Progress Claims

Progress Claim accounting is used to record the difference between the value of invoices issued and the work/product that was billed to jobs.

This is additional to, and separate from, the value of work-in-progress which is the valuation of work/products assigned to jobs and not yet invoiced.

Setup

A General Ledger account must be set up to hold the progress claims value. This would normally be a Current Liability account in the Balance Sheet, but it can be a Current Asset account.

It must be GST inclusive, not GST exempt.

The Financial Defaults – Progress Claims (+/-) must be linked to this account. Admin / Defaults / Manage Financial Defaults

 

 Job Setup

When a job is created, on the Invoicing tab, you can specify if Progress Claims are to be used. You need to specify if the Progress Claim will be based on

• Actuals (ie the costs entered to date)
• Fixed $ Amount (often used when a payment schedule has been agreed with the quote acceptance)
• % of Quoted (only available if a quote has been entered against the job)

 

Invoice Actuals

If the Actuals option has been selected; when the first invoice is created the screen will look similar to this:

 

When the invoice is processed the Financials will record the debt against the Customer Control account, and the Sales and GST accounts will also be posted to.

As more costs are assigned to the Job, further invoices can be created, and each time the financial transaction is the same – Customer Control account, and Sales and GST.

There will be no postings to the Progress Claims account as the business is not claiming any funds in advance of work being done, and any work-in-progress is recorded separately.

When the final Progress Claim invoice is raised there is no need for any posting to the Progress Claim account.

Invoice - Fixed Amount

If the Fixed Amount option has been selected; when the first invoice is created the screen will look similar to this:

 

When the invoice is processed the Financials will record the debt against the Customer Control account, and the Sales and GST accounts will also be posted to. It will also record the difference in the Progress Claims account.

If the invoice is for less than the actual costs recorded a Debit is recorded and if the invoice is for more than the actual costs recorded a Credit is recorded.

So in the above example, where actual costs-to-date are $134.00, if the first progress claim invoice is $500, then the journal will include $366 Credit to the Progress Claim account ie the company has claimed for work to the value of $366 in advance of work being done. This is separate from any work-in-progress which has not been invoiced.

As more costs are assigned to the Job, further progress claims invoices can be created, and each time the variance between the actual costs and the claimed costs is calculated, and a posting made to the Progress Claims account.

So carrying on with the example above; further costs of $1599 are added to the job (ie total costs-to-date are $1733, of which $1599 are unbilled), and another progress claim invoice, for $1000, is created:

 

 The journal now will include a Debit to the Progress Claims account of $599 (the difference between 1599 and 1000) and the total effect is that the Progress Claims account has a Debit balance of $233. This is a negative liability or an asset – ie funds that the business can expect to invoice in the near future, but which are not reflected in any work-in-progress reporting.

 At the end of the job, when all costs have been added and a final invoice created, the balance that remains in the Progress Claims account for that job is cleared out.

Below is an example where the final claim invoice is raised. Note that the job costs came in under quote and this reflects in the Job Detail report.

 

In this example of a final claim the job costs came in over quote:

 

In both examples, the resulting journal will include a Credit for $233 posted to the Progress Claims account, to bring the balance in that account back to zero (for that job).

Any profit/loss on the job is reported through the Job Detail report and has no bearing on the Progress Claim account.

 Invoice -% of Quoted

If the if the % of Quoted option has been selected; when the first invoice is created this is what the screen will look like:

 

When the invoice is processed the Financials will record the debt against the Customer Control account, and the Sales and GST accounts will also be posted to. It will also record the difference in the Progress Claims account.

If the invoice is for less than the actual costs recorded a Debit is recorded and if the invoice is for more than the actual costs recorded a Credit is recorded.

In the above example, actual costs-to-date are $134.00 and the first progress claim invoice is for 20% ($404.80), then the journal will include $270.80 Credit to the Progress Claim account ie the business has made a claim for work that it has not yet done.

 As more costs are assigned to the Job, further progress claims invoices can be created, and each time the variance between the actual costs and the claimed costs is calculated, and a posting made to the Progress Claims account.

 Carrying on with the example above; further costs of $1684 are added to the job (ie total costs-to-date are $1818, of which $1684 are unbilled), and a progress claim invoice for 60% ($1214.40) is created.

 

 The journal now will include a Debit to the Progress Claims account of $469.60 (the difference between 1684 and 1214.40); the total effect is that the Progress Claims account has a Debit balance of $198.80. This represents the difference between the total costs-to-date of $1818 minus the invoiced-to-date value of $1619.2. This is a negative liability or an asset – ie funds that the business can expect to invoice in the near future, but which are not reflected in any work-in-progress reporting.

 At the end of the job, when all costs have been added and a final invoice created, the balance that remains in the Progress Claims account for that job is cleared out.

This is an example where job costs came in under quote but the full quote value was claimed:

 

Another example, where job costs came in under quote and the full quote value was not claimed:

   

When job costs come in over quote,  the full quote value can be claimed but it is not possible to over claim ie claim > 100%.

 

In the examples above, the journal for that final claim invoice will include a Credit for $335 posted to the Progress Claims account, to bring the balance in that account back to zero (for that job).