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Manage financial data for project-related activities with the manage project financials process area

  • Article

Applies to: Dynamics 365 Finance, Dynamics 365 Project Operations, Dynamics 365 Supply Chain Management

This article describes how you can use Dynamics 365 products to support your organization's needs for managing project financials.

Introduction to manage project financials

The manage project financials business process area focuses on managing the financial data that is associated with project-related activities. It involves generating, processing, and reviewing invoices according to contractual arrangements. It also involves tracking payments, managing project budgets, adjusting project transactions, and recognizing project revenue. The manage project financials business process ensures the accuracy of the financial data that is linked to the project. In this way, it also ensures a healthy cash flow for your organization.

Manage project financials is an essential step in the project to profit end-to-end business process flow. Maintaining a structured and well-defined approach to project financial management is critical for preventing financial risks and payment delays. It also helps ensure control and successful completion of project tasks in your organization.

The manage project financials business process should be outlined and incorporated into the overall implementation during the planning phase. The planning phase typically occurs at the project's launch. It involves setting project goals, defining project scope, and developing a detailed project plan.

Stakeholders

Various individuals throughout your organization should participate in the design of the manage project financials business process. The following list provides examples of such stakeholders:

  • Project manager: The project manager is responsible for overseeing the entire project. The project manager has the following assigned tasks:

    • Overseeing the project billing backlog
    • Managing the project budget
    • Handling estimations and accruals
    • Overseeing resource allocation and cost tracking

    Depending on your organization's processes, a project manager might also be responsible for reviewing and approving project transactions or preparing proforma invoices.

  • Project accountant/Accounts receivable clerk: This individual is responsible for generating precise and accurate customer-facing invoice documents, posting revenue, and reviewing the project's budget.

  • Finance department: The finance department is tasked with overseeing financial matters, conducting financial project reporting, and performing analysis.

  • Executive leadership: Executives are responsible for providing project oversight and ensuring alignment with the strategic goals of the organization.

Manage project financials process flow

The following diagram illustrates the manage project financials business process area.

Each solid gray rectangle on the diagram represents an end-to-end business process. The solid blue rectangle represents the business process area. The diagram shows the subprocesses for the business process area. The arrows on the diagram show the flow of the business process in an organization. If a subprocess can lead to more than one other subprocess, the parallel subprocesses are shown as branches.

Flow diagram for the business process area, which is explained in the paragraphs after the image.

The manage project financials business process area flow diagram covers the following steps.

  1. Start

  2. Project to profit end-to-end process

    (A parallel branch of this process is the Record to report end-to-end process.)

    1. Define ledger structure and currency policies

    2. Manage project financials

      1. Estimate project

      2. Review and approve project estimates

      3. Condition Is approved?

        1. A branch for Yes leads to iv. Manage project budgets.
        2. A parallel branch for No leads to the Adjust estimate subprocess, which connects back to i. Estimate project.

      4. Manage project budgets

      5. Create project invoices

      6. Record project fees

      7. Allocate project transactions

      8. Condition Correction required?

        1. A branch for No leads to ix. Manage and record project revenue.
        2. A parallel branch for Yes leads to Correct project transactions.

      9. Manage and record project revenue

      10. Analyze project transactions

  3. Project to profit end-to-end process

    1. Govern projects

      Parallel branches of this subprocess are:

      • Manage project contracts
      • Manage project contracts
      • Manage project resources and schedules
      • Manage project delivery

  4. End

Manage project financials benefits

There are many key benefits that can be used to monitor and measure the success of integrating technology to support the manage project financials business process area. The following sections outline the key benefits that an organization might monitor and measure for manage project financials.

Advanced financial and resource management

Advanced project finance management solutions improve financial and resource management for your organization's projects. They help project managers identify potential project risks, such as overspending. They also help project managers prioritize tasks, track project expenses, and effectively allocate resources. Project budget management offers financial transparency and therefore helps project managers make informed decisions that are based on accurate financial data.

Learn more at Configure accounting for billable projects.

Flexible invoice consolidation and control

Top-level project finance management systems enable the consolidation of invoices for projects across the same project contract. Invoice control helps monitor both invoiced and non-invoiced transactions. It also provides an end-to-end view of a project by analyzing those transactions against quotations. As a result of this business process, your organization can offer customers the most suitable and preferred billing method. In the end, a streamlined invoice control process ensures faster invoice processing and helps with cash flow management.

Efficient and automatic invoicing

Dynamics 365 project invoicing solutions offer flexibility for fixed-priced projects. Billing schedules and rules can be used to determine invoice creation based on defined terms and milestones. For example, you might establish the following customer billing schedule:

  • 20 percent when the project contract is signed
  • 30 percent on first delivery
  • 15 percent on second delivery
  • 35 percent on final delivery

Learn more at Billing schedules with projects and Set up billing rules for project contracts.

For organizations that use Dynamics 365 Project Operations and Dynamics 365 Finance, the automated invoicing solution provides seamless integration between products. Therefore, users of both apps can view financial details of posted project invoices. They can also perform automatic posting if it's selected.

Real-time visibility into a project's progress and profitability

Successful project financials management relies on:

  • Flexible project financial tracking.
  • Planned project tasks.
  • Resources.
  • Resource units.
  • Different types and categories of financial transactions.

Visibility into the overall budget helps you identify differences between the budgeted and actual amounts, so that you can take any proactive measures that are required. If more budget is allocated to the project, the project manager can revise the budget so that it reflects the new forecasts.

Learn more at Project management and accounting overview and Revenue recognition overview.

Valuable insights for future projects

Top-level project management solutions enable financial project forecasting and loading project budget amounts from a forecast model. This feature provides flexibility for enhanced project budgeting and financial management, because insights can be drawn from the history of past projects.

Transaction adjustment

You can use adjusting project transactions to correct mistakes in your financial records. Project adjustments are used, for example, to update billable status on a large scale, recalculate cost after a configuration change, or update funding sources.

Multiple project cost and revenue profiles and rules

Dynamics 365 supports various accounting options and rules for billable projects, including both time-and-material and fixed-price transactions. Depending on the defined setup, various accounting principles are applied when project transactions are recorded and invoiced. For example, you set up short-term project costs and revenue so that they are directly recorded in profit and loss accounts. However, you use work in progress (WIP) accounts for long-term projects.

In addition, rules for project cost and revenue profiles determine the specific profiles to apply when billable project transactions are processed. You can define rules by project contract, project group, or a specific project. Dynamics 365 always uses the rule that has the highest level of detail first.

Learn more at Configure accounting for billable projects.

Flexible revenue recognition and billing

Advanced project invoicing solutions automatically calculate revenue periodically, based on the forecast and actual transactions that are entered during that period. The results of these calculations can be reviewed and adjusted as required.

Learn more at Project management and accounting overview and Revenue recognition overview.

Subscription billing enables organizations to use billing schedules to manage subscription revenue opportunities and recurring billing. There is also an option to have a deferral schedule. In this way, project revenue for the service can be recognized either based on an event-based template, or on a monthly, quarterly, or yearly basis. This approach helps manage revenue for the project, because it ensures that revenue is recognized when it's earned.

Learn more at Project deferrals.

Advanced reporting

For organizations that use Dynamics 365 Project Operations and Dynamics 365 Finance, project cash inflow and outflow are tracked from both actuals and estimates. Details such as the expected payment day and the actual payments that are received are available for reporting.

Next steps

If you want to implement Dynamics 365 solutions to assist with your manage project financials business processes, you can use the following resources and steps to learn more.

  1. Govern projects

  2. Manage project contracts

  3. Manage project resources and schedule

  4. Manage project delivery

  5. Manage project financials (the article that you're currently reading)

  6. Monitor and analyze project performance

You can use the following resources to learn more about the manage project financials process in Dynamics 365.

Contributors

Microsoft maintains this article and the following contributors originally wrote it.

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