This is my first year using Sage 100 Contractor (or sage at all). I started with a construction company in March 2021. I recently took a deep dive into how the overbillings and changes to estimated job profits effect each fiscal period. I simply wanted to explain what I have gathered and make sure I have the correct understanding and hopefully help others with this area.
I was told from day 1 that overbillings does not "talk" with the balance sheet so each month we have to make an entry for over/under billings. This simply would be an entry to overbillings and contract income. Typically reducing contract income to account for the overbillings liability. We make one entry each month.
If we have a sub billing or invoice come in late. If it is large enough, i will typically open back up the correct period and post it to that period. This will obviously change the overbillings for that month and any months after it. Although it is not likely a material amount, I still like to keep the most accurate data for each month for monthly comparison purposes. I am aware that i could just make the overbillings adjustment in the current period and it would catch everything up to date, but this does not reflect the most accurate data since its wrapping up multiple months adjustments into the current period.
On the other hand, the main thing that got my attention was our monthly projections with project managers. Example: Our project manager does not thing a job is going that well and expects to incur another $25,000 than originally anticipated. We would go into the budget and use the "unique code" and add $25,000 to accurately reflect where we think the job profit will end up. However, this effects each fiscal period associated with the job. This means for accurate data, you would need to go adjust the overbillings entry for every period associated with this job. IMPORTANT!!!: I wondered if this would go back and effect the prior year periods (prior year retained earnings). I would go pull the balance sheet and check this and it noticed it did not change. This led me to conclude that if a job started in a prior year, it would not adjust those prior year months overbillings, but simply roll those months into January of the current year. After thinking about this further, it does actually change the overbillings amount for the prior year months, you simply are not going back and adjusting those monthly overbillings entries for prior year periods.
After monthly projection meetings I would go all the way back to January and update each months entry for over/under billings adjustment to get contract income correct for each period. So i was ultimately getting the most accurate data for each period, EXCEPT, all prior year periods were getting adjusted in January which causes January to be skewed.
I hope all of this makes sense, and if there is a better way to do this or if I have a misunderstanding, please let me know.
