PM507 – How to Manage Time and Material (NO WIP) Projects in D365 Finance Project Management and Accounting

Introduction

In today’s fast-paced business world, managing Time and Material (T&M) projects effectively is crucial for businesses that bill customers based on actual time worked and materials used. Dynamics 365 Finance provides a robust framework for T&M projects, enabling seamless management of financials, resources, and customer expectations.

For T&M projects with No Work in Progress (No WIP), revenue is not accrued incrementally but is instead recognized only at the end of the project. This approach ensures that revenue is tracked and posted upon project completion rather than throughout its execution. The project group ‘TM_NoWIP’ is configured to drive ledger postings, ensuring that revenue is only recognized when the project is finalized. This eliminates the need for interim revenue postings, simplifying financial management and maintaining compliance with accounting policies.

Since No WIP (Work In Progress) is used, costs are immediately recognized in the Profit and Loss (P&L) account instead of a Work in Progress (WIP) account. Similarly, revenue is posted only when invoicing occurs, avoiding any interim revenue recognition.

Journal Posting Entries for Time and Material (No WIP) Project

No nominal accounts are used within the Project group; instead, nominal accounts are defined in the Ledger Posting setup.

PROJECT GROUP

Scenario in Focus

At Precision Auto Distributors, a leading provider of car parts and on-site repair services, efficiency and customer satisfaction are paramount. Recently, one of their most valued clients—a regional logistics company—requested urgent maintenance services for their fleet. This project involved diagnosing mechanical issues, replacing worn-out parts, and ensuring the vehicles were back on the road swiftly to minimize downtime.

To meet these critical demands, Precision Auto Distributors relied on Dynamics 365 Project Operations to manage the entire process, from creating the initial quotation to tracking time and materials consumed and finalizing the project closure. By leveraging the capabilities of T&M projects in Dynamics 365, the team ensured accurate billing, efficient resource utilization, and complete visibility for the client.

In this article, we’ll explore how Dynamics 365 Finance simplifies the management of T&M projects, empowering businesses like Precision Auto Distributors to deliver high-quality service while maintaining financial control.

Project lifecycle

Initiate Project

Create, Send and Confirm Quotation

1. IMPORT WBS FROM TEMPLATE

Feel free to make any necessary adjustments to the imported WBS, including dates, hours, categories, and costs.

• Maintain > WBS Structure

• Import > Choose Template

• I want to use Rate defined in WBS template, therefore I am selecting NO.

• Scheduling– Scheduling organizes the timeline for completing project tasks, ensuring they are done in a logical sequence and within the project’s timeframe.

Scheduling Header level

Scheduling Detail Level

• Cost Estimate – Cost estimate determines the financial resources required for each task, ensuring the project stays within budget and aids in financial planning and control.

Cost Estimate Header Level

Cost Estimate Detailed Level

CREATE QUOTATION LINES FROM WBS

• Quotation lines > Generate > Copy > Create quotation lines from WBS

Copied Lines

• VERIFY TOTAL

SUBMIT FOR APPROVAL

• Quotation status will turn to ‘Approved’ after workflow processing

• PROCESS QUOTATION OPTIONS

• Send quotation – The “Send Quotation” option allows you to send a project quotation to a customer for review and approval. Once sent, the quotation status changes to “Sent,” and no further modifications can be made.

After creating a project quotation, you can send it via email or print it for the customer. This step is crucial for formalizing the quotation and initiating the approval process.

• Revise – The “Revise” option allows you to make changes to an existing quotation that has already been sent or activated. This is useful for updating the quotation based on customer feedback or internal changes.

When you revise a quotation, the original quote is closed, and a new version is created with the same ID but an incremented revision number. This new quote can be edited and sent again for approval

SEND QUOTATION

• Process > Send Quotation

• Standard output document

• Quotation status changed to Sent

QUOTATION FOLLOW UP

• Confirm – The “Confirm” option finalizes the project quotation, indicating that the customer has accepted it. This changes the status to “Confirmed,” and no further modifications can be made

• Cancel – The “Cancel” option voids the project quotation, indicating that it is no longer valid. This changes the status to “Cancelled,” and the quotation cannot be used for any further actions

• Lost Quotation – The “Lost Quotation” option marks the quotation as lost, indicating that the customer did not accept it. This changes the status to “Lost,” and the quotation is closed and cannot be reopened

• CONFIRM QUOTATION

• Quotation status is confirmed

Create Project Contract

Note: A project contract can be created, or an existing one can be linked by following the procedure for transferring a quotation to a project.

To create a new contract, Go to Project management and accounting > Projects > Contracts > +New

1. Create Project from Quotation

• Quotation > Follow up > Modify > Transfer to project

• Click Next

• Select ‘New Project’ > Next

• Choose Project group, Select or Create Project Contract, Click Next

• Choose Forecast model

• Click Finish

Create Project and WBS

• The project is automatically created from the quotation, and the Work Breakdown Structure (WBS) is also transferred from the quotation to the project.

PROJECT:

• Assign Project Responsible (Optional)

WBS:

• WBS Copied from Quotation to Project
• Click on Project > Plan > Activities > Work Breakdown Structure

• Publish WBS (Modify WBS if required)

Create Project Forecasts and Budget

Setup Forecast

• Since we have enabled the transfer of quotation transactions, project transactions have been created.
• Navigate to Project > Action tab: Plan > Forecast > All forecast to view or modify forecast transactions.

Setup Budget

• Turn on Budget control manually or default from Project management and accounting Parameters

• Plan > Budget > Project Budget

• Action Pane Import > Import to Project Budget > Source Type: WBS Estimate > Select Forecast model > OK

• WBS budget Submit to workflow

• Budget status changed to ‘Approved’ after workflow approval

• Budget Balanced are added: Action Tab: Budget > Related Information > Project Budget Balances

Assign Worker and Category

Assign Resources

• Assign Resources allows you to allocate specific resources (such as employees or equipment) to a project. By assigning resources, you ensure that the necessary personnel and tools are available to complete the project tasks. This step is crucial for resource planning and management, ensuring that the right resources are assigned to the right tasks at the right time

Assign Categories

• Assign Categories is used to assign project categories to various transactions within the project. Project categories help in classifying and managing different types of project costs and revenues, such as labor, materials, and expenses. Proper categorization is essential for accurate project accounting and reporting

Other:  Setup Project Contract Billing Rules

• Go to Project > Fast Tab: General > Customer > Project Contract ID > Select

• Under Project Contract > Fast Tab: Billing Rules > +Add

• Setup Billing Rule

• Define Chargeable activities

• Change Project status to In Progress
• Action Pane: Project > Maintain > Project Stage > In Progress > Save

Execute Project

Manage WBS

• Manage WBS (Work Breakdown Structure) stage under the Execution stage of the project lifecycle refers to the process of overseeing and updating the detailed breakdown of the project’s tasks and activities during the execution phase.

It involves:

1. TASK MANAGEMENT

• Ensuring that all tasks outlined in the WBS are being executed as planned. This includes tracking progress, updating task statuses, and making adjustments as necessary

2. RESOURCE ALLOCATION

• Managing the assignment of resources to various tasks within the WBS. This ensures that the right resources are available and utilized efficiently
• Go to Project > Action tab: Plan > Activities: Work Breakdown structure

Book Resource hours (Optional)

• Project > Scheduling > Add

• Scheduling > Specify resource hours

• Hard Book > Specify Hours

• Specify Hours

• Confirm Hours

3. MONITORING AND CONTROL

• Continuously monitoring the progress of tasks against the project plan. This involves identifying any deviations from the plan and implementing corrective actions to keep the project on track
• Cost and Time Tracking: Keeping track of the time and costs associated with each task in the WBS. This helps in maintaining budget control and ensuring that the project stays within its financial constraints.
• Go to Project > Action tab: Plan > Activities: Work Breakdown structure > Action pane: Tracking View

EFFORT TRACKING

COST TRACKING

4. COMMUNICATION AND REPORTING

• Regularly communicating the status of the WBS to stakeholders and providing updates on the project’s progress. This helps in maintaining transparency and ensuring that everyone is informed about the project’s status

Record Work

RECORD HOURS (Admin)

• Action Tab: Journals > Hours

• Click +New to create hour Journal Header and Go to Lines

• Add appropriate line details > Post

• Posted transactions are available on posted transaction screen (Project > Action tab: Manage > Related information: Posted transactions)

• Verify Voucher transactions (Note – This is NO WIP project and therefore Revenue recognition transaction aren’t generated)

RECORD HOURS – TIMESHEET ENTRY

ENGINEER SUBMIT TIMESHEET VIA CLIENT AND OR VIA MOBILE APPLICATION FOR ON SITE REPAIR WORK

• Project Management and Accounting > Time sheets > My Time Sheet > + New

• Register entries > Submit to Workflow for approval

• Timesheet Approved and Posted (I have workflow setup to automatically post timesheet after approval)

• Timesheet approved entries are visible at Project posted transaction

Project > Action Pane: Manage > Related Information > Posted Transactions

• Verify Voucher transactions

Manage Project Budget and Forecast

Manage Budget

• Track Budget balance – Go to Project > Action Tab: Plan > Budget: Project Budget > Action Tab: Budget > Related Information: Project budget balance

COST

REVENUE

• New Revision: This button allows you to create a new budget revision. When you need to update or adjust the project budget due to changes in project scope, costs, or other factors, you can use this button to initiate a new revision process

• Revisions: This button provides access to a list of all previous budget revisions. It allows you to review the history of changes made to the project budget, ensuring transparency and traceability of budget adjustments

Manage Forecast

• Manage Forecast stage is essential for updating and overseeing financial projections as the project progresses. This involves adjusting forecasts based on actual performance, monitoring costs and revenues, ensuring efficient resource allocation, conducting variance analysis to identify and address discrepancies, and communicating updated financial information to stakeholders. By managing forecasts effectively, project managers can maintain financial control and ensure the project remains on track.

Procure Product and Services

• Our project involves an item transaction type where engineers use this item for parts replacement activities. The part is currently in stock, and I will be utilizing the on-hand stock through the picking procedure.

• Project > Action Pane: Project > Journal > Item

• Click +New > Lines

• Add line details

• Pick Item

• Item Picked

• Post Item Journal

• Verify Voucher Entry

Process Project Invoices

• Go to Project > Manage > Invoice Proposal

• Make cost changes here if required All billable activities are listed on the invoice proposal. Select all items and make any necessary cost adjustments here.

• Post Invoice Proposal

• Invoice Journal records all posted invoices – Go to Project > Action Tab: Manage > Bill > Invoice Journals

Recognize Revenue & Capitalize costs

Revenue Recognition:

• Recording the revenue earned from the project based on the work completed. This ensures that the financial statements accurately reflect the project’s progress and earned income
• This is a No Work in Progress (WIP) project; therefore, revenue is recognized upon the posting of the Invoice Proposal. Click Voucher button on Invoice Journal screen.

Capitalization of Costs:

• Identifying and capitalizing costs that are considered assets, such as equipment or development costs, which will provide future economic benefits. This helps in accurately tracking and reporting the project’s financial health
• Not Applicable for this project

Close

The Close step of the project execution stage serves several important purposes:

1. Finalization of Transactions: It ensures that all transactions related to the project, such as time entries, expenses, and invoices, are recorded and finalized

FAST FORWARD AND I HAVE POSTED REMAINING PROJECT TRANSACTIONS

2. Read-Only Status: Once the project is closed, it is set to a read-only status, preventing any further modifications or additions. This helps maintain the integrity of the project data

MARK WBS ACTIVITIES AS COMPLETE

Note – When WBS is closed, IT will no longer allow posting of additional hour. System will show ‘Cannot modify closed activity’ warning message.

CHANGE PROJECT STAGE TO FINISHED

3. Financial Reconciliation: The close step allows for the reconciliation of all financial aspects of the project, ensuring that all costs and revenues are accurately accounted for
4. Reporting and Analysis: Closing the project enables the generation of final reports and

Analyze Project

Analyze Cash Flow

• This stage involves examining the cash inflows and outflows associated with the project. It helps in understanding the project’s financial health, ensuring there is enough liquidity to cover expenses, and identifying any potential cash flow issues
• Project > Action Pane: Control > Statement > Cash Flow

Review Costs

• This stage focuses on evaluating all costs incurred during the project. It ensures that the project stays within budget and helps identify any areas where costs can be optimized or reduced
• Project > Action Pane: Control > Control > Cost Control

Analyze Performance

• This stage involves measuring various project metrics to determine if the project is meeting its objectives. It includes tracking key performance indicators (KPIs) such as schedule adherence, budget compliance, and overall project progress
• Project > Action Pane: Control > Statement > Project Statement

Review Invoices

• This stage ensures that all invoices related to the project are accurate and have been processed correctly. It helps in verifying that all billable work has been invoiced and that there are no discrepancies
• Project > Find Project Contract > Action Pane: Maintain > Bill > Invoice Journal

Analyze Utilization

• This stage examines how effectively project resources, such as personnel and equipment, have been utilized. It helps in identifying any underutilization or overutilization of resources, ensuring optimal productivity and efficiency

HOUR UTILIZATION

• This button provides a detailed view of how many hours each resource has worked compared to their available hours. It helps in tracking the actual hours logged by team members against their allocated hours, allowing project managers to monitor workload distribution and identify any over- or under-utilization of resources
• Project > Action Pane: Control > Utilization >Hour Utilization

RESOURCE UTILIZATION

• Resource Reservations: It allows you to view and manage the reservations of resources for various tasks and projects. It helps ensure that resources are allocated efficiently and are available when needed

• Resource Reservation Analysis – Resource: This analysis focuses on individual resources, providing insights into how each resource is being utilized. It helps in identifying any underutilization or overutilization of specific resources, allowing for better resource management

• Resource Reservation Analysis – Project: This analysis provides a project-level view of resource utilization. It helps in understanding how resources are allocated across different projects, ensuring that resources are used effectively to meet project goals

• Resource Reservation Analysis – Role: This analysis focuses on the utilization of resources based on their roles. It helps in assessing whether specific roles are being effectively utilized and can assist in planning future resource needs based on role requirements

Conclusion

Managing Time and Material (T&M) projects effectively is essential for businesses like Precision Auto Distributors, where efficiency, customer satisfaction, and accurate financial tracking are top priorities. By leveraging Dynamics 365 Finance – Project Management and Accounting, organizations can streamline their entire project lifecycle—from quotation creation and contract management to task execution and financial reconciliation—ensuring seamless operations and compliance.

In No WIP T&M projects, where revenue is recognized only upon project completion, maintaining standardized practices—such as consistent project coding, clear cost tracking, and structured ledger postings—is crucial for ensuring accuracy and financial transparency. Dynamics 365 enables organizations to automate billing, track resources efficiently, and maintain real-time visibility into project costs, helping businesses optimize their operations while maintaining strong financial control. By implementing these best practices, businesses can enhance operational efficiency, strengthen customer relationships, and drive long-term success. With Dynamics 365, T&M projects become more structured, financially transparent, and scalable—transforming project management into a strategic advantage.

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