Overview

This article provides a detailed explanation of the processes for unbilled/billed accounts receivable, invoicing, and recognizing revenue in Oracle Financials Cloud (OFC) for awards and contracts. It covers the accounting process after expenditures are incurred, contract events are processed in Project Portfolio Management (PPM), and how these events transition into General Ledger (GL) accounts.

Essential Information

• Revenue and Billing:
  • Revenue is recorded in PPM up to the contract funding amount through the Generate Revenue schedule process.
  • Billing entries are created based on the award type, either cost-reimbursable or fixed price/milestone awards.
• PPM Contract Setup in OFC:
  • Bill Plan Options: PPM creates invoices based on the funding type:
    • Cost Reimbursable: Invoices are created based on actual expenses.
    • Fixed Price/Milestone: Invoices are based on pre-set amounts or agreed milestones.
  • Revenue Plan Options: Revenue is recorded based on how it's earned:
    • As Billed: Revenue is recognized when the invoice is created.
    • As Incurred: Revenue is recognized as expenses are incurred.
• Accounts:
  • Unbilled and Billed Accounts: Track the progression of transactions from revenue recognition to cash application.
  • Example: Sponsored Awards use a matrix of subledger accounting (SLA) rules that follow specific chartstrings.

 

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Accounting Overview

Accounting in OFC:

1. Revenue Recognition Key Points:
   • Cost Reimbursable Awards: Revenue is recognized based on actual expenses incurred during billing. For example, costs like supplies or labor are recognized as revenue when invoiced.
   • Fixed Price/Milestone Awards: Revenue is recognized when an invoice is created, based on agreed milestones or payment schedules, regardless of actual expenses incurred.
   • Revenue Recording: Revenue is recorded at the Project Owning Financial Unit (FinU), Fund, and Project GL level for accurate financial reporting.
   • Multi-Project Contracts: OFC allows multiple projects under a single contract to be billed and recognized individually, with each project having unique billing and revenue recognition methods.
2. Accounts Receivable (AR) Key Points:

• • Cost Reimbursable Awards: AR progresses from unbilled to billed as expenses are incurred and invoiced.
  • Fixed Price/Milestone Awards: AR is directly linked to the invoice amount, moving from unbilled to billed when the invoice is generated.
  • AR Recording: AR is recorded at the Contract Owning Financial Unit (FinU), Fund, and Project GL level for some awards. For sponsored projects or multi-project contracts, AR is recorded to Project Zero GL level, a centralized project code used for managing AR across multiple projects under a single contract.

Case 1: Cost Reimbursable Invoice

Example Project Number: 1018296

Date	Action	Journal Entries
02/01/20XX	Lab supplies purchased	Debit: Lab Supplies Expense Credit: Accounts Payable
02/08/20XX	Invoice created (including lab supplies purchased)	Debit: A/R Federal Grants Billed Credit: A/R Federal Grants Unbilled
02/08/20XX	Revenue recognized in PPM	Debit: A/R Federal Grants Unbilled Credit: Federal Grants Revenue
02/09/20XX	Cash received	Debit: Cash Credit: Undistributed Cash
03/01/20XX	Payment applied to the invoice	Debit: A/R Federal Grants Billed Credit: Undistributed Cash
	Revenue Flow to General Ledger	Revenue flows into the General Ledger from PPM. Verification can be performed by running the General Ledger Transaction Details Report in Oracle.

 

 Lab Supplies Purchased

 

Invoice Created

 

Cash Received

 

Payment Applied to the Invoice

 

Revenue Flow to the General Ledger

 

 

Case 2: Fixed Price/Milestone Invoice

Example Project Number: 1031203

Date	Action	Journal Entries
07/02/20XX	Invoice created (per agreement payment schedule)	Debit: A/R Unbilled Private Credit: Private Contracts Revenue Debit: A/R Adv Billed Private Credit: A/R Unbilled Private
07/02/20XX	Revenue recognized in PPM	Debit: A/R Unbilled Private Credit: Private Contracts Revenue
07/22/20XX	Cash received	Debit: Cash Credit: Undistributed Cash
08/01/20XX	Payment applied to the invoice	Debit: A/R Adv Billed Private Credit: Undistributed Cash
	Revenue Flow to General Ledger	Revenue flows into the General Ledger from PPM. Verification can be performed by running the General Ledger Transaction Details Report in Oracle.

 

 

Invoice Created

 

 

Revenue Recognized in PPM

 

Cash Received

 

Payment Applied to the Invoice

 

Revenue Flow to the General Ledger

 

 

Case 3: Multi-Project Contract Invoice

Example Contract Number: 2045567
Projects Included:

• Project A (Cost Reimbursable): Research Lab Equipment
• Project B (Fixed Price/Milestone): Prototype Development

Date	Action	Journal Entries
07/05/20XX	Invoice created for both projects	Project A (Cost Reimbursable): Debit: A/R Federal Grants Unbilled Credit: Federal Grants Revenue Debit: A/R Federal Grants Billed Credit: A/R Federal Grants Unbilled Project B (Fixed Price/Milestone): Debit: A/R Unbilled Private Credit: Private Contracts Revenue Debit: A/R Adv Billed Private Credit: A/R Unbilled Private
07/05/20XX	Revenue recognized in PPM	Project A (Cost Reimbursable): Debit: A/R Federal Grants Unbilled Credit: Federal Grants Revenue Project B (Fixed Price/Milestone): Debit: A/R Unbilled Private Credit: Private Contracts Revenue
07/20/20XX	Cash received for both projects	Debit: Cash Credit: Undistributed Cash
07/25/20XX	Payment applied to the invoice	Project A (Cost Reimbursable): Debit: A/R Federal Grants Billed Credit: Undistributed Cash Project B (Fixed Price/Milestone): Debit: A/R Adv Billed Private Credit: Undistributed Cash
	Revenue Flow to General Ledger	Revenue from both Project A and Project B flows into the General Ledger via PPM. Verification can be performed by running the General Ledger Transaction Details Report in Oracle Financials Cloud (OFC).

 

 Invoice Created

 

 

Revenue Recognized in PPM

 

 

Cash Received & Payment Applied to the Invoice

 

 

Revenue Flow to the General Ledger

 

 

 

Quick Recap & FAQ

Quick Reference Table

Step	System Action	Your Role
1. Expense Incurred	Costs recorded in PPM as expenses.	Ensure expenses are project-related and documented & in compliance with contract restrictions.
2. Invoice Created	Costs moved to AR and invoice sent to sponsor.	Monitor invoice status in OFC & review the AR Aging for open invoices.
3. Revenue Recorded	Revenue appears in GL.	No action needed; this is automatic.
4. Payment Received	Cash applied to invoice, reducing AR balance.	Review unapplied cash report & submit claim to apply the payment to open invoices. Confirm payment has been applied correctly.

 

FAQ:

1. What is PPM?
   Project Portfolio Management (PPM) is the system where project-related expenses and revenues are tracked. It's used to manage funding, expenses, and reporting for awards and grants.
2. What is Revenue Recognition?
   Revenue recognition ensures UCSD records income correctly based on rules like when costs are incurred or milestones are met. It follows specific accounting principles to ensure compliance and accurate reporting.
3. What are Unbilled and Billed Accounts Receivable?
   • Unbilled AR: Expenses incurred but not yet invoiced to the sponsor.
   • Billed AR: Amounts that have been invoiced to the sponsor but not yet paid.
   • Once an invoice is generated, the amount moves from "Unbilled AR" to "Billed AR."
4. How do I know if my project's revenue is recorded?
   Run a "Revenue Report" in Oracle Financials Cloud for your project. Look for recognized revenue against incurred expenses or milestones.
5. What happens if expenses exceed the contract’s funded amount?
   The system will not allow billing or revenue recognition beyond the award funding. Review budgets and funding limits regularly.
6. How can I track performance at the project level?
   Use PPM reports to view expenditures, revenue, and billing for each project.
7. How does the system handle multi-project contracts?
   Each project is billed and recognized individually, but the system consolidates reporting under one overarching contract.
8. What if one project finishes before the others?
   OFC allows completed projects to close independently while leaving the contract and other projects open.
9. Can I reallocate funding between projects?
   Yes, adjustments can be made within the total contract funding limit, subject to sponsor approval through a cost transfer.

 

Change in Contract Billing Subledger Accounting Rules (SLAs)

Effective Date: November 26, 2024

• Oracle Financials Cloud will start posting revenue for LOC and SSA contracts in project-specific chartstrings.
• This change aligns with UCOP’s requirements for project-based revenue and expense reporting.
• Key Benefits:
  • Supports posting revenue to multiple Project Owning Organizations (Financial Units) from a single contract.
  • Simplifies revenue allocation for complex projects.

Notes:

• Balance sheet accounts will continue to post to the contract-owning organization.
• There is no impact on receivables direct invoicing.
• Changes apply only to PPM Contract Billing.