Determine and track project cost

 

Updated: November 1, 2016

Applies To: Dynamics Marketing

System_CAPS_importantImportant

Microsoft Dynamics Marketing is scheduled to be retired on May 15, 2018. After that date the service will no longer be available. Please plan accordingly. For details, see the blog post Microsoft Dynamics Marketing service will be discontinued, and learn what’s coming next.

Use the Job Costing features in Microsoft Dynamics Marketing to determine and track the cost of your projects.  Job costs fall into two categories which Microsoft Dynamics Marketing handles differently:

  • Labor

  • Material

Microsoft Dynamics Marketing makes it easy to track the non-labor costs associated with each job. Material costs fall into two categories:

  • External Costs: costs incurred for a client/job.

  • Internal Costs: costs of items/services incurred for a client/job but not purchased separately. For example, if you were preparing a poster for a client you might print out several proofs. You want to allocate some of the cost of the paper to the client/job but you used paper you had on-hand.

Allocating external costs is easy:

  1. Create an expense for the vendor that sold you the items you want to add to the job cost.

  2. Create an expense item for each item you purchased from the vendor.

  3. On each expense item, choose the Details button and select the job the expense item is for.

  4. Choose Submit. More information: Track costs of items, media, and services purchased from vendors

Allocating internal costs is a little more tricky. For internal costs, you are the vendor (there is no external vendor). The issue is that if you create an expense and select your own company as the vendor, Microsoft Dynamics Marketing will create a payable that will need to be paid, etc. Here's one way to handle these expenses that is easy to use and manage; there are alternatives so feel free to use any approach that you prefer.

  1. Set up an Accounts Payable account for your internal transactions. You could call it Accrued Internal Costs. Make this the default Accounts Payable account for the site company (some users will create a separate company).

  2. Set up one or more Expense or COGS accounts for the internal costs; you might want to create an account with sub-accounts to facilitate tracking these expenses. You could call it Internal Costs.

  3. Create expenses as shown above, specifying the site company as the vendor and using one of the Expense/COGS accounts you created. Be sure to choose the Details button and select the job the expense item is for.

  4. At the end of each month or financial reporting period you will see a balance in the accounts you created and in the Accrued Internal Costs account. The sum of the Expenses/COGS should equal the balance in the Accrued Internal Costs account. Create a journal entry to adjust these balances to zero.

When you do a project you incur two sets of costs:

  • Direct costs such as supplies, outside services, printing, etc. These costs are tracked in Microsoft Dynamics Marketing as expenses and post to the general ledger.

  • Direct labor costs. Direct labor is the cost of the time of your employees and staff. These costs are tracked in Microsoft Dynamics Marketing as payroll expenses and post to the general ledger. However, it is cumbersome and time consuming to have to manually calculate the direct labor costs for each job and to create journal entries to debit your payroll expenses and credit your job costs.

Microsoft Dynamics Marketing enables you to associate an hourly cost with the services provided and tracked on each time slip associated with a job, regardless of whether it is billable or not. Hourly rates can be job-specific, client -specific, or person-specific. (Track items and services). For example, if a designer posted a time slip for 2 hours on a job, and the hourly cost of the service is $50.00 then the direct labor associated with the time slip would be $100.00. The direct labor rate is set when a time slip is posted; if the rate associated with the service subsequently changes, the direct labor will not change.

System_CAPS_noteNote
  • You must have the View All Direct Labor User role to view direct labor costs.

  • Direct Labor Costs are Non-Posting: Microsoft Dynamics Marketing uses non-posting accounts and transactions to track job labor costs. If you want to, you can post job labor costs to COGS in your general ledger using journal entries.

To view Direct Labor:

  1. Go to the dashboard page of the job.

  2. Choose the Analysis tab.

    The direct labor costs are displayed.

    Or,

  1. Under Performance, choose Other Reports. 

  2. Choose the Jobs folder.

  3. Choose the Job Profitability Report hyperlink.

Since the direct labor doesn't post to your general ledger, you have considerable leeway in determining how to calculate direct labor. Choose the method that you are most comfortable with and which you think is the most accurate given your environment. For example if you have two designers, combine their total salary, tax and benefit costs, and divide by the total number of possible billable hours to determine an average hourly cost. For example if the designers earn a combined $50,000 per year including payroll taxes and benefits and typically bill a total of 1,000 hours per year, a reasonable direct labor rate would be $50,000/1,000 or $50 per hour.

Should you include other costs in direct labor, such as equipment, office space, utilities and overhead? It's really your choice; job costing is ultimately a management exercise to help you make good decisions about allocating resources and not an attempt to calculate to-the-penny job profitability.

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