Q. What's the difference
between task-based WIP and cost-based WIP?
The term Work in Progress (WIP) means Unbilled Costs in Clients & Profits X. WIP is tracked using two methods in C&P X: by task totals and by individual costs.
For a more thorough discussion about the two methods and how to ensure the accuracy and agreement between the various task-based and cost-based WIP reports in C&P X, please refer to the best practice guide
on this topic.
Q. Do all A/R invoices affect
task-based and cost-based WIP?
No, only invoices that reference a job and task. These would include Job Billings, Progress Billings, Estimate Billings, Multi-job Billings, WIP Billings, and Media Billings. Those that don't are Retainer Billings, Advance Billings, Miscellaneous Billings, and Finance Charge Billings.
However, Estimate Billings and Media Billings are added to the job ticket prior to the costs being added against the job ticket. Task-based WIP will be updated correctly in this situation, but cost-based WIP will not, leaving the billing status as 'Unbilled' once the costs are incurred. To fix this, go to Viewpoint > WIP, then click the Verify button. This will apply the billings to the costs as though the costs arrived first and the billings second, automatically updating the costs' billing statuses accordingly. Please refer to the best practice guide
on this topic for more information.
However, Clients & Profits Pro X does have a feature to automatically accrue costs against media billings in the general ledger. Please see the FAQ on this topic
for more information.
Q. Can I print a prior period WIP report like I can with my invoice agings?
Clients & Profits X can only print WIP reports through today. If you need a prior period WIP amount, then make a point to print to hard copy the WIP report you need on a certain day each month, or make a backup of your database on a certain day each month then open that database and print the WIP report you need as of the day of the backup.
Q. I need to prepare my year end WIP adjusting journal entry, but I'm in period 15, how do I do this if I can't print a prior period WIP report?
If you did not print the WIP report you need at the end of the year to hard copy, nor have a backup of your database from near the last day of the year, then you'll need to estimate your year end WIP amount. This is Ok to do, since many generally accepted accounting principles are based on estimating and material accuracy. If you have run WIP reports for your open jobs from month to month in the past and have found the total WIP amount not to deviate very much, then it's logical to assume the year end WIP amount would be similar. So, the WIP amounts from other months may in fact be able to estimate with material accuracy the year end WIP amount. Do take into account special situations that may have happened at the end of the year, like if you did a special billing run.
Q. What is the Billing Worksheet on an A/R invoice?
The Billing Worksheet lets you review the costs that are billed on a particular invoice. This is useful if your agency uses cost-based WIP reports. For each task on the invoice you'll see the individual costs that are billed, including partial billing amounts. C&P X records the invoice number on which each individual cost was billed. Billing amounts, hours, and billing statuses can be manually edited, if needed, in the Billing Worksheet window before the invoice is posted.
The Billing Worksheet is very similar to the Viewpoint > WIP window on the job ticket. In fact, any changes made in the Billing Worksheet or the WIP window will reflect in the other location (since both windows are looking at the same data). This is important to understand because if you verify the billing statuses in the WIP window, this potentially can reassign costs to different A/R invoices, changing the billing worksheets on existing invoices. This normally is not a problem, unless the billing worksheets are printed and sent to your clients, since they won't be expecting to see the same cost listed again on a future invoice's billing worksheet.
If your agency primarily uses task-based WIP reports, then the Billing Worksheet will most likely be a feature you will not use.
Q. How do I remove a cost from the Billing Worksheet on an A/R invoice?
If the invoice isn't posted, the Billing Worksheet can be edited by clicking on the Worksheet link. The Billing Worksheet opens, listing the job costs billed on this invoice. Here you can edit the amounts in the "Bill Now" column, the hours in the "Hours" column, and the billing statuses in the "Status" column. However, because this window can only be saved if the total in the "Bill Now" column matches the total amount of the invoice, you'll first need to reduce the amount of the invoice. To do this, go back to the invoice's main window and double click the task from which you'll be removing the cost. Reduce the amount to be billed on this task per the gross amount of this cost. Then open the Billing Worksheet. On the cost to be removed, change the "Bill Now" amount to zero, and change the "Status" to 'Unbilled'. Save the worksheet. Open it again to make sure this cost is now completely removed from the Billing Worksheet.
Q. If I edit the billing amounts on an A/R invoice is the Billing Worksheet updated?
No, it isn't. You'll need to manually edit the Billing Worksheet to reflect the new billing amounts. If you need to increase the billing amounts to reflect additional costs to be billed on certain tasks, you'll need to delete and readd this task to the billing, since costs can't be added to the billing worksheet, only removed. Readding the task will pull these new costs to the billing worksheet.
Q. Do I have to use cost-based WIP, manage Billing Worksheets, and make sure my costs' billing statuses are accurate?
No, you don't. Many agencies choose to use the more simple task-based WIP for everything from billing to making their year end WIP adjusting journal entry. C&P X just simultaneously tracks WIP using two methods, but you don't have to use both methods. Therefore, it's Ok if your costs' billing statuses are not accurate and you never open a Billing Worksheet or the Viewpoint > WIP window on a job ticket, since the task-based WIP will be accurate regardless. For more information on task-based vs. cost-based WIP refer to the best practice guide
on this topic. There is a rare situation when the cost-based WIP can impact the task-based WIP when saving the Viewpoint > WIP window of which you should be aware. This guide addresses that situation and more.
Q. I noticed the Unbilled Job Ticket Costs report does not agree to the unbilled amount on the job ticket window or on the Job Ticket Summary report, is this a problem?
No, it's not a problem, if your agency is not using cost-based WIP. This relates to the prior question on if your agency will use cost-based WIP or just stick to task-based WIP. The typical situation that will cause these reports not to agree is when estimate billing a job. Cost-based WIP is properly updated if the job costs are added before
the job billings. When estimate billing a job, then adding the job costs later, this will cause all the job costs to have a billing status of 'Unbilled' as reflected on the Unbilled Job Ticket Costs report. However, the task-based unbilled amounts, as reflected on the job ticket window or on the Job Ticket Summary report, will be accurate, since the order of when the costs and billings are added does not matter with task-based WIP. So, if your agency is not using cost-based WIP, these reports do not need to agree. For more information on task-based vs. cost-based WIP, and how to make these two methods agree on reports, please refer to the best practice guide
on this topic.
Q. What does verifying the costs' billing statuses in the WIP window do?
Instead of manually updating each cost's billing status in this window, this feature will automatically update them all at one time. It will apply the amount billed on a task against the gross costs on that task, starting with
the oldest costs first. If a task has more billings than gross costs, these extra billings are not
rolled over to other tasks on the job ticket. So, for any costs that are fully billed, the cost's billing status will automatically
be changed to 'Billed'. If a cost is only partially billed (often happens on the last cost on a task), then it will get a status of 'Partial'. Any unbilled cost-based WIP reports include both 'Unbilled' and 'Partial' costs, and for partial costs, these reports only include the remaining unbilled portion of those costs.
Q. Where do I find the verify cost
billing status utility?
The quickest way is to open the Viewpoint > WIP window on a job ticket, then click the Verify button. But, it can also be run from the Verify/Recover window under Setup > Utilities > Verify/Recover. In the Verify/Recover window you'll need to enter the job ticket number for which you want to verify the costs' billing statuses. Do not confuse this with the Verify/Recover Costs/Billings by Status option. This is the verify/recover function which can be run on a production status range of job tickets.
Q. What is the difference between a verify/recover of a job ticket and verifying the billing statuses of costs on a job ticket?
A verify/recover is a re-totaling utility. For job tickets, it rebuilds the task totals based on the underlying orders, costs, and billings. However, it does nothing to the cost's billing statuses on that job. Thus, a verify/recover of a job ticket should not be confused with verifying it's cost billing statuses.
Q. Can I verify the billing status of costs on all open jobs at one time?
Not at this time, it can only be done one job ticket at a time.
Q. Cost-based WIP seems very labor intensive.
Is it worth it?
That depends on the needs of your agency. You'll need to decide if the benefits of accurate cost-based WIP are worth the effort to maintain their accuracy. Sometimes your clients may want to see the exact costs billed on invoices, or your accountants may want to defer unbilled costs and overbillings instead of accruing unbilled revenue at the end of the year. Such needs normally play a key role in deciding if you want to maintain accurate cost-based WIP.
If you choose to mainain accurate cost-based WIP, then it's essential to read the best practice guide
on this topic.
Keep in mind, it's not a good idea to design your work flow around a tool (in this case C&P X), rather the tool should enforce and augment good work flow. What this means is if your agency does things like estimate bill its jobs, which is good work flow (getting money in advance is better than getting it later), don't change to progress billing knowing that progress billing will automatically update the cost-based WIP. It's better to update it manually periodically in this case. However, if your shop requires cost-based WIP, instead of creating estimate billings, consider using retainer and/or advance billings. These types of invoices are later applied to job or progress billings (once the costs have been added to the job), which will correctly update cost-based WIP. This can save time when manually verifying the cost-based WIP.
Generally accepted accounting principles require that job costs be "matched" against their respective billings on the income statement so that income is not over or under stated. Any time an agency incurs costs in one period, and bills these costs in a different period, creating over or under billed jobs, then an adjusting entry may be needed. So, the simple answer is yes, a WIP year end adjusting entry should be made according to accounting principles.
However, determining if you really need to track WIP in the G/L depends on (1) the necessity to present your financials according to generally accepted accounting principles, (2) the amount of unbilled costs carried over from month to month (are the financials being materially misstated?), (3) the desire of management to adjust financial statements to even out peaks and valleys in income (match costs against billings), and (4) the experience and capabilities of the accounting staff, who have to make the adjusting journal entry.
Q. Does Clients & Profits X make the matching adjusting journal entry for me?
No, it doesn't, the adjusting WIP journal entry is made manually. However, Clients & Profits X has reports that aid in determining the amounts and accounts to be used in the WIP adjusting journal entry.
However, Clients & Profits Pro X does have a feature to automatically accrue costs in the general ledger against media billings. Please see the FAQ on this topic for more information.
Q. How do I determine the accounts and amounts to use in the WIP adjusting journal entry?
First, determine which method of matching your agency will use. The first method is to accrue revenue against all unbilled costs on open jobs. The second method is to defer unbilled outside costs to a WIP asset account and defer overbillings (if any) to a WIP liability account. Often, an agency will choose the first method if they have the right to progress bill their jobs before they are completed, while others will choose the second method if they only final bill their jobs once they are completed.
The easiest method is to accrue revenues against all unbilled costs on open jobs. To do this, go to Snapshots > Work in Progress > Billing Worksheets > Job Billing Worksheet. Enter the production status range of your open jobs, then choose the options to "Show Overbilled Jobs". This report will return a total Unbilled (WIP) amount at the bottom of the report, netting out over and under billed jobs. An overbilled job is one that has been billed in advance, such as via an estimate billing, but the costs have yet to be incurred, so it has a negative unbilled amount. The total of this report is the amount that would be billed if all the open jobs with unbilled costs (underbilled jobs) were progress billed today and overbillings (such as via an estimate billing) were backed out. To make the adjusting journal entry, debit a WIP asset account and credit a WIP revenue account for the total on this report. This is the short and simple adjusting WIP journal entry. If you want to break out the revenue into multiple accounts, include open PO's in this entry, or more, please contact the Clients & Profits helpdesk for assistance. As well, some agencies choose to accrue the underbilled jobs, but defer the billings on the overbilled jobs (instead of netting them out in one journal entry). See the steps for the deferral method below for how to defer the revenue on overbilled jobs.
The harder method is to defer the unbilled costs and overbillings on open jobs. Before following the steps below, you should first ensure your costs' billing statuses are correct and materially in agreement with your task-based unbilled amounts. Please follow the steps in the best practice guide on this topic before making a deferral WIP adjusting journal entry. Once you've determined your costs' billings statuses are materially accurate, then go to Snapshots > Work in Progress > Misc and print the G/L Accrual - Costs by dGL report for your open jobs. This will return all 'Unbilled' and 'Partial' billed outside costs (A/P invoices) sorted by their respective job cost accounts. Then make a journal entry that credits each of these job cost accounts and debits a WIP asset account. To defer overbillings, again return to the Billing Worksheet report used in the accrual method, but choose the option to show one job per pace, then manually identify, only the overbilled jobs (negative unbilled amount). You'll need to manually determine the revenue account used on each overbilled task on these jobs. Then make the journal entry by debiting these revenue account and crediting a WIP liability account.
With any WIP journal entry, reverse it into the next accounting period. C&P X has an auto-reversing option when adding journal entries.
Q. How do retainer and job advance billings impact my WIP adjusting journal entry?
If you use retainer or job advance billings, the matching is already properly handled as progress or job billings are generated against these jobs, moving amounts from the retainer or advanced billing liability account to the income statement as the progress or job billings are posted that had a retainer or advanced billing amount applied against them. Therefore, these is no special accounting needed for the retainer or job advances.
For this reason, many agencies will retainer or advance bill a job ticket, knowing such invoices credit an unearned revenue liability account instead of going to the income statement like an estimate billing. This prevents jobs from having overbilled amounts that estimate billings can create.
Q. What if the total on my job billing worksheet is negative? Do I credit the WIP asset account or set up a WIP liability account?
It is possible to have a negative total on the Job Billing Worksheet report. This implies that most, if not all, jobs are near 100% estimate billed prior to the costs being incurred. This means that the tasks are overbilled (amount of billings is greater than the gross costs). In this case, you'll defer the total overbilled amount on this report. To make the journal entry, first set up a WIP liability account, rather than using a WIP asset account, since technically this is unearned revenue, which is traditionally a liability account. Debit revenue, and credit the WIP liability account. To break out debits to the various revenue accounts, you'll need to print the Job Billing Worksheet with one job per page, and manually determine which revenue account is associated with each overbilled task.