About Cost Codes and Cost Code Rules

  [About Cost Code Selection Criteria] [Override Cost Code]

Introduction

Cost Codes are used to control how cost is posted, based on a combination of; cost code rule, existing information on the work task and setup in Posting Control.

In the work task management solution, it’s possible to break down the work into different work tasks. Each work task could potentially need to be posted to different code parts to better reflect the work done. For example; one work task may have an external customer where WIP handling could be the preferred cost handling, while another work task is for internal work and should directly be posted to a cost account. A third work task could handle warranties or a service contract. With the use of cost codes, it is possible to capture several business scenarios and define how cost should be managed.

A cost code can be defined as a cost code or a WIP cost code. The defined cost codes are configured in Cost Code rules, to capture the different business scenarios where cost should be management in different ways depending on the work task information. Both cost codes and WIP cost codes, can be defined if they are to be used to override the system-retrieved cost code. This can be useful if a cost no longer can be invoiced, then a non-invoiceable cost code could be used, or perhaps a portion of cost is taken as a goodwill cost. The cost code can be overridden on the work task or for specific transactions on a work task.

It is possible to manage work in progress (WIP) handling with cost codes. This is commonly used in Service Management, where cost of ongoing work is placed on a work in progress account, until the point where the work is considered finished. At the WIP reversal point, the cost is released to the final account, for example a Cost of Sold Services account. For each cost code, it can be configured if a WIP cost code should be used. For each WIP cost code a WIP reversal point is defined, and whether the transaction date or the event date should be used, when the cost is posted to final accounts. It is possible to manually release WIP. This can be useful if cost that was expected to be invoiced, no longer is. In that situation, the cost should be released from the work in progress account, and directly be taken as a cost.

The defined cost codes and WIP cost codes are used as control type values in posting control, for control type C106 – Work Task Cost Codes. For each Posting Type, the control type can be used to defined how each cost code should be posted. When a transaction is reported, a cost code is retrieved to the work task transaction, based on the cost code rules and used when building the code string in posting control.

Example: a company wish to cost manage the following business scenarios with the use of cost codes:

The control type C106 - work task cost codes are setup against required posting types. The cost codes are used as control type values for control type C106 to define how a certain cost code should be posted for each code patr.

• Scenario 1: In posting control he WIP cost code is mapped to a work in progerss account, and the SALES cost code is mapped to a Cost of Sold Services account. When a work task is created with an external customer, and cost is reported, the cost code WIP will be retrived to the work task transaction, and the cost will go into Work in Progress until the WIP reversal point is met.
•  Scenario 2: In posting control, the cost code INTERNAL is mapped to an internal maintenance account. If a Work Task is created with an Intenal customer and cost is reportedm then the cost code e INTERNAL is retrived to the work task transaction and posted to the internal maitenance account.
• Scenario 3: In Posting Control, the cost code CUSTWAR is mapped to an account for Warranties setoffs. When a work task is created with a customer warranty, and cost is reported, the CUSTWAR is retrived to the work task transaction and the cost is posted to the warranties account.

Example; Work Task Cost Code Rules:

Example; Posting Control details for control type C106 defined for Posting Type: T1 Time Reporting

For more details, refer About Cost Code Selection Criteria