Process / Document Administration
Methods of Raising Accounts Receivable:
The correct method of raising an Accounts Receivable transaction is determined by Question 8 in Project Master Maintenance [3.1.7] Accounts Control 243 and is summarised as:-
Invoice – Use Sundry Invoice [ 6.3] The Contract Value is adjusted to the value of invoices raised.
Lump Sum – Use Lump Sum Progress Claim [6.1] The Contract Value is determined by the Project Master Question 18.
Remember with Lump Sum projects, the Accounts Receivable is treated as payment on account affecting liquidity, NOT used in profit calculation.
Cost Plus – Use [6.2] Usually there are two projects with the progress claim based on the Cost Report.
The second project is usually referred to as the Management Project. See Procedure 5801.
Small Jobs – Use [10.3] The invoices are created within the Small Jobs Module and the revised contract value is equal to the sum of invoices raised.
Head Contract Variation Management – It is imperative that all identified changes to Scope of Works are correctly raised as Variations, even if only having a ball park value as the progress claim. Both Lump Sum and Cost Plus should be a “current up-to-date contractual summary”.
Income (Accounts Receivable) Orders [6.4] – All Accounts Receivable transactions are attached to a single “C” Order, usually in Allocation 1000 Project Income. However, a project may have a number of different income streams, each of which would have its own “C” Order. Note: Allocations 1000 – 1148 are set aside for Project Income.
“Both” Transaction – Discussion of invoicing would not be complete without mentioning the “Both” transaction that allows “Cash Receipt” to be flagged as “Both” as sometimes the money is received without any formal invoice having been raised. This should only be used in lieu of Sundry Invoice.
Tax Invoice – Once you raise a Tax Invoice, then you have a GST tax liability (and the Client a GST tax credit), although no payment has been received.
We believe contractors need to become very active in better managing their client’s income. Therefore the Project Manager should obtain agreement for payment of the worksheet before an invoice is raised. If that is not received by the month end, then the tax invoice would be dated the following month, moving the GST credit to the client and liability to yourself by one month. This then becomes a major reason for the client to expeditiously approve the worksheet.
Deposit – Muli allows “Deposit” invoices on projects, not overheads.