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CP-27:Unbilled Accounts Receivable – An Asset or a Risk?
Clarissa M. Van Leuven, Phacil, LLC
Unbilled Accounts Receivable (A/R)An Asset or a Risk?
SESSION AGENDA
• Unbilled A/R Definition
• What does the Unbilled A/R balance represent?
• Entries that create Unbilled A/R balance in Costpoint
• The Costpoint Unbilled A/R Analysis Report
• What could an Unbilled A/R credit balance represent?
• Risk factors – positives/negatives of carrying an Unbilled A/R balance
Unbilled Accounts Receivable (A/R)An Asset or a Risk?
Unbilled A/R Definition
Unbilled AR is an Asset account on the balance sheet that represents amounts recognized as revenue for which invoices have not been sent.
When analyzing an organization’s balance sheet you look at that Accounts Receivable balance aging to get a sense of cash to be collected and when it will be collected.
Cash is king and should always be the final relief of Unbilled A/R.
Unbilled Accounts Receivable (A/R)An Asset or a Risk?
• Unbilled A/R is also considered potential cash that will be collected at
some future date.
CURRENT ASSETS
CASH $858,806 Billled A/R 6,351,245$
ACCOUNTS RECEIVABLE 8,031,147 -->
NOTE RECEIVABLE - CURRENT 0 Unbilled A/R 1,679,902$
PREPAID EXPENSES 592,128
$9,482,081
Unbilled Accounts Receivable (A/R)An Asset or a Risk?
What does the Unbilled A/R balance represent?
• In all industries Unbilled A/R should represent amounts that can be billed
to a customer at some future date.
• It should always represent eventual receipt of cash.
Unbilled Accounts Receivable (A/R)An Asset or a Risk?
What does the Unbilled A/R balance represent?
• In our Government Contracting industry Unbilled A/R represents:
– Revenue recognized but the invoice has not been sent to customer
or posted to the G/L;
– Indirect rate variance – Revenue is recognized with indirect rates that vary from your
billed indirect rates; (Actual vs Provisional)
– Fee withheld – All costs and fee is recognized as revenue but you must withhold 15% of
your fee when billed to the customer;
– Timing difference between revenue recognized and invoices issued
Unbilled Accounts Receivable (A/R)An Asset or a Risk?
Entries that create Unbilled A/R balance in Costpoint
Revenue = Billed Amount
Projects Billing Module DR CR
Accounts Receivable $100
Unbilled A/R $100
Invoice issued and posted:
Revenue Journal Posting
DR CR
Unbilled A/R $100
Revenue $100
Revenue is posted
Revenue recognized equals amount invoice $0 Unbilled A/R
Unbilled Accounts Receivable (A/R)An Asset or a Risk?
Standard Billing Journal Fiscal Year: 2019 Period: 8 Subperiod: 1
Posting Sequence: 36
Page 1 of 1
09/16/19
06:21 PM
Invoice
Project
Project Name
Bill Number
Invoice Date
Due Date
Amount
Account: 10-020-00 Accounts Receivable
Organization: 1.071.01 DOT
INV-0000025149 02133.04.001 Dept of Transportation 0 09/13/19 10/13/19 100.00
Subtotal for Account: 10-020-00 Organization: 1.071.01 100.00
Account: 10-022-00 UNBILLED RECEIVABLES
Organization: 1.071.01 DOT
INV-0000025149 02133.04.001 Dept of Transportation -100.00
Subtotal for Account: 10-022-00 Organization: 1.071.01 -100.00
Billing Module DR CR
Accounts Receivable $100
Unbilled A/R $100
Invoice issued and posted
Unbilled Accounts Receivable (A/R)An Asset or a Risk?
Revenue Journal Fiscal Year: 2019 Period: 8 Subperiod: 1
Page 1 of 1
10/10/19 04:33 PM
Posting Sequence: 2
Rate Type: Target
Variance Posting: No Variances
Project
Project Name
Amount
Account: 10-022-00 UNBILLED RECEIVABLES
Organization: 1.071.01 DOT
02139.03.004 Dept of Transportation 100.00
Subtotal for Account: 10-022-00 Organization: 1.071.01 100.00
Account: 40-100-08 REVENUE
Organization: 1.071.01 DOT
02139.03.004 Dept of Transportation -100.00
Subtotal for Account: 40-100-08 Organization: 1.071.01 -100.00
Projects – Revenue Journal Posting
DR CR
Unbilled A/R $100
Revenue $100
Revenue is posted
Unbilled Accounts Receivable (A/R)An Asset or a Risk?
Entries that create Unbilled A/R balance in Costpoint
Withheld Fee
Projects Billing Module DR CR
Accounts Receivable $1,000
Unbilled A/R $1,000
CPFF Contract Billed with fee withheld
Revenue Journal Posting DR CR
Unbilled A/R $1,111
Revenue $1,111.
Revenue is posted; CPFF Contract recognize all costs and fee as revenue
Unbilled A/R
DR Revenue Recognized $1,111
CR Amount Billed (1,000)
Unbilled A/R Balance $ 111
$111 represent CASH to be collected at a future date
Unbilled Accounts Receivable (A/R)An Asset or a Risk?
Standard Billing Journal Fiscal Year: 2019 Period: 8 Subperiod: 1
Posting Sequence: 36
Page 1 of 1
09/16/19
06:21 PM
Invoice
Project
Project Name
Bill Number
Invoice Date
Due Date
Amount
Account: 10-020-00 Accounts Receivable
Organization: 1.071.01 DOT
INV-0000025149 02133.04.001 Dept of Transportation 0 09/13/19 10/13/19 1,000.00
Subtotal for Account: 10-020-00 Organization: 1.071.01 1,000.00
Account: 10-022-00 UNBILLED RECEIVABLES
Organization: 1.071.01 DOT
INV-0000025149 02133.04.001 Dept of Transportation -1,000.00
Subtotal for Account: 10-022-00 Organization: 1.071.01 1,000.00
Billing Module DR CR
Accounts Receivable $1,000
Unbilled A/R $1,000
CPFF Contract Billed with fee withheld
Unbilled A/R
DR Revenue Recognized $1,111
CR Amount Billed (1,000)
Unbilled A/R Balance $ 111
$111 represent CASH to be collected at a future date
Unbilled Accounts Receivable (A/R)An Asset or a Risk?
Revenue Journal Fiscal Year: 2019 Period: 8 Subperiod: 1
Page 1 of 1
10/10/19 04:33 PM
Posting Sequence: 2
Rate Type: Target
Variance Posting: No Variances
Project
Project Name
Amount
Account: 10-022-00 UNBILLED RECEIVABLES
Organization: 1.071.01 DOT
02139.03.004 Dept of Transportation 1,111.00
Subtotal for Account: 10-022-00 Organization: 1.071.01 1,111.00
Account: 40-100-08 REVENUE
Organization: 1.071.01 DOT
02139.03.004 Dept of Transportation 1,111.00
Subtotal for Account: 40-100-08 Organization: 1.071.01 -1,111.00
Revenue Journal Posting DR CR
Unbilled A/R $1,111
Revenue $1,111.
Revenue is posted; CPFF Contract recognize all costs and fee as revenue
Unbilled Accounts Receivable (A/R)An Asset or a Risk?
Entries that create Unbilled A/R balance in Costpoint
Indirect Rate Variance Pg1
Billing Module DR CR
Accounts Receivable $212,300
Unbilled A/R $212,300
CPFF Contract Billed at PROVISIONAL indirect rates
Revenue Journal Posting DR CR
Unbilled A/R $222,547
Revenue $222,547
Revenue posted CPFF Contract; revenue is recognized at ACTUAL indirect rates.
Unbilled Accounts Receivable (A/R)An Asset or a Risk?
Entries that create Unbilled A/R balance in Costpoint
Indirect Rate Variance Pg2
Unbilled A/R
DR Revenue Recognized $222,547 @actual indirect rates
CR Amount Billed (212,300) @provisional indirect rates
Unbilled A/R Balance $ 10,247
$10,247 represents CASH to be collected at a future date:
May bill rate variance when final indirect rates are established for the year OR
at final audit and close out of contract. Watch funding is available on contract!
Unbilled Accounts Receivable (A/R)An Asset or a Risk?
Revenue posting in Costpoint
Unbilled Accounts Receivable (A/R)An Asset or a Risk?
Contract revenue is recognized at ACTUAL indirect rates.
This may be done monthly, once at year-end when final indirect rates are established or
at some other interim point during the year depending on management’s objective.
Unbilled Accounts Receivable (A/R)An Asset or a Risk?
Revenue Journal Fiscal Year: 2019 Period: 8 Subperiod: 1
Page 1 of 1
10/10/19 04:33 PM
Posting Sequence: 2
Rate Type: Actual
Project
Project Name
Amount
Account: 10-022-00 UNBILLED RECEIVABLES
Organization: 1.071.01 DOT
02139.03.004 Dept of Transportation 222,547.00
Subtotal for Account: 10-022-00 Organization: 1.071.01 222,547.00
Account: 40-100-08 REVENUE
Organization: 1.071.01 DOT
02139.03.004 Dept of Transportation 222,547.00
Subtotal for Account: 40-100-08 Organization: 1.071.01 -222,547.00
Revenue posted CPFF Contract revenue is recognized at ACTUAL indirect
rates.
This may occur monthly or once at year end when final indirect rates are
established
Unbilled Accounts Receivable (A/R)An Asset or a Risk?
Entries that create Unbilled A/R balance in Costpoint
T&M Labor Hours unbilled pg 1
Projects Billing Module DR CR
Accounts Receivable $6,250
Unbilled A/R $6,250
Invoice issued and posted for only 125 billable hours worked at $50 per hour. Reason: Funding, documentation…
Revenue Journal Posting DR CR
Unbilled A/R $10,000.
Revenue $10,000.
Revenue is posted Represents 200 billable hours worked at $50 per hour bill rate to customer
Unbilled Accounts Receivable (A/R)An Asset or a Risk?
Entries that create Unbilled A/R balance in Costpoint
T&M Labor Hours unbilled Pg2
Unbilled A/R
DR Revenue Recognized $10,000
CR Amount Billed (6,250)
Unbilled A/R Balance $3,750
$3,750 represents CASH to be collected at a future date
when you bill the additional 75 hours @ $50/hr
Watch: Don’t lose track of those 75 hours!
Unbilled Accounts Receivable (A/R)An Asset or a Risk?
Entries that create Unbilled A/R balance in Costpoint
FFP ETC Revenue Pg 1
Projects Billing Module DR CR
Accounts Receivable $300,000
Unbilled A/R $300,000
Invoice issued and posted based on customer provided FFP billing schedule
Revenue Journal Posting DR CR
Unbilled A/R $250,000
Revenue $250,000
Revenue is posted based 25% completion of $1.0m project.
Unbilled Accounts Receivable (A/R)An Asset or a Risk?
Entries that create Unbilled A/R balance in Costpoint
FFP ETC Revenue Pg1
Unbilled A/R
DR Revenue Recognized $250,000
CR Amount Billed (300,000)
Unbilled A/R Balance ($50,000) CREDIT BALANCE
$50,000 Advance payment. Will show as negative unbilled. Should reclass to Liability
section of balance sheet
Unbilled Accounts Receivable (A/R)An Asset or a Risk?
Creating an Unbilled Analysis Report:
Unbilled Accounts Receivable (A/R)An Asset or a Risk?
Creating an Unbilled Analysis Report:
First Update the Unbilled Analysis Report TablesAfter any revenue or billing journal posting.
Unbilled Accounts Receivable (A/R)An Asset or a Risk?
Print Unbilled Analysis Report here:
Unbilled Accounts Receivable (A/R)An Asset or a Risk?
Project Project Name Project TypeAcct
GrpActive ITD Revenue ITD Billings Unbilled Amount Unbilled Per G/L
01003.008.10 GSA - PHILADELPHIA T&M D8T N 763,864.14 440,358.55 323,505.59 323,505.59
01025.00.009 CHEROKEE NATION SUPPORT T&M DCT N 84,197.52 0.00 84,197.52 84,197.52
02057.05.001 US MINT ADMIN SUPPORT - DC T&M DDT Y 1,428,957.50 1,095,674.32 333,283.18 333,283.18
02057.06.001 US MINT ADMIN SUPPORT - PA T&M DDT Y 902,880.47 902,880.47 0.00 0.00
02057.07.001 US MINT ADMIN SUPPORT - NY T&M DDT Y 335,747.99 335,747.99 0.00 0.00
02080.00.002 DOS EMBASSY INSPECTIONS T&M DSC N 142,704.00 142,704.00 0.00 3,750.00
02080.00.006 DOS COURIER SERVICES T&M DSC N 434.06 434.06 0.00 0.00
02112.00.001 ARMY AIR MANUFACTURE FIXED PRICE DST N 1,225,006.12 1,750,000.00 -524,993.88 -524,993.88
02112.00.004 ARMY AIR TRAVEL/ODC CPFF DST N 34,324.66 29,514.58 4,810.08 4,810.08
02112.00.006 ARMY AIR COMMUNICATION CPFF DST N 2,719.52 2,092.12 627.40 627.40
02112.00.008 ARMY AIR MAPS CPFF DST N 5,259.07 4,991.21 267.86 267.86
02139.03.002 US DEPT OF TRANSPORTATION FIXED PRICE DSC Y 35,648.00 20,794.62 14,853.38 14,853.38
02139.03.003 US DEPT OF TRANSPORTATION FIXED PRICE DSC Y 453,874.77 310,867.20 143,007.57 143,007.57
02139.03.004 US DEPT OF TRANSPORTATION FIXED PRICE DSC Y 105,062.77 123,950.40 -18,887.63 -18,887.63
02139.03.030 DOT TRAVEL CPFF DSC Y 5,333.26 1,367.56 3,965.70 3,965.70
02142.00.002 OBXtek DDSB-BY-TSK 2 T&M DCT Y 272,750.93 269,242.08 3,508.85 3,508.85
02142.01.002 OBXtek DDSB-OY1-TSK 2 T&M DCT Y 259,465.15 262,120.85 -2,655.70 -2,655.70
02142.02.002 OBXtek DDSB-OY2-TSK 2 T&M DCT Y 244,610.33 244,610.33 0.00 0.00
Unbilled Analysis Report Example:THIS REPORT IS REVIEWED MONTHLY WITH CONTRACTS/ ACCOUNTING/SR MGRS
Unbilled Accounts Receivable (A/R)An Asset or a Risk?
What could an Unbilled A/R credit balance represent?
• Under booking of revenue – you billed the correct amount but the revenue you recognized is less than the full amount – may be a pickup on your income statement
• Overbilling to customer – refund to customer may be required;
• You’ve billed the customer in advance, will have to incur additional costs to complete the project in the future.
When a refund is due to the customer or you will be required to incur additional costs to complete the project you should consider re-classing the credit to a liability account as Deferred Revenue or Billings in Excess of Costs
Unbilled Accounts Receivable (A/R)An Asset or a Risk?
Risk factors – positives/negatives of carrying an Unbilled A/R balance
Unbilled A/R can tell an interesting story to auditors, financial institutions and potential buyers.
• Clean, reconciled and explainable Unbilled A/R shows you manage your finances well;
• Significant debit balances can signify:
– potential cash income in the future;
– perhaps you are slow biller;
– a sign you are over recognizing revenue
• Credit balances can signify
– Significant future liability to complete a project
– Additional revenue to recognize
Unbilled Accounts Receivable (A/R)An Asset or a Risk?
Risk factors – positives/negatives of carrying an Unbilled A/R balance
• All of these situations can reflect either a risk or a reward to your organization, financials institutions and potential buyers
• Knowing what your Unbilled A/R balance represents on a project by project basis at all times keeps you and management aware of your organization’s financial success or potential risks
• The Unbilled A/R is always a potential source of cash collections
Unbilled Accounts Receivable (A/R)An Asset or a Risk?
In Review
• Unbilled A/R Definition and what does it represent? ($$)
• We looked at a variety of entries that create an Unbilled A/R balance
• The Costpoint Unbilled A/R Analysis Report and what an Unbilled A/R balance may signify
• Risk factors – positives/negatives of carrying an Unbilled A/R balance
Unbilled Accounts Receivable (A/R)An Asset or a Risk?
Questions????