution.


Learn more about the Microsoft Cloud by download our white paper.

In the white paper, we will detail the business value of platform adoption, examine the specific needs of professional services firms and project-based business, review the elements of the Microsoft Cloud, and demonstrate why the Microsoft Cloud is the superior solution for the services sector.

We also included a general Primer on Cloud Computing for those who need a grounding or refresher on cloud concepts, as well as a review of Microsoft Dynamics 365 and Office 365 components and benefits.

Dynamics 365 For Operations Tip: Now you can use Position based hierarchies in all workflows

Using a Reporting manager hierarchy for routing workflow documents has always been possible in Microsoft Dynamics AX and Dynamics 365 For Operations. This worked great in cases where you were required to route all of an employee’s workflow documents, such as timesheets, expense reports, purchase requisitions and more, to the manager they report to.

Now in Dynamics 365 For Operations, you can use Custom configured position hierarchies to route workflow documents. So, let’s say  you have a scenario where you need to route timesheets of an employee to the reporting manager, but route the expense reports to a manager they report to in a specific project hierarchy, you can configure this in Dynamics 365 For Operations ! Let’s see how?

On the Position Hierarchy Types, you can select the workflows which can use the selected position Hierarchy for outing documents. For example, in the screenshot below notice that the Matrix based hierarchy can be used by the expense report – USMF and Timesheet workflow.

dynamics365-position-hierarchy-types

NOTE: Note that a workflow can use only one custom hierarchy.

Additionally, you will notice that, on the workflow setup form, you can now view and manage the associated configurable hierarchies.

dynamics365-associate-hierarchy

On the workflow setup/configuration, you can select the steps to be assigned to a Configurable hierarchy. See screenshot below.

dynamics365-workflow-step-1

So, when an employee submits their expense report/timesheet, this workflow setup is going to look for the Matrix Position Hierarchy and assign the workflow document to the worker to whom the employee reports in the Matrix hierarchy instead of the managerial hierarchy.

dynamics365-position-hierarchy

dynamics365-ar-administrator

Small, but useful enhancement !! Hope this quick tip is useful.

Sandeep

Sandeep ChaudhurySandeep Chaudhury is a Dynamics 365 enthusiast with over 10 years of experience in functional consulting, Solutions architecture and systems integration, with expertise in the areas of Professional services automation(Project Management and accounting), Financials Management, Services Management, Sales and Marketing, Human resource management, Travel and Expenses Management and Procurement & Sourcing modules of Microsoft Dynamics 365 ERP. He has experience working with the Dynamics 365, AX 7, AX 2012 R3, AX 2012 R2, Dynamics 365 for Operations and more.

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