^{Use case:}
Project overview
and workflow

This paper outlines an example
project use case using ERPx
to support revenue recognition.

Here are the high-level project details:

Project details
Project name:	Enterprise System Implementation
Client:	ABC Corporation
Type:	Fixed-price contract
Total contract value:	$500,000
Duration:	6 months
Start date:	January 1
End date:	June 30

Resources
Senior consultant:	$200/hour
Junior analyst:	$100/hour
Project manager:	$150/hour

1. Project setup and resource allocation

The project is created in the ERP system with milestones and deliverables.
Resources (Senior Consultant, Junior Analyst, and Project Manager) are allocated, each with their billing rates.

2. Time and expense tracking (January)

Resources log hours and expenses against the project:
• Senior Consultant: 120 hours
• Junior Analyst: 160 hours
• Project Manager: 80 hours

Problem

Manual tracking often leads to inconsistencies and errors in time and expense reporting.

ERPx solution

ERPx provides a centralized platform for logging time and expenses. It is accessible from anywhere, ensuring consistency and accuracy. Automated reminders and validations help minimize errors and omissions.

3. Month-end accrual of WIP account balance (end of January)

As a Fixed Price project, the actuals are used to calculate the % of Completion. The % of Completion determines the total recognizable revenue, and the WIP might be equal to this amount if nothing has been billed yet.

_{ERPx calculates the Work-in-Progress (WIP) for January:}

Senior Consultant: 120 hours * $200 = $24,000
Junior Analyst: 160 hours * $100 = $16,000
Project Manager: 80 hours * $150 = $12,000

➞	Total actual cost for January:	$24,000 + $16,000 + $12,000 = $52,000
➞	% of Completion based on actuals:	$52,000 / $260,000 = 20%
➞	Recognizable revenue for January:	20% of $500,000 = $100,000

An accrual entry of $100,000 is posted to the WIP account.

Problem

Calculating Work-in-Progress (WIP) manually at month-end can be time-consuming and prone to errors.

ERPx solution

ERPx automates the calculation of work in progress (WIP) by aggregating logged hours and expenses throughout the month.

It ensures the accuracy of accrual entries, reducing the time and effort required for month-end close.

ERPx also allows project managers to update the % completion based on predefined criteria and milestones if needed. This ensures a more objective and standardized approach to tracking progress.

4. Revenue recognition calculation (end of January)

Revenue is recognized based on the updated % completion:

➞

Fixed-price revenue recognized for January:

20% of $500,000 = $100,000

Revenue posted by resource type (based on their hours logged and time costs):

➞	Senior Consultant:	(120 hours / total hours 360) * $100,000 = $33,333
➞	Junior Analyst:	(160 hours / total hours 360) * $100,000 = $44,444
➞	Project Manager:	(80 hours / total hours 360) * $100,000 = $22,222

Problem

Calculating revenue recognition accurately can be complex, especially with different recognition rules for various projects.

ERPx solution

ERPx supports various revenue recognition methods, including percentage of completion, completed contract, and time and material.

It automates calculations based on the selected method to ensure accuracy and compliance with accounting standards.

ERPx can handle different revenue recognition rules and automatically apply the correct rule based on the project setup, ensuring consistent and accurate revenue recognition across all projects.

5. Month-end close and reporting
(end of January)

The ERP system processes all WIP accruals and revenue postings.
Financial reports are generated, showing:
• Recognized revenue: $100,000
• WIP balance: $52,000
• Project progress: 20% complete
Reports are reviewed by the finance team for accuracy and compliance.

Problem

Month-end close can be time-consuming and prone to errors if done manually.

ERPx solution

ERPx automates month-end close processes, including WIP accruals, revenue postings, and adjustments. It generates accurate financial reports, saving time and reducing the risk of errors.