Project management is at the core of many companies’ business processes. Although NetSuite’s project management module offers a comprehensive set of features that help users have an extensive view on their projects and the related profitability, some companies need a bit of customization to have their most specific needs met.
In the case covered in this article, for tax purposes, one of our NetSuite OneWorld customers needed to be able to purchase services from a vendor in a different subsidiary than the project/customer’s one.
As a standard, NetSuite does not allow to link a transaction to a project in another subsidiary. The solution offered by NetSuite is the Intercompany Time and Expenses feature, which requires the employee or the vendor to book time on the project. However, in this case, the company needed to generate purchase orders and vendor bills; therefore we were bound to come up with a creative alternative.
The custom process described in this article aims at linking purchase orders in one subsidiary to projects in other subsidiaries, while handling the committed and actual intercompany impact of these transactions.
The central idea of this customization is to always have a purchase transaction that is linked to the project through the standard line field in order to ensure that the related costs will be included in the project profitability of the project.
Our custom intervention occurs in three places:
- when a vendor PO is created in a different subsidiary than the project’s one and the committed costs need to be generated;
- when this vendor PO is billed and the actual costs need to be generated;
- when the actual costs are generated and the committed costs need to be removed.
1. Vendor PO and Committed Costs
Three new custom fields are added on the purchase order and will be used if the PO is related to a project in another subsidiary.
The user selects first a subsidiary and then the related project in the selected subsidiary.
When the PO is saved, another equivalent PO is automatically created in the project subsidiary with the intercompany vendor representing the subsidiary of the initial PO. This intercompany PO is linked to the project in the “project/customer” item line field, which allows the costs to be included in the project profitability calculation and in the project P&L subtab.
Both POs are also linked to each other via the third custom field.
2. Vendor Bill and Actual Costs
When the initial purchase order is billed, two things need to happen:
- the actual costs must be reflected in the project;
- the committed costs need to disappear.
First, in order to generate the actual costs in the project P&L and take care of the intercompany transaction at the same time, our customization creates an advanced intercompany journal entry when the vendor PO is billed. This journal entry serves two purposes:
- it is linked to the related project via the standard field and is included in the project P&L as an actual cost;
- it posts the intercompany expense in the customer subsidiary and the related income in the vendor subsidiary.
3. Removal of Committed Costs
The second action of the script consists in automatically closing the intercompany purchase order which was linked to the project. That way, the committed costs are no longer considered in the profitability calculation.
As a result, if we have a look at the project P&L after billing a vendor PO, we can see that the committed costs have become actual costs.
This custom solution offers the double advantage of allowing NetSuite users to include purchase orders in the project profitability calculation across multiple subsidiaries, while booking the intercompany impact of such transactions in real time.
Thanks to this process, our customer can have, at any moment of a multi-subsidiary project, a clear and accurate view of both the project’s profit and loss and the general intercompany accounting situation.
- Accurate project P&L
- Accurate intercompany accounting impact
- Fully automated
A question? You would like to implement this solution?