Required GL Accounts: Recovery

Recovery accounts are used in the processing of timesheets and resource transactions. These accounts are also known within Eralis Job as clearing accounts. However, the nature of the accounts is more of a recovery account than a clearing account. The accounts reflect the values of the recovery made based on the time recorded against a job.  

Recovery transactions begin with direct payroll expenses being entered into SAP Business One via the payroll system or journals. These expenses are processed into the profit and loss Salaries and Wages account. Timesheets are recorded against the jobs, and due to the recovery journals that are processed (which debit the WIP and credit the recovery account), the payroll expenses are moved out of the profit and loss statement and into the balance sheet to form part of the WIP cost. When the timesheet and resource transactions are invoiced, the cost of those transactions are then moved out of the balance sheet WIP account to the profit and loss Cost of Goods Sold accounts. Through the recovery transactions, the costs related to the timesheet and resource transactions are processed into the profit and loss at the same time as the related revenue. This helps to avoid large fluctuations in the profit and loss statement.  

It is important to note that there could be a delay between the timesheets being recorded and the A/R invoice being processed due to the nature of the job. With the recovery posting taking place, the profit and loss statement is not being negatively impacted by the expenses.  

There are a few important points to note regarding the recovery accounts and their related processing. 

• The costs that are used on timesheets and the related recovery journals are standard costs and not actual costs. This means that there will be a difference between the value that is posted to the payroll accounts and the value posted to the WIP account as part of the recovery journal. The standard cost for staff should be as close as possible to the actual cost. This will be an ongoing process of analysis and review. Differences between the actual and standard cost can include factors such as: 
  • Non-wage costs being apportioned into the standard cost, etc. 
  • Actual working hours being different from what was planned when calculating the standard cost.  
• Unless the system is specifically configured in such a manner, the Cost of Goods Sold account that is used in the A/R invoice is not the same as the recovery account used in the timesheet recovery entry. The cost value that is used in the A/R invoice entry and the recovery entry is the same, but this may not be the case in the General Ledger accounts. This means that the balance in the recovery accounts is not cleared – this remains as a credit value in the income statement.  
• Within a UDF (User Defined Field) on the SAP Business One Item Master screen, a field is added by Eralis Job called Clearing account. When a timesheet or resource entry is posted, the system will look to this UDF value for the item codes used on the transaction. If the field is populated, the system will use the General Ledger account from this field. If no account is specified, then the system will look to the Eralis Job System Initialization screen and use the default clearing account, which is a mandatory field specified in the Setup screen.  

By setting the recovery account on the Item Master screen, the company can configure the system to post recoveries from staff timesheets to one area in the profit and loss (close to the direct labor cost account) and recoveries from resource entries can be posted to a different area (close to direct maintenance etc.).