Project Costing
Tracking the actual cost of a project is important in ERPNext, particularly for industries based on services where labor costs are an important component. It is achieved by tagging Tasks to a Project and capturing time spent via Timesheets. Automatic costing is tallied based on timesheets entered on each activity under the project.
1. Activity Type
Activity Type is a master for specifying the types of services your business offers (e.g., Development, Support, Design). Every activity type is utilized to categorize the work done and is required for proper costing and billing. These types can be user-defined according to business requirements.
Navigation Path:
You can specify the activity name, e.g., "UI Design" or "Consultation".It assists in standardizing work classification over projects. The Activity Type chosen will subsequently drive the costing and billing logic by employee roles.
2. Activity Cost
Activity Cost is a master in which you set the billing rate and costing rate for an employee against particular activity types. This means that various employees may have varying cost and billing rates for the same activity so that exact profitability can be tracked.
For instance, a Senior Developer may have a costing rate of \$60/hr and a billing rate of \$100/hr, while a Junior Developer may have a bill rate of \$60/hr and a cost of \$30/hr. These records get pulled automatically when a Timesheet is inserted with an associated Activity Type.
3. Timesheet
A Timesheet is a report that is employed for tracking actual employee time worked on tasks against a project. Each timesheet time log:
- Identifies the Activity Type, From Time, To Time, and the associated Task/Project.
- When the Activity Type and employee are selected, the Billing Rate and Costing Rate are automatically fetched from the Activity Cost master.
- The system then performs:
- Costing Amount = Hours × Costing Rate
- Billing Amount = Hours × Billing Rate
These figures directly help the Task's and ultimately the Project's overall costing and billing statistics.
4. Costing in Project and Task
As more than one timesheet is created for a Task, ERPNext will automatically add these up to alter the Total Costing Amount, Total Billing Amount, and Total Hours Spent for the Task.
Likewise:
- The Project inherits cost metrics from all the Tasks that it is linked to.
- It facilitates management to analyze:
- Total cost spent on human resources,
- Revenue (billings) to be billed,
- Projected profit margin both at task and project levels.
This system facilitates real-time costing and aids in improved project budget monitoring and profitability calculations.
As you can see as we updated the timesheets the cost for the total project was updated as well.