Partial delivery of item requirement linked with payment terms in project accounting

I am creating mile stone based fixed price project. There is a payment terms like 40% is receivable of total cost value of items delivered to the customer. For example, there are 5 items, having qty 1 and value of 100 each. If I am delivering three item to customer, cost value would be 300 and as per payment terms, invoice should be generated 40% of 300 i.e. 120. How should i map this requirement in ax 2012 project accounting. Your help will be highly appreciated.

I am not sure but cant we get it using customer retention functionality?

If you want to generate only 40% for invoice that means you want to retain 60% of the invoice amount. Use customer payment retention functionality to achieve this requirement. But what about this retained amount? Will the customer pay back or not?

check the basic setup of this functionality, it may be helpful to you

No, balance 60% will be covered as 50% advance and 10% project closure. Main problem is we need to make invoice at all three stages. i.e. at the time of advance, delivery and project closure. Please suggest.

Dear Hasmukh,

Please try to give full details in order to suggest you better with the scenario.

If I understand your requirement correctly, the customer agrees to pay 50% of the contract amount as an initial payment (advance) and during the delivery of the project retains 60% of the invoice amount out of which 50% is deducted from the advance payment and rest of the 10% will be paid after/during project closure. Confirm on this.

Please read below scenario which can give better understanding of issue.

Project “XYZ” is a trading kind of project and having total value of 10000 USD. In this project, company is suppose to deliver following three material with below mentioned payment terms.

Item X Qty : 10 Rate: 100 USD Total amount : 1000 USD

Item Y Qty : 50 Rate: 100 USD Total amount: 5000 USD

Item Z Qty: 20 Rate: 200 USD Total amount : 4000 USD

Now project have payment terms like.

50% as initial advance

40% at the time of delivery (There could be partial delivery, so customer will pay 40% for invoice which will be generated. Invoice will contain partial items delivered).

10% after completion of the project.

For example above say, Item Y and Item Z are available and Item X is long lead item so instead of waiting and holding 9000 USD amount in inventory due to item X , company dispatches item Y and Item Z to customer with invoice. Hence invoice amount will be 40% of 9000 USD and Payment will be made by customer accordingly. Balance 60% would be settled against 50% advance and 10% project closure. Now item X will delivered with separate invoice when it will available in inventory. Also we need to generate invoice for advance 50% as well as Project closure 10% for getting payment from customer.

So in above case, total four invoice will be generated.

invoice 1: 50% of advance of total amount : 5000$ USD

invoice 2: 40% of item delivered (item Y and Item Z): 40% of 9000 USD: 3600 USD

invoice 3: 40% of item delivered (Item X) : 40% of 1000 USD: 400 USD

invoice 4: 10% of total amount at project closure: 1000 USD

Total invoice generated: 5000+3600+400+1000 = 10000 USD

Payment will also received respectively against invoices.

How we can map above requirement with project invoice.

Hope above example will give you more clarity to understand the problem. Please suggest appropriate solution.

I understood your requirement. There are number of ways you can configure this in AX 2012 but Estimate billing concept in Advance project accounting/PSA fits more to your requirement. Here is an overview of how you can achieve that.

Create a project contract and define your sales price rates accordingly.

Create a time & material project (hope you know that a sales order can’t be created and invoiced against Fixed price, if you create item requirement, still no invoice can be generated against the cost but it should be matched with Estimate function which is again rigorous process for revenue reconciliation).

Create a billing rule of type Time & material and add 10% as the retainage amount. Add up only Project category of items which are allowed to be charged against project under Chargeable categories list.

Define project budget with those items and revenue amount being $10,000. (This is not mandatory for the scenario to work)

Now ask for 50% pre-bill from project budget and invoice the customer. Then when you incur project cost, in the create invoice proposal form split your pre-bill for 50% invoice amount and the rest 10% is retained. So remaining is 40% which would be applicable for your invoice.

Similarly complete all your project cost (posting sales orders for items) and finally when you are done with the project you release the retained 10% of the invoice amount.

Let me know if you have any doubts. Feel free to message me in person.

Please read it as mandatory for the scenario to work.

Thank you Kiran. I think it will work. We have tried using simple payment terms and it is working. Now we will map complex payment terms which are inclusive of milestone as well as time and material basis. so will check and revert.

Thank you very much.