Project Management

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    Avesh Ganodwala
    Do not hit revenue account in recievable for the complete...
    Topic posted August 8, 2019 by Avesh GanodwalaSilver Medal: 2,000+ Points, tagged Project Billing & Revenue, Tip 
    20 Views, 1 Comment
    Title:
    Do not hit revenue account in recievable for the complete amount
    Summary:
    Do not hit revenue account in recievable for the complete amount
    Content:

    Hi All,

    Our client has requirement where in they want the split the project revenue for the below screnario.

    The total funding of the project is 100K and out of that only 20K belongs to our client and rest to other vendor. however our client need raise the invoice for 100K as they are going to manage the complete project.

    As only 20K belogs to our client, when we raise the invoice we do not want hit our P&L for the complete amount.

    How to achieve this requirement.

    Regards,

    Avesh Ganodwal

     

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    Comment

     

    • Perry Unrau

      To me, it sounds like you might need to do much more than just split the revenue.  I would suggest you consider:

      1. Creating a business unit that represents the joint venture between the 2 vendors.
      2. This business unit would have an external contract with the ultimate customer and would invoice 100K to that customer and recognize 100K in revenue.
      3. The other vendor would issue an invoice for 80K to the joint venture business unit, so the other vendor can get paid.
      4. Your client would create a contract with the joint venture business unit and issue an invoice for 20K to the joint venture business unit, so your client can get paid.
      5. Any non-reimbursable costs incurred by your client would be charged to the project associated to the 20K contract with the joint venture business unit, but set to nonbillable, and would affect your client's profit margin.

      Issues involving legal entities and relationships between the joint venture business unit and the client's business unit would need to be resolved.  If the relationship between your client and the other vendor isn't as formal as a joint venture but is at arms length, then perhaps instead of splitting the 100K of revenue, all that is needed is an invoice from the other vendor to your client that captures 80K of cost against the project and contract to net against the 100K of revenue.

      Perry