Understanding how to Invoice when using WorkflowMax

Background

There are so many different ways to invoice in WorkflowMax it can quickly become overwhelming.  New Progress Invoice, or New Final Invoice? Then which of the 5 options do you choose? Then you need to pick between calculated or fixed price!

Each option has its purpose, but in this document we are hoping to simplify everything for you so you can design an invoicing process that will work for you. We first need to start by running through some terminology.

• Work in Progress
• Interim vs Actual Invoice
• Actual vs Quoted
• Final vs Progress Invoice
• Calculated vs Fixed Price

Once we’ve covered each of these items, we can get into the process we would recommend for invoicing.  You can adapt this to your own situation once you understand the four items listed above.

Work in Progress

Work in Progress is the unbilled work on a job.  So if you have $1,000 of billable time and cost on the job, and you have invoiced $400 previously, you will have $600 of work in progress.  You can also have negative work in progress. So if you send a deposit invoice for $500, and have not yet done any work, you will have ($500) work in progress.  Work in progress is an asset to you. It is work you can bill. Negative work in progress is a liability to you. It is work that you have billed for, but not yet done.

Interim vs Time/Cost Invoice

When you invoice in WorkflowMax, you are either invoicing timesheets and costs, or you are creating an ‘Interim’ invoice.  An Interim is an invoice that is not associated with timesheets or costs. It is a negative work in progress entry that is later washed up against the timesheets and costs.  

When you raise an invoice, if you are selecting timesheets and costs to bill, this is an Time/Cost Invoice.  If your invoice is not associated with actual timesheets or costs, it is an interim. At the end of the job, you will apportion the the interim invoice amounts against the time and cost entries.  When you do this, you will often recognise and write up or a write off.

Actual vs Quoted

An Actual invoice is when you are invoicing the time and costs on the job, whereas a Quoted invoice will look at the quote on the job and prepare the invoice based on those figures.  Let’s say we have a quote for $1,000, and we put $900 of time and cost on the job. If we choose an Actual invoice, it will show $900 on the invoice, and it will break it out by the actual time and cost put on the job.  If we choose a Quoted invoice, it will show the $1,000 based on the quote we created in WorkflowMax.

Quoted invoices should only be used if there is a quote on the job, otherwise you will see some strange figures in the invoice based on the ‘estimated time’ and ‘estimated cost’ on the job.  It is important to understand how you will be billing the job when it is set up. Are we billing this job based on the time and cost we put on it? Or are we invoicing this job based on a fixed fee we have provided to our customer?

Final vs Progress Invoice

Final and Progress Invoices are different depending on whether we are creating an Actual or Quoted Invoice.  

Let’s first look at an Actual Invoice.  

When we raise an Actual Invoice, we will be invoicing the actual time and cost on the job.  If it is a Progress Invoice, any time and cost we do not invoice will be left on the job as Work in Progress.  So if we have $1,000 of time and cost on the job, and we invoice $800, $200 will stay on the job as work in progress to be invoiced in a future period.

If it is a Final Invoice, any time and cost we do not invoice will be written off.  So if we have $1,000 of time and cost on the job, and we invoice $800, $200 will be recognised as a write off.

Now let’s look at a Quoted Invoice.

If we raise a Quoted invoice, we will be invoicing based on the quoted amount on the job.  This could be done as a % of the quoted value, a fixed amount, or by viewing the whole quote and checking the items we wish to bill.  If this is a progress invoice, the invoice amount will be an ‘Interim’, which means it is creating a negative work in progress entry on the job.  

If we choose Final Invoice, we will not be creating an interim.  Instead, the invoice amount will be apportioned against the time and cost entries on the job.  So if we had one timesheet entry for $100, and we did a new final invoice for $5,000 as a deposit, rather than creating a $5,000 interim on the job, it will apportion the full $5,000 of revenue to that single timesheet entry.  This means we will see a $4,900 write up on that timesheet entry.

We therefore want to be careful when selecting between progress and final invoices, especially when raising progress claims as this has a big impact on how our revenue apportionment is done on the timesheets.

Calculated vs Fixed Price

When you are in an invoice, you will see a dropdown called ‘Pricing Mode’ with two options.  Calculated or Fixed Price. Calculated means the invoice is being prepared by taking the quantity of the time (or cost) and multiplying it by the rate.  So if you have 10 hours at $150 per hour, the invoice will show $1,500. If you want to write this up (or down), you must change the hours from 10 to, say, 12 hours, which would make the invoice show $1,800.

Alternatively, you can make the pricing mode ‘Fixed Price’.  This gives you a box to type in the amount you wish to charge for the item.  This also impacts how the write ons or write offs are apportioned.

If you have the pricing mode set to Calculated, you must write up or write off on specific timesheets.  This means the write up or write off is associated with the timesheets which you edit. If you choose Fixed Price, it will apportion the write up or write off over all those timesheet entries, so everyone gets an apportion of it.

Our advice is to use Fixed Price wherever possible.  It is important to first quote the jobs using fixed price, so the invoice defaults to fixed price.  If you quote with calculated, the invoice at fixed price, you may find issues with future invoicing on the job because you have jumped between both pricing methods.

How to Invoice

Now we have covered the terminology, let’s look at the process for invoicing.  We will look at these following situations:

• Time and Cost
• Quoted
• Quoted with Time and Cost Variations

 Time and Cost

Time and Cost invoices are easy.  Just do your timesheets and select either New Progress or New Final Invoice, then choose ‘Actual Time and Cost.  If you choose New Progress Invoice, anything you don’t bill will be rolled forward to the next period. If you choose New Final Invoice, anything you don’t bill will be written off.

If you wish to change the amount of the tasks on the invoice, you can do this by clicking into the task and editing the timesheets times, or marking them as not billable.  This will create a write up or write off on the time and this will be posted against that staff member.

If you would prefer to do a blanket apportionment of the write up/off, you can change the pricing mode from Calculated to Fixed Price, then override the amount in the box.  The difference will be apportioned against all the timesheets. If you do overwrite the amount using the fixed price box, be careful to check your invoice template does not show the rate and quantity.  You don’t want to show 4 hours @ $100 = $500!

Quoted

If you are invoicing based on the Quoted method, you must first raise a quote against the job.  Think of the quote as a draft invoice. What you quote will become your invoice.  

You don’t have to invoice the full amount of the quote however, you can make progress claims against the total amount.  To make a progress claim, you have three options.  

• Claim a % of the total quoted value
• Enter a fixed sum
• Use the ‘Quoted/Estimated Value’, 

If you choose a % of quoted value, it will automatically populate that amount as an interim.  So if you have a $10,000 quote, and you choose 20%, it will give you a cost item for $2,000. Note that this is NOT a cost item however.  It is an interim.

If you choose a fixed sum, you can free text the amount you wish to invoice.  This will also be an interim.

If you choose ‘Quoted/Estimated Value’, WorkflowMax will present you with an exact replica of your quote as an invoice.  If you edit this to a lesser amount and invoice it, the next time you go to invoice it will automatically reduce the amount to invoice to the remaining amount.  If you have chosen Fixed Price as the Pricing Mode, you can overwrite the amounts in the text boxes. If you have chosen Calculated as the Pricing Mode, you can click into the task and edit the hours for the task.  Let’s look at an example:

Let’s say you have a task called Concept Design and you have quoted $5,000 for it.  When you raise an invoice based on Quoted/Estimated Time and Cost, you will see $5,000 for this task.  If you have Fixed Pricing Mode selected, you can free text $2,000 into this box. Once you approve this invoice and raise the next invoice, WorkflowMax will automatically show $3,000 in the box, because it knows $2,000 of the $5,000 has already been invoiced.

Using the same scenario but as calculated, you are unable to change the $5,000 to $2,000, so you will need to update the invoice hours on the task from say 50 hours to 20 hours.  This will multiply by the billable rate of $100 and give $2,000. The next time you go to invoice, it will have 30 hours remaining in that task, which is $3,000.

It is much easier to work with Fixed Price as the Pricing Mode.  We recommend always using this.

Quoted Progress vs Quoted Final Invoice

When you raise a Quoted Invoice, there is a big difference in how the Work in Progress is treated depending on whether you choose Progress or Final Invoice.

If you choose Progress Invoice, you will be creating an interim, which is a negative Work in Progress entry.  If you choose Final Invoice, you will be apportioning the invoice amount to the unbilled time and costs on the job, thus recognising a write up or a write off.

You therefore need to make the decision as to whether you want to recognise the wash up of invoice totals against the time and costs at the point of each invoice, or at the end of the job.  So if you have a job open for 6 months and you are invoicing monthly, do you want to be allocating the write ups and write offs each invoice, or wait till the end of the job and do one big wash up?

Let’s look at an example of a $50,000 job over a 4 month period:

In both situations, the net write off of the job was $5,000, but when raising Final Invoices the whole way through we were recognising the write up or write off in each period, whereas with the progress invoices, we were waiting till the end of the job to recognise the write up or write off.

You need to decide which method suits you better.  If you are keeping your invoicing consistent with the billable work done in each period, it may be better to raise final invoices each time.  But if you are raising large deposits for the work, you may be better to raise progress invoices until the end of the job.

You can do your washup one of two ways.  You can raise a Final Invoice, which as we have seen above washes up the invoice totals against the timesheets.  Or you can hit ‘Remove from Invoice List’. This totals up all the interim invoices, and apportions them against all the timesheets entries.

In most situations, it is best to raise progress invoices throughout the project, then a final invoice for the last invoice on the job.

What about variations?

We treat variations differently depending on whether it is a time and cost variation, or whether it is quoted.  If it is quoted, we recommend setting up a new job, quoting it and invoicing it separately. If it is a time and cost variation, you can add a new task to the existing job, but it will need to be invoiced separately to the fixed price portion of the job.  This is because it is not possible to bring through the actual time on a task when doing a quoted invoice. So you want to be invoicing the quoted portion on one invoice, then raising an actual time and cost invoice on the same job for the variation.  

It is also important to ensure you keep the pricing mode consistent.  So if the quoted invoice is done on Fixed Price, make sure you Actual Time and Cost variation is also done on Fixed Price, even if you don’t end up changing the total.

Caution!

It is very important you never add a task or a cost to an invoice.  These are called ‘Additional Time’ and ‘Additional Disbursements’ and they cause massive problems with reporting.  When you add a task or a cost at an invoice level, you are recognising revenue against that line item, but there is no corresponding billable amount.  So the total amount of the revenue is also recognised as a write up. So if you create a task on an invoice and make it $2,000. You will have a $2,000 write up on that task, but no staff member gets recognised for that revenue.

This is a very important point.  Never add a task or a cost to an invoice.

Final Words

We hope this article has clarified a few things on how the invoicing in WorkflowMax impacts the reports.  It is a good idea to document your invoicing process and only invoice within that process. If you would like to write this up, our team would be more than happy to verify your process to ensure it will not cause any reporting issues down the track.

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