Using Progress Billing Orders
Progress Billing orders are a series of Sales and/or Purchase Orders linked to a Progress Billing item that has specified payments, with billing amounts and due dates different than the shipments. The intent is to manage the cash receipts and billing separate from the shipments and to avoid timing issues for accounting by recognizing the costs and revenues in the same period. The system relieves inventory as it goes but relieves the cost to a progress billing account instead of COGS. Billings are made as it goes but accumulate to the progress billing account instead of a revenue (Sales) or expense (Purchases) account.
Configuration
In order to create a Progress Billing order, multiple items must be set up before entry:
- Progress Billing Categories - Maintained in Sales > Maintenance > Progress Billing Categories.
- A Progress Billing order must be set up before the associated Sales and/or Purchase Orders are entered.
- A non-stock item, created in Item Master must be created exclusively for use on Progress Billings. For more information on Part setup, refer to Designing a Part Numbering System and Creating Parts.
Process
Adding a Progress Billing
- Navigate to Sales > Progress Billing. Click "New".
- The "Created" field populates with the current date, but can be changed if desired. The Category and Currency also populate with default values but may be modified if desired.
- Select the Bill-to Company this order is for. The Ship-to Company, Facility, and Terms should populate based on order defaults, but may be modified if desired.
- Fill in any desired optional fields, such as Bill-to PO or Description.
- Click "Add" and in the Edit Billing Event form, select an Event Part Number (any Part with "Stocked" not checked in its' Item Master) and enter an Amount to charge for the part.
- If any amount should be invoiced now, enter it in the "Bill Now" field.
- If an amount of money (in construction jobs, usually this is around 10%) will be withheld until project completion, enter in a percent in the "Retainage %" field.
- Click "Save" and close the form if only one line will be added, or click "Next" and repeat steps 5-7 to add more lines.
- Notice that once lines have been added, the "Remaining Amount" field will calculate the sum of all values in the "Amount" column of the lines.
Example Progress Billing order
Below is an example of Progress Billing to construct a building with the following payments due:
|
Transaction |
Amount |
Due |
Due On |
|
|---|---|---|---|---|
| 1st Billing | $40,000 | May 10 | Due immediately | |
| 2nd Billing | $40,000 | June 14 | Due upon completion of foundation | |
| 3rd Billing | $35,000 | July 3 | Due upon completion of building | |
The planned shipments for the building (note that these are not visible on the Progress Billing form) are:
|
Transaction |
Amount |
Date |
Shipment Materials |
|
|---|---|---|---|---|
| 1st Shipment | $35,000 | May 17 | Lumber and materials | |
| 2nd Shipment | $15,000 | June 16 | Floor trusses | |
| 3rd Shipment | $40,000 | June 23 | Wall panels | |
| 4th Shipment | $25,000 | June 28 | Roof trusses | |
Two additional, unplanned shipments are made during the course of construction:
|
Transaction |
Amount |
Date |
Shipment Materials |
|
|---|---|---|---|---|
| 5th Shipment | $4,000 | June 29 | Roof truss error | |
| 6th Shipment | $-3,000 | July 2 | Return of unused lumber | |
The transactions create the following GL entries:
|
Transaction |
Account |
Debit |
Credit |
|---|---|---|---|
| 1st Billing | AR | $40,000 | |
| Progress Billing Revenue | $40,000 | ||
| 1st Shipment | Inventory | $28,000 | |
| Progress Billing COGS | $28,000 | ||
| 2nd Billing | AR | $40,000 | |
| Progress Billing Revenue | $40,000 | ||
| 2nd Shipment | Inventory | $9,000 | |
| Progress Billing COGS | $9,000 | ||
| 3rd Shipment | Inventory | $9,000 | |
| Progress Billing COGS | $9,000 | ||
| 4th Shipment | Inventory | $17,000 | |
| Progress Billing COGS | $17,000 | ||
| 5th Shipment | Inventory | $3,000 | |
| Progress Billing COGS | $3,000 | ||
| 6th Shipment | Inventory | $2,100 | |
| Progress Billing COGS | $2,100 | ||
| 3rd Billing | AR | $35,000 | |
| Progress Billing Revenue | $35,000 |
The total of the shipments equals $116,000. Since the Progress Billing amount is $115,000 there is a $1,000 loss on the Progress Billing.
At this point the Progress Billing is marked as completed by clicking the "Close-out" button on the Edit Progress Billing form. This reverses out the Progress Billing totals to the appropriate revenue/expense accounts and reverses the Progress Billing totals to the appropriate COGS accounts. On the Sales side, the transaction will look like the following:
|
Account |
Debit |
Credit |
|---|---|---|
| Progress Billing Revenue | $115,000 | |
| Sales – Lumber | $32,000 | |
| Sales – Floors | $15,000 | |
| Sales – Walls | $40,000 | |
| Sales – Roofs | $25,000 | |
| Sales – Roof errors | $4,000 | |
| Sales – progress billing gain/loss | $1,000 | |
| Progress Billing COGS | $82,900 | |
| COGS – Lumber | $25,900 | |
| COGS – Floors | $9,000 | |
| COGS – Walls | $28,000 | |
| COGS – Roofs | $17,000 | |
| COGS – Roof errors | $3,000 |
Thus, by utilizing this functionality for a job that spanned three periods, all revenues and expenses for this Progress Billing are recognized on the same date. The system also manages the AR and billing issues and integrates the credit issues associated with Progress Billings.
Adding Sales Orders against open Progress Billings
There are two methods for adding Sales Orders against open Progress Billing Orders.
- The same process as described in the Entering Sales Orders Using the Order Entry Function page. The only necessity is that the Bill-to Company selected must have at least one open Progress Billing order. Once the Bill-to Company is selected, a list of available Progress Billing Orders should appear and the user may select one for use. If not, navigate to the Misc 1 tab and select the desired Progress Billing order from the pick list.
- Run a report using Sales > Progress Billing and drill into the desired Progress Billing order on the Progress Billing Summary form. On the View Progress Billing form, select the desired Part from the list and click "View Orders", then "New Linked SO" to open the Sales Order Entry form with most of the necessary fields populated. Once the Sales Order is saved, it may be shipped and invoiced as normal.
Adding Purchase Orders against open Progress Billings
When linking Purchase Orders to Progress Billings, transactions will post to the GL as follows once the Progress Billing has been closed out:
|
Transaction |
Account |
Debit |
Credit |
|---|---|---|---|
| Progress Billing PO Receipt | Progress Billing COGS | $200 | |
| AP | $200 | ||
| Closing Out the Progress Billing | Expense Account on the PO | $200 | |
| Progress Billing COGS | $200 |
Reporting on Progress Billings
After Progress Billing orders have been added and used, users have the ability to generate Progress Billings by navigating to Print Outs > Progress Billing and clicking "Print".
Un-invoicing a Progress Billing sales order
- Navigate to Print Outs > Invoices.
- On the pre-filer select the sales order linked to the Progress Billing you wish to un-invoice. The selection is made in the "Sales Order" field on the form.
- Click the "Un-Invoice" button at the top of the pre-filter.
- The system will ask you to confirm you wish to un-invoice the order.
- Click "Yes" to un-invoice the order and complete the process. This will cause the value in the "Amt Billed" field on the Progress Billing order lines to reverse to the state before invoicing.
FAQ & Diagnostic Tips
Note: Adding inventory parts to a Progress Billing order will not relieve the inventory when the order is invoiced. A regular Sales Order must be entered and shipped to relieve the inventory.