What are the Billing types supported in AW?
When a client signs a billing contract with your company, the pricing model set for the billing contract determines how revenue is forecasted and recognized. The main models supported in AdaptiveWork are fixed-price, time & materials, and milestone.
- Revenue forecasting is a process of estimating the future revenue of a company.
- Revenue recognition is an aspect of accrual accounting that stipulates when and how businesses “recognize” or record their revenue.
The Billing type set at the Project level defines which Pricing model is applied to the Work Items so that your Revenue is forecasted and recognized according to your billing model when aggregated into work item. When using the accurate billing model, you can accurately forecast monthly, quarterly, and yearly revenue. This allows Finance and Delivery teams to track the split of planned and actual revenues and drive insights into which types of customer contract is the most profitable.
Financial Managers and Controllers can use the financial planning panel to view Budget Revenue, Expected Revenue, and Actual Revenue time phased data aggregated into work item. The Billing Type is set at the Project level and controls how Revenue time phased data is forecasted and recognized when aggregated into work item. Revenue Time-phased (month/quarter/year) data is consistent across the application in Financial Planning, aggregated work item financial data, and financial Reports.
Who can do this? To set the Billing Type field, you must have Financial Permissions and edit permissions on a Project, and this should reflect the commercial terms you have agreed upon in your customer contracts. Your organization's Admin can set your User details with the Financial Permissions toggle turned ON and enable Editor Permission Access Level for the Project. NOTE: In order for Revenue to appear on a Work Item, the item must be marked as Billable |
Billing Type | Description |
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Fixed Price (also known as “Fixed Fee”) |
The Fixed Price model is a model that guarantees a fixed budget for the project, regardless of the time and expense. The main advantage of a fixed price model is that it allows you to plan and set an exact budget. A fixed-price contract is based on an estimate of the amount of work that needs to be done. In this model, it’s important to discuss everything before the actual development in order to estimate the cost of the project. The fixed-price model ensures that a project is done and delivered within a specific timeframe and budget. Advantages
Disadvantages
|
Fixed Price Milestones (also know as “Milestone Method”) |
With Fixed Price Milestone pricing, the client is billed when you have delivered a specific scope of work over a certain period of time, achieving a predefined milestone. At that point, the client needs to pay an amount that depends on the time spent to complete the given milestone. Advantages
Disadvantages
|
Time and Materials (also known as “T&M”) |
The Time & Materials model involves regularly paying for work completed. It means that your expected revenues are incrementally earned with the performance of work, even if work packages were not completed. With this model, the client carries higher risks for the delivery of the project than with Fixed Price or Fixed Price Milestone projects. The customer is billed for the actual time for the Work item to be completed. Advantages
Disadvantages
|
Mixed |
This Pricing model is set by default in the application and allows you to define different Billing types for Work Items. For example, a Mixed project can include sub projects, some are T&M and some are Fixed Price. |