Earned Revenue Factor Method

Select this method to recognize revenue by multiplying cost with an earned revenue factor. The earned revenue factor can be manually entered or can be calculated. The calculated ERF is based on the contract amount and the aggregated bottom up budget.

When to use this method

This method can be used for projects that have the Contract Type set to Fixed Price and use cost reimbursement as a base to recognize revenue thus achieving a cost plus scenario within a fixed price contract.

Calculation of revenue recognized

Revenue Recognized = Cost for current period x Earned Revenue Factor

You can manually enter the earned revenue factor or click Calculate to get the calculated value. LN calculates the factor using the following formula:

ERF = Project Contract Amount/Total Budgeted Costs

Note

The contract amount is the aggregation of sub amounts by business partners. For projects with Unit Rate invoicing method, the ceiling amount is considered as the contract amount.

Earned Revenue Factor can be recognized at these levels:

  • Project
  • Extension
  • Element
  • Activity

Constraints

To calculate ERF, the project status has to be Active, because the total budgeted cost calculated using the build cost control process is known only for active projects.

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