COGS has to book In Finance based on the milestone percentage

Question

Dear Experts,
My Client has a business scenario
Building renovation Business- they are considering  this as a Project with multiple milestones.
Project based procurement will happens and will be delivered at site
Example
Project value is USD 1000
Raw materials will be delivered at customer site worth of USD 400
First Milestone is 20% of Project - USD 200
Second Milestone is 30% of the Project USD 300
Third Milestone is 40% of the Project USD 400
Final settlement is 10 % of the project USD 100
Now raw materials expenditure is USD 400
but First Milestone going to receive USD 200
When the fist quarter if i analyse the project status - it shows loss
so client wants to book the COGS in finance based on the milestone 20% of billing
Is it possible , or please guide me how to solve this issue?
Regards,
Pratheep

Answer 1

Hi,
For milestone billing you can take the help of SD specialist you can link SD with PS and trigger the billing from PS as well. From PS point of view it goes like this.
1.       1. Create RA key with revenue based Percentage of Completion. This calculate the %ge of completion of a project based on Plan revenue Vs Actual revenue and calculate the proportionate COGS.
2.       2. Complete the configurations in OKG1 to OKG8.
3.       3. Update plan revenue and plan cost in the project (WBS Element).
4.       4. When you execute Result analysis you can see the calculation how revenue and WIP or provision is calculated. For example if Plan revenue is 1000 and plan cost is 800 you have billed for 200 and cost booked for 400. System will calculate a COGS (160) which is 20% of plan cost as only 20% revenue is recognized.
5.       5. Execute Settlement. It will transfer the excess cost to WIP (400 – 120). In your example if cost is less booked at this point of time (Say only 100 instead of 400) it will calculate a post a provision 20 (120-100) and create an expenses.
Hope this helps.
Regards
RCSanat6