Project Contribution NOT Profit which only emerges after Overheads are allowed.
MULI uses the words “Project Contribution”, not Project Profit, as projects make a contribution to Overheads – only after Overheads have been paid, does a profit emerge.
Earned Value Project Management:
For traditional construction projects, Contribution recognition is calculated on an “Earned Value Basis” where total income is projected to completion (after taking into account the Risk that Unapproved Variations may not get paid by a Client),
Less project final forecast cost (which takes into account the total Risk outstanding in completing a project to the Client’s requirements),
Equals predicted final contribution.
By taking approved costs divided by final forecast cost, we obtain the % complete.
Predicted final contribution x % complete = Earned Value
Users review each active project, taking up Earned Value which becomes part of the project cost.
(If taking up the Contribution leads to negative liquidity, the company should consider its policy)
Project Prepayment = Received Income (-) Project Cost.
If this is -ve, you have -ve prepayment and should be reviewed by management to confirm the recognised value is realistic in relation to the project under review.
The contribution maintenance screen starts with the traditional (CASH based) Income-Expense analysis of the project to guide Users re taking up Earned Value when the funds have not been received from the Client.