PM518 – Understanding Cost Templates in D365 Finance & Supply Chain Project Management and Accounting
Introduction
Cost templates in Dynamics 365 Finance & Supply Chain(D365FSCM) play a crucial role in project accounting by defining how costs and revenue are recognized over time. These templates determine how completion percentages are calculated and ensure that project financials align with actual progress.
In this article, we will explore the different cost templates available in D365FSCM Project Management and Accounting, along with their use cases and examples to illustrate their real-world application.
Cost Templates in D365FSCM and Their Use Cases
| Cost Template | Description | Use Case | Example |
| Auto Amount for Completion Based on Cost Amount | Automatically calculates project completion percentage based on incurred costs versus total budget. | Suitable for projects where cost is the best indicator of progress. | A construction project budgeted at £500,000 has incurred £250,000 in costs. The completion percentage is 50% (250,000/500,000). |
| Auto Unit with Completion Based on Quantity | Determines completion percentage based on the number of completed units against planned units. | Ideal for manufacturing and production-based projects. | A car parts manufacturer plans to produce 1,000 units for a project. If 400 units are completed, the project is 40% complete. |
| Straight Line with Completion Based on Straight Line | Recognizes cost evenly over a fixed period, irrespective of actual work progress. | Suitable for projects with consistent work over time, such as subscriptions or fixed-term services. | A 3-year IT service contract worth £120,000 will recognize revenue at £40,000 per year, regardless of actual work progress. |
| WBS Percentage Based on Work Progress Percentage | Recognizes cost based on percentage of work completed in the Work Breakdown Structure (WBS). | Best for consulting, engineering, and research projects with detailed task-based tracking. | An ERP implementation project has 10 defined tasks in the WBS. If 5 tasks are completed, the project is 50% complete, and costs/revenue are recognized accordingly. |
Detailed Explanation of Each Cost Template
Auto Amount for Completion Based on Cost Amount
This template calculates completion percentage based on cost incurred compared to the total planned cost. It is useful when financial expenditure is the most accurate measure of progress.
✅ Best for:
- Construction projects
- Large-scale procurement-based projects
- Engineering and infrastructure projects
🔹 Example:
A warehouse expansion project is budgeted at £1 million. If the company has already spent £400,000, the completion percentage is 40%, and the corresponding revenue is recognized.
Auto Unit with Completion Based on Quantity
This template measures project progress based on units produced versus total planned units. It works best in manufacturing and production environments where project success is determined by completed outputs rather than cost.
✅ Best for:
- Manufacturing projects
- Large-scale production orders
- Equipment assembly projects
🔹 Example:
A car parts distributor is fulfilling a contract to produce 5,000 brake pads for a client. If 2,500 pads have been completed, the project is 50% complete, and costs/revenue are recognized accordingly.
Straight Line with Completion Based on Straight Line
This template recognizes costs and revenue evenly across the project duration, regardless of work progress. It is ideal for projects where work is expected to be spread equally over time.
✅ Best for:
- Subscription-based services
- IT maintenance contracts
- Fixed-term consulting projects
🔹 Example:
A 3-year cloud hosting contract worth £360,000 will recognize £120,000 per year, even if the company provides the majority of services in the first few months. This ensures predictable revenue over time.
WBS Percentage Based on Work Progress Percentage
This template recognizes revenue based on percentage completion of tasks in the Work Breakdown Structure (WBS). It is best for milestone-driven projects, where each task has a defined contribution to overall progress.
✅ Best for:
- ERP implementations
- Engineering and consulting projects
- Research and development (R&D) projects
🔹 Example:
A software development company is implementing an ERP system. The WBS has 8 phases, such as Requirement Analysis, Development, Testing, and Deployment. If 4 phases are completed, the project is 50% complete, and costs/revenue are recognized based on that percentage.
Choosing the Right Cost Template in D365FSCM
| If your project measures progress based on… | Use this cost template |
| Incurred costs compared to the total budget | Auto Amount for Completion Based on Cost Amount |
| Number of completed units against total planned | Auto Unit with Completion Based on Quantity |
| Fixed time duration, not work progress | Straight Line with Completion Based on Straight Line |
| Milestones or task completion percentages | WBS Percentage Based on Work Progress Percentage |
Key Takeaways
✔ Accurate Financial Reporting: Selecting the right cost template ensures proper revenue recognition and expense tracking.
✔ Project-Specific Flexibility: Different templates work best for construction, manufacturing, IT services, and consulting projects.
✔ Improved Forecasting: Cost templates help businesses predict cash flow, recognize revenue appropriately, and maintain financial compliance.
By leveraging the right cost template in D365FSCM, businesses can improve financial accuracy, streamline project tracking, and ensure compliance with revenue recognition policies. 🚀
Would you like a step-by-step guide on configuring these cost templates in D365FSCM? Let me know!
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