Example of Proration
Suppose that you have a contract to build a warehouse. You have multiple business units (jobs) associated with the warehouse contract, as shown in this list:
A105: Demolition
A110: Grading
A115: Foundation
At the end of the period, you bill 5000 USD for the contract, which is the combined total of the amounts due for the demolition, grading, and foundation work. Of the 5000 total billed, 1500 (30%) is for job A105, 1500 (30%) is for job A110, and 2000 (40%) is for job A115. The F4812H table will have one billing line number that totals 5000, but the amounts are shown as three entries because you have three jobs, as illustrated in this list:
A105: 1500
A110: 1500
A115: 2000
You bill the customer for 5000 USD. The retainage amount, per the contract, is 10%, or 500 USD.
The F4822 table shows one billing line with one entry for 5000 (invoice number 123). It also shows the retainage amount for the billing line, as illustrated in this table:
Contract |
Line Number |
Invoice Number |
This Period (billed) |
Retainage |
|---|---|---|---|---|
Warehouse |
0.1 |
123 |
5000 |
500 |
The customer remits 4000 (received amount). The open amount (1000) is the gross amount (5000) less the received amount (4000). The system uses the difference between the gross amount and the open amount to calculate the received amount that is prorated in the project financial management process. The F03B11 table includes a line for the invoice, which includes the gross amount and the open amount, as illustrated in this table:
Contract |
Line Number |
Invoice Number |
This Period (billed) |
Retainage |
|---|---|---|---|---|
Warehouse |
0.1 |
123 |
5000 |
500 |
When the project management financial process calculates the received amount values for the three jobs, it prorates the received amount (4000) between the three jobs based on the percentage of the received amount to the billed amount. In this example, jobs A105 and A110 were each 30% of the total billed, so the prorated amount for each is 30% of the total received (4000 x 30% = 1200). Likewise, job A115 comprised 40% of the total billed, so the prorated amount is 40% of the total received amount (4000 x 40% = 1600). This table shows the prorated amounts calculated by the system:
Job (Business Unit) |
Billed Amount |
Total Billed |
Open Amount |
Total Received |
Prorated Amount |
|---|---|---|---|---|---|
A105 |
1500 |
5000 |
1000 |
4000 |
1200 |
A110 |
1500 |
5000 |
1000 |
4000 |
1200 |
A115 |
2000 |
5000 |
1000 |
4000 |
1600 |
(5000 total amount billed) |
(4000 total amount received) |
Similarly, the project financial management process calculates the retainage amount values for the three jobs, it prorates the retainage amount (500) between the three jobs, based on the percentage of the retainage amount to the billed amount. In this example, the retainage is 10%, so the system calculates 10% of the billed amount for each job.
Job (Business Unit) |
Billed Amount |
Total Billed |
Total Retained |
Prorated Amount |
|---|---|---|---|---|
A105 |
1500 |
5000 |
500 |
150 |
A110 |
1500 |
5000 |
500 |
150 |
A115 |
2000 |
5000 |
500 |
200 |
(5000 total amount billed) |
(500 total retained amount) |