Financial reporting for Fixed Fee Projects can be challenging because of the irregular nature:

• You estimate the price
• You do not know how long the project will last
• You want to post revenue reflective of when the work is being done (i.e. cost and revenue should show up close to the correct month)
• Revenue may be paid up front, in arrears, phased or some combination

MSPCFO tries to match the monthly work with revenue and costs.  At the inception of a FF Project, an MSP estimates costs, time and profitability to calculate the revenue and time span to finish a project. MSPCFO recognizes revenue during the length of a project based on the work being done by members.  In the final month of the project, MSPCFO 'trues up' recognized revenue to match actual revenue. Here are the steps of analyzing a project:

1. Use the start month and estimated end month in the PSA to look at the revenue and costs for a project. The estimated end date, set in your PSA (with an override available in the Lookup/FF Projects table) is the last month any member puts time into a project.
2. For all months starting with the start month, work by members for the project is tracked. This continues during the length of the project until  the estimated end month (what is called the 'true-up' month).
3. For each member who works on the project during  a month, MSPCFO looks at what would have been billed if it was actual rate time (the PSA includes a rate on each member time entry).
4. In each month prior to the 'true up' month, a percentage of the shadow billable is used for both member attributed revenue and project revenue. The discount reflects the uncertainly around projects abd allows for a more conservative approach. The % is set up in Lookup/Options/Time logs/Fixed Fee Project Discount (the default is .25 or 25%) but can be altered if appropriate.
5. The remaining revenue is recognized in the true up month(end month). Attributed revenue is calculated for each member.  To achieve the calculation, the efficiency of the project is calculated.
Efficiency = labor revenue/shadow billable
The efficiency is used to tabulate the remaining revenue to be distributed to the members and the project. At this point the attributed labor revenue = actual labor revenue.
If the project has already over estimated the labor revenue, the revenue for the end month will be negative to offset previous revenues recognized.

The Fixed Fee Project Analysis report breaks down labor revenue each month the project is worked on and then uses the actual project labor revenue to true-up the project in the last month. The Shadow Billable section, shows the member(s) who worked on the project each month, and their monthly shadow billable.   The Revenue section, attributes revenue for each member who worked on the project during the month taking in account the FF Project Discount mentioned in 4. above.

In the ending month, actual invoiced labor is matched to total attributed revenue (as described in 4. above) The last section of the report, Project Totals, summarizes the project.

Revenue for products in a project is recognized when the invoice is sent.

The report is filtered for a specific project (1).  This report contains a search on the Project Name. To find projects under a specific client, open the list and scroll (all projects are listed under clients that are sorted alphabetically).  

To exclude inactive members, click on the box (2).

Note: Each of the reports can be downloaded in either PDF format or as an Excel/CSV spreadsheet using the icons at the right on the Filters heading . The "+" allows you to store the reports for later download. You can also save the report to use in Recurring Deliveries (see highlighted area below).

The body of the report shows the Shadow Billable for each month there is work done on the project along with the true-up month.  Once the shadow billable is derived, each month before the true-up month, Revenue is attributed to the members who worked on the project during each month and is also attributed to the project.
These sections are totaled for total shadow billable and revenue for the month.

The final section of the report body is the Project Totals. The section contains a review of the project:

• Invoiced Labor - All labor revenue invoiced over the length of the project
• Shadow Billable - The amount of revenue the members would have generated over the length of the project using their hourly rates
• Efficiency - Invoiced Labor/Shadow Billable
• Ended At - The estimated end date either from the PSA or an override in the Lookup/Fixed Fee Projects table
• Last Date Worked - The last time time was done on the project

Example 1 - True-up Month is Negative

Even though a discount is taken off the shadow billable each month, a project can go way over what was budgeted. Also a project can be estimated at a very low revenue or no revenue at all to help draw more business from a client in other facets of the relationship. In the example below, product was sold to the client under a FF Project, but the client was not charged for the labor. In the FF Project Analysis, only the labor part of the project is represented. To see the total project profitability including the product portion, use the P&L/Project P&L report.

Example 2 - True-up Month shows revenue that still has not been distributed.

A project can have excess revenue that needs to be taken in the true-up month. In the example below, that is the case. The invoiced labor for Project 1788 below was $3,500. Only $2,481.25 of shadow billable was spent servicing the project. The standard 25% discount was taken each month the project was worked to assign revenue credit to the members and to the project (listed in the P&L on the open project line until the project is closed; when the project is reached, the revenue moves down to the closed project line). Therefore, even though no one worked on the project in September, the closing month, the members and the project receive revenue credit to match the actual invoiced labor value.

Projects that are worked beyond the close month.

If MSPCFO sees time entered by a member beyond the ending month (Ended At below), the time (Last Date Worked) will be highlighted in red. This is a warning to let you know that the time should be included in the project and  that either the Estimated End Date in the PSA should be extended or an override in Lookup/FF Projects table needs to be entered.