1. Administrator Guide
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  3. Revenue Recognition

Revenue Recognition

The Revenue Recognition feature lets you set up revenue recognition rules for each project individually, and you can also recognize revenue using project billing rules. Each project can have multiple revenue recognition rules, providing flexibility to meet the needs of your company’s current recognition structure. You can also create manual recognition transactions within a selected project, clicking the Create button, and selecting Recognition transaction.

Note:

There are several switches which affect revenue recognition. See Revenue Recognition Switches for the complete list. To enable them, contact OpenAir Customer Support.

To create one of the following recognition rules, click Create and select Recognition > [Rule from list below]:

Revenue Recognition Rules

% Complete

This rule recognizes a fixed amount over time based on overall completion of the project. The total amount to recognize can be set in the Amount dropdown, and the calculation method can be set in Calculate using. You can select the following calculation methods:

You can apply rules to an entire project, or to elements of it, such as specific phases or tasks, by choosing them in the drop-down list boxes.

Drop-down list for approved vs planned hours for the project.

As Billed

This rule creates recognition transactions when a charge is created or when a charge is invoiced. It also uses charges which were already created by project billing rules and charges which were already invoiced.

Limit the time period this rule is applied to by setting a Start and End date in the Date range section of the form, or leave these fields blank to include all dates in the recognition rule.

This recognition rule calculates the recognition amounts from already-created charges from billing rules, so you can set filters on the charge types using the Charge types to exclude section of the form. You can choose the following:

Note:

Expense item charges are automatically excluded if you have created an Expenses rule, and product charges are automatically excluded if you have created a Purchases rule.

You can also apply filtering rules in the Recognition rule filters section of the As Billed form. Click the > Create link and select only the charges which you want to process when the recognition rule is run.

Recognition rule filters with highlighted the create form.

In the Other section of the form, if you select an agreement or customer PO, transactions will be set against that agreement or customer purchase order and the drawdown will be reported. Additionally, if you need to report hours recognized, select the Populate hours in recognition transactions checkbox.

Expenses

This rule recognizes revenue from expenses, and offers more options than the As Billed rule. It recognizes receipts created in the Expenses module as revenue.

You can set one of several different scenarios to recognize revenue in the Revenue to recognize section of the Expenses rule form. The options are:

You can limit the recognition rule to specific users and expense items in the Recognition Rule Filters section of the form. You can also restrict values based on associated tax location.

Fixed amount on date or milestone / Fixed amount on % complete

These rules recognize a fixed amount on a set date or upon completion of a milestone/percent completed. Use the drop-down list box under User to select a user to associate the rule with. Enter the remaining information and click Save.

Purchases

This rule recognizes revenue based on purchases created in the Purchases module. There are two scenarios to choose from:

Incurred vs. forecast rule

This rule recognizes revenue based on how the project is tracking against the ongoing plan by dividing incurred costs by forecast costs and then multiplying by the amount of revenue to be recognized. Incurred and forecast costs can include any combination of labor, expenses, and purchases.

This rule is similar to the percent complete recognition rule; however, while the percent complete rule only uses hours, the incurred vs. forecast rule uses other inputs.

The Incurred portion of the percentage calculation is the numerator. The following items can be included in the Incurred portion:

The Forecast portion of the percentage calculation is the denominator. The following items can be included in the Forecast portion:

Important:

Consider the following guidelines:

  • The cut-off date used for Approved and booked hours multiplied by the employee/user cost is based on the latest approved timesheet for that user across all projects, and is not restricted to any one project.

  • The loaded cost for the employee is set in Administration > Employees > [Select an Employee] > Cost. It includes the Current hourly cost, which specifies the hourly cost effective today, and any Historical hourly costs, which may specify both past and projected hourly cost values effective within a given date range.

    • By default, the Estimated hours multiplied by user cost forecast is calculated using the current hourly cost for the employee. OpenAir can be configured to calculate the Estimated hours multiplied by user cost forecast using the loaded cost effective on the day work is assigned, taking into account both current hourly cost and historical hourly costs.

      To enable this feature, contact OpenAir Customer Support and request the following revenue recognition switch: For incurred vs. forecast recognition rules, use hours from assign by day table for the forecast, instead of planned hours, so that dated loaded cost can be used for the forecast instead of current loaded cost.

    • The Approved and booked hours multiplied by the employee/user cost forecast calculation always uses the loaded cost effective on the day work is assigned, taking into account both current hourly cost and historical hourly costs

Note:

When selecting any of the options which use hours multiplied by cost, you can select which cost level to use from the User cost to use drop-down list box in the Other section of the form. Additionally, you can tie agreements, customer purchase orders, and services to the rule like any of the other recognition rules.

Time project billing rule

Recognizes revenue from charges that have been or would be created by selected time billing rules. This revenue recognition rule can only be created after at least one time billing rule has been created on a particular project. If you try to create the rule without a time billing rule, you will receive a “You must first create at least one Time billing rule” message.

When you’ve created one or more time billing rules for a project, you can select the billing rule or rules which will create recognition transactions when the recognition is run.

Balanced Incurred vs. Forecast Rule

This rule uses true-up transactions to balance out previous accounting periods and adjust your projections to reflect project changes. It is particularly useful when your previously recognized income is more or less than the actual revenue as of the current date.

To use this rule, first enter the amount to recognize, and select whether the rule's calculations are based on bookings or assignments. The calculations are the same for both. Selecting bookings uses bookings for forecasts, while selecting assignments uses assignments for forecasting. Actual time entries are used in both scenarios:

Note:

Whenever worked hours are entered, they are prioritized over booked or assigned hours to more accurately project what is occurring in OpenAir.

It isn't possible to combine both booked AND assigned hours in the same rule.

For the Incurred section of the calculation, you may also plan for expenses and purchases to incorporate approved receipts or fulfilled purchase items, which makes it easier to transfer from the original Incurred versus Forecast rule.

In the Forecast section, define what type of hours (booked/assigned or logged timesheet hours) are used for revenue projection calculations. Two periods are considered in the forecast:

The forecast can use either time entries or booked/assigned hours. Time entries are preferred over bookings or assignments. You can also enter total planned receipts and purchase items into the forecast.

When the rule is run, true-up transactions are used to balance out previous accounting periods when there is more or less revenue to recognize as of today. They can be generated per project or per employee.

Example of the Balanced Incurred vs. Forecast Rule

In December 2015, the following project data exists. The project will run from January 2016 to March 2016. Booked hours, projected cost, and projected revenue are the same for January 2016, February 2016, and March 2016. If there are no changes to Booked or Logged hours, the Actual revenue will match the Projected revenue for the duration of the project.

Balance incurred vs forecast rule example.

The following formulas are used to determine Projected cost and Projected revenue:

Projected cost = Booked hours x User cost

Projected revenue = (Projected cost / Total Projected cost) x Total project revenue

In February 2016, the Actual revenue for January 2016 has been recorded. In this example, the Actual hours were the same as the Booked hours, therefore the recorded Actual revenue was the same as the Projected revenue in January 2016.

Balance incurres vs forecast rule example.

In March 2016, the project is extended to April 2016, and 320 additional booked hours are added to April 2016. These additional booked hours increase the cost profile for the entire project. If the projected revenue was recalculated in March 2016 with this new data, the projected revenue for each month would be lower for January, February, and March in 2016.

Because the January 2016 accounting period is already closed, the Actual revenue recognized for January 2016 cannot be changed. Therefore, the Balanced IvF rule creates a true-up transaction of ($10,000) in February 2016 to balance the Actual revenue from January 2016.

Actual revenue.

In April 2016, income is recognized for March 2016. March 2016’s booked hours were the same as its actual hours, so the Actual Revenue is the same as the Projected Revenue: $15,000. The rule will not create a balancing transaction for this month.

Total project revenue.

In May 2016, it is determined that April 2016’s Actual hours (200) were lower than the booked 320 hours. Therefore, the rule will need to create a true-up transaction in April 2016 which will take into account the true-up transaction made in February.

When the rule is run, it recalculates what the Actual revenue would have been if this new April 2016 data had been taken into account using the following multi-step calculation:

  1. The rule creates a Revised Actual Revenue for each period it must account for. The formula is:

    (Actual cost for period / Total Actual Cost) x Total project revenue = Revised Actual Revenue for period

  2. The rule subtracts each accounting period’s original Actual revenue from the corresponding Revised Actual Revenue. The formula is:

    Revised Actual Revenue for period — original Actual revenue for period = Actual Revenue Difference for period

  3. The Actual Revenue Differences for each previous period (January, February, and March 2016 in this example) are summed, and subtracts any previously-recorded true-up transactions, to give the true-up transaction for April 2016. In this example, the sum of ($7,352.94), $2,647.06, $2,647.06, less ($10,000) creates a true-up transaction of $7,941.18 for April 2016.

Actual revenue differences.

The Balanced IvF rule can be limited to specific employees, expense items, time types, or tasks using a standard OpenAir filter.

This rule can only be used with accounts using accounting periods. You can then define which accounting date to use with the rule. We recommend selecting "Use the accounting period specified below" and using the default accounting period.

The Balanced IvF rule includes a "Do not generate recognition projections for already recognized revenue" option, which functions in a similar manner to the original Incurred versus Forecast rule. If selected, the sum of all revenue recognition projections and actuals will always be equal to the revenue recognition amount defined on the rule.

With the Balanced IvF rule, you can also choose to include or exclude booked or assigned hours for users with missing time entries into recognition revenue projection calculations in periods before the pivot date.

Note:

This rule also prioritizes using time entries over booked or assigned hours when generating recognition revenue projections. For example, if an employee logs time to a different project than they were originally booked to for a particular period, the calculation will use that employee's logged time rather than their booked time for the recognition calculation.

Finally, other settings allow you to add different "stamps" to generated transactions (for example, service X line, agreement, customer purchase order). You can also select which user loaded costs are used in calculations and define if the recognition rule is active or not.

Running Revenue Recognition Manually

When a recognition is run, a list of potential recognition transactions based on the set recognition rules is displayed. You can select items which you want to turn into transactions. Then, you can click Recognition transactions to see a list of transactions.

Note:

You must have at least one recognition rule for a project before running the recognition.

To manually run Recognition (after creating at least one recognition rule)

  1. Select a project and click Financials > Recognition, then click the Run recognition sub-link.

    • Enter a Start and End date for the revenue recognition run, if applicable. By default, these dates are the values entered when the last revenue recognition was run.

  2. Click Next. The list of available revenue items appears. If no revenue is available, you will receive a “No recognition transactions are pending for this project” message.

  3. If necessary, edit any items in the list. Click on the date of the revenue item you want to change. After making your changes in the dialog box, click Save.

  4. Select the check boxes next to each item you want to include as revenue recognition transactions.

  5. Click the Create recognition transactions link.

You can see and edit the items which have been recorded as revenue transactions by clicking the Recognition transactions link.

When you have created revenue transactions for a project, revenue information is displayed on the Financial analysis report for the project. If you want to re-run the recognition, click the Click here link at the bottom of the page. This will give you the option of entering a new set of dates.

Running Revenue Recognition Automatically

OpenAir has three options for automatically running revenue recognition on a timed basis. They are:

To find the auto-run options for each project, navigate to the project, click the Recognition link, and then click the Auto-run sub-link. A dialog box containing the three auto-run options will open.

You can set up automatic revenue recognition runs without creating the corresponding revenue items:

To set up a Trial Automatic Revenue Recognition Run

  1. Click the Run recognition, do not create recognition transaction option in the Auto-run dialog.

  2. To add users who should receive email messages of the trial run results, click the > Create or > Edit link, select users from Available items, and click Add highlighted items to move them to Selected items.

  3. Select the day of the week and time when the trial recognition will run. Email messages with results of the run will be sent as soon as the trial has been run. All times are in U.S. Eastern Time.

  4. If you don’t want emails to be sent when no transactions are recognized, click Suppress the email if there is nothing to recognize.

  5. Click Save.

You can set up automatic revenue recognition runs which create recognition transactions:

To set up an Automatic Revenue Recognition Run

  1. Click the Run recognition and create recognition transaction option in the Auto-run dialog.

  2. To add users who should receive email messages of the trial run results, click the > Create or > Edit link, select users from Available items, and click Add highlighted items to move them to Selected items.

  3. Select the day of the week and time when the trial recognition will run. Email messages with results of the run will be sent as soon as the trial has been run. All times are in U.S. Eastern Time.

  4. If you don’t want emails to be sent when no transactions are recognized, click Suppress the email if there is nothing to recognize.

  5. Click Save.

Revenue Reporting

The reporting values for recognized revenue can be used in reports. Commonly-used reports for reporting revenue based on the previous settings include the following:

To set up the captured time range, configure the Period, # of periods, and Date items. Then, choose corresponding fields which should be calculated in the resulting report. The following list are commonly-used Measures:

Detailed Revenue Reports

Separate reports are available for reporting revenue recognition and corresponding values. These reports are:

Projects — Recognition Rules

To view details about all currently created recognition rules, select Reports > Detail > [Projects] > Recognition rules in the old reporting system, or search for and select Projects — Recognition rules in the Next Generation Report Management interface. Set up the date filter for when the revenue recognition was created, either by selecting any predefined time range or using a custom date period.

Projects — Recognition Transactions

To view details about recognition transactions, select Reports > Detail > [Projects] > Recognition transactions in the old reporting system, or search for and select Projects — Recognition Transactions in the Next Generation Report Management interface. Set up the date filter for when the revenue recognition was created, either by selecting any predefined time range or using a custom date period. For this type of report, you can also choose conversions on a different basis in Forex conversions and User loaded cost determination. Any report value which requires a foreign exchange conversion will use that date as the exchange rate date. The date will also dictate the date used for the currency conversion of user-loaded costs for any cost reporting value.

Projects — Pending Recognition Transactions

To view details about pending recognition transactions, select Reports > Detail > [Projects] > Pending recognition transactions in the old reporting system, or search for and select Projects — Recognition Transactions in the Next Generation Report Management interface. Set up the date filter for when the revenue recognition was created, either by selecting any predefined time range or using a custom date period. For this type of report, you can also choose conversions on a different basis in Forex conversions and User loaded cost determination. Any report value which requires a foreign exchange conversion will use that date as the exchange rate date. The date will also dictate the date used for the currency conversion of user-loaded costs for any cost reporting value.

Projects — Recognition Projections

To view a complete overview of current recognition projections, navigate to Reports > Detail > [Projects] > Recognition projections in the old reporting system, or search for and select Projects — Recognition in the Next Generation Report Management interface. Set up the date filter for when the revenue recognition was created, either by selecting any predefined time range or using a custom date period. For this type of report, you can also choose conversions on a different basis in Forex conversions and User loaded cost determination. Any report value which requires a foreign exchange conversion will use that date as the exchange rate date. The date will also dictate the date used for the currency conversion of user-loaded costs for any cost reporting value.

Specialized Revenue Reports

Two reports with pre-defined options are available in Reports > Advanced. These can be used to view pending recognitions and fixed fee projections. These reports are:

Pending Recognition

This report shows what recognition transactions would be generated if the projection recognition rules were run. You can also recognize revenue on individual projects or across all projects. Included items can be included based on the following:

If there are pending recognition transactions, the project name is hyperlinked. Click this link to view and create recognition transactions for the project. You can also click a link in the Tips menu to create all revenue recognition transactions across all projects with one click.

Fixed fee projections

This report shows total billings or revenue recognition anticipated under the fixed fee rules. It shows the total value of all rules: the amount used (where rules have already been run and transactions created), the percentage of the total used, and the amount remaining. This report can be customized with the following options:

You can also subtotal information by customer and project.

Merging Slip and Revenue Projection Deltas Using Automatic Backup Service (ABS)

By default, when OpenAir runs slip and revenue projections, it fully generates the slip_projection and revenue_projection tables, with no indication of which records were changed against the previous run. You can use the Merge Daily Changes Into Slip Projection and Revenue Projection Tables feature to generate slip and revenue projections so that changes can be recognized using the standard “created”, “updated”, and “deleted” OpenAir columns. To enable this feature, contact OpenAir Customer Support. Currently OpenAir detects changes only in the following fields:

  • transaction_id

  • acct_date

  • slip_projection_id (only available in the revenue_recognition table)

If other fields are changed, the old row in the slip_projection or revenue_projection table will be flagged as “deleted” (the “deleted” field will change from null to “1”), and the new row will be added to the table.

You can also use the Create Virtual Slip and Revenue Projection Merge Tables feature to download deltas (all new, deleted, and modified transactions) for the slip_projection and revenue_projection tables using Automatic Backup Service. To enable this feature, contact OpenAir Customer Support.

When this feature is enabled, a Virtual Projection Tables option is added to the Automatic Backup Service. When this option is selected and ABS first runs, it will create the two virtual tables. ABS then copies the data directly from the slip_projection and revenue_projection tables to these virtual tables. For subsequent ABS runs, updates, additions, or deletions will be applied to these virtual tables. If the feature is disabled, the counter is reset, and when it is enabled again, ABS will recreate the two virtual tables.

You can also manually download these deltas for a selected period. Start and end dates for the deltas can be set in Administration > Global Settings > Account > Integration Import/Export > Export charge projections, Recognition projections deltas. The data file is saved in the same format as ABS MySQL export files, with SQL commands containing “update”, “delete”, and “insert SQL” statements.

Revenue Recognition Switches

The following is a list of Internal Switches which affect the Revenue Recognition feature. To enable any of these switches, please contact OpenAir Customer Support and request the switch or switches you would like to activate.