Set up overhead absorption
If you want to apply additional costs to your projects to account for your overheads or Uplift costs, you must choose to Record and track overhead absorption.
Use this if you want to be able to apply additional overhead costs to you projects when direct costs are entered and see these costs reflected in your profitability reports, affecting the Gross profit of your projects.
Note: You can choose whether to include the uplift costs or not when reporting profitability.
If you want to see overheads reported separately to the direct costs, and not to affect Gross Profit, then do not select Record and track overhead absorption. You can then create project items types that are designated as an Overhead Project Item type. This is set on the Default tab for each Project Item type (Utilities > System Setup > Project Structure Settings > ProjectItem Type). The costs posted to these items are reported separately in the profitability reports, affecting Net profit but not Gross profit.
| If Overhead absorption is selected | If overhead absorption is not selected | ||||||||||||||||||||
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The profit report including the uplift costs:
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The profit report:
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Once you have chosen to use overhead absorption, you then choose how this is applied to each of your project item types. You set the default rules here. You can override these rules for individual project items as long as you choose the Set project specific overhead uplift rates option.
These options allow you to control how uplift costs are applied to your projects and whether these costs are posted to the nominal ledger.
You have project items of the type Plumbing. When timesheets for your plumbers are entered, these will post costs to your Plumbing project items. You also want to record additional employment costs for your plumbers, for sickness and holiday pay, of 20%. To do this, you apply a Percentage uplift of 20% to the Plumbing project item type.
You also have a project item type called Subcontract. When Purchase invoices are submitted by the subcontractors working on your projects, costs are posted to these project items. As there are no additional employment costs associated with subcontractors, you do not want to add overhead costs to your Subcontract project items. To do this, you choose Not Applicable for the Subcontract project item type.
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Record and track overhead absorption |
This setting can be changed at any time. If this options is cleared, subsequent overhead costs will not be posted to your projects. Any overhead costs that have already been posted are not affected. |
| Overhead uplift rates: Code, CC, Dep, Modifier, Value |
Any of these settings can be changed at any time. As these are default values, any changes made will only affect new project items subsequently added to the project. As long as you have Set project specific overhead uplift rates selected, you can make changes to existing individual project items. |
| Post overhead absorption journals to the nominal ledger |
Changing this setting will affect subsequent postings to the Nominal Ledger. |
| Set project specific overhead uplift rates | Changing this setting will affect whether you can change the Uplift % on individual project items. |
You must have set up your project item types
To enter overhead absorption settings
Open: Project Accounting > Utilities > System Setup > Project Accounting Settings | Features.
Enter the following settings:
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Choose whether to add additional uplift costs to you projects.
Record and track overhead absorption Select this if you want to add Uplift costs to you projects.
To enter the type and amount of uplift costs, click Settings.
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Enter the Overhead uplift rates for each project item type:
Modifier Select whether the cost will be modified by a Percentage or a specific Amount.
If the project item type has no uplift rate, set this to Not applicable.
Value Enter the uplift percentage or amount for the project item type. Post overhead absorption journals to the nominal ledger Select this if you want to create nominal ledger postings for overhead absorption.
Once selected, enter the nominal account Code, CC and, or Dep ) for each project item type. The accounts that you select must be posting accounts.
Set project specific overhead uplift rates Select this if you want to be able to override the defaults you have set here on individual project items.