This topic introduces revenue and cost recognition in Q360 for the various job types.
- Q360 job types:
- Projects
- Service calls
- Service contracts
- Simple orders not linked to any of the above, sometimes used for “box” sales
- Master types:
- Assets and quantity type masters (A types and Q types)
- Labor (L)
- Other types
Q360 is an accrual, period-based accounting system, as opposed to cash-based method. The difference between cash and accrual accounting lies in the timing of when revenue and expenses are recorded on your accounts. Cash accounting recognizes revenue and expenses only when money changes hands. Accrual basis of accounting records transactions for revenue when earned and expenses when incurred. In Q360, revenue is recognized on the percent cost complete method when a product or service is delivered to a customer with the expectation that money will be paid in the future. Expenses of goods and services are recorded despite no cash being paid out yet for those expenses.
Cost recognition rules
| Q360 Job Container | Master Type | Cost Recognized When |
| Project | A, Q | 1. Equipment / materials are marked as shipped[1]; and
2. Projects COGS are recognized (manual or automated nightly) |
| Project | L | Timebill is posted |
| Project | S, M, F, B | Voucher (vendor invoice) is posted |
| Service Call | A, Q | 1. Equipment / materials are marked as shipped
2. Service call invoice is posted |
| Service Call | L | Timebill is posted |
| Service Call | S, M, F, B | Voucher (vendor invoice) is posted |
| Service Contract | A, Q | Not applicable. Costs linked to Service Contracts must be incurred via a Call or Voucher. |
| Service Contract | L | Timebill is posted. Note: timebill must be linked to a service contract-related call[2]. |
| Service Contract | S, M, F, B | Non-amortized cost: Voucher (vendor invoice) is posted Amortized cost: After voucher is posted, cost is recognized evenly during amortization period. See below for details. |
| Order | A, Q | 1. Equipment / materials are marked as shipped, and
2. Order invoice is posted |
| Order | L | Not applicable |
| Order | S, M, F, B | Not applicable |
Revenue recognition rules
| Q360 Job Container | Revenue Recognition |
| Project (Deferred Revenue) | Q360 uses the percent cost complete method for revenue recognition, using the following formula:
|
| Project (Not Deferred Revenue) |
Optionally, Q360 can provide for revenue recognition on projects upon invoicing. In this instance, materials must be shipped before the revenue will be recognized. If the materials have not been shipped, revenue will be recognized upon shipment. |
| Service Call | Revenue is recognized when the call is Invoiced.
If the billed service call is related to a service contract, this revenue will contribute to overall revenue of the service contract. |
| Service Contract | Revenue for pre-billed services is recognized evenly on a monthly basis for the duration that spans the coverage period, which ends when the next invoice is due. |
| Order | Revenue is recognized when the order is billed and the invoice is posted. |
Prepaid expense amortization
Prepaid expenses are future expenses that are paid in advance. Prepaid expense amortization is the method of accounting for the recognition of a prepaid expense over time.
Amortization of prepaid expenses can be automated in Q360. Common usage scenarios include:
- Overhead expenses, insurance policies, estimated taxes, and utility bills
- Manufacturer services that are used in customer service agreements
Alternative project revenue recognition method
The revenue recognition method for projects outlined above is referred to as expense ratio and is used in conjunction with the percent cost complete method for by default in Q360. Alternatively, you can use a method known as job cost classification. This method works similarly to expense ratio but apportions the calculation for revenue earned for each revenue account total as determined in projected revenue. Examples of classes that each have their revenue recognition tracked separately are equipment and materials, labor, subcontractor, and miscellaneous. While more complex, this method offers a nuanced costing and revenue recognition if your project costs generally skew more towards certain type of cost such a labor. For more information about job cost classification method, consult with your Q360 implementation team.
[1] It is important for accurate financial reporting to complete the shipping or RMA processes for all equipment and materials in the period where the expenses are incurred to match the revenue to be recognized for work completed in that period. COGS entries with order ship dates after the last day of the accounting period cannot be back dated in Q360.
[2] Q360 service contracts typically have service calls linked to them. When a type of cost is recognized to a call, the associated service contract automatically reflects that cost as well. The same applies to revenue.