A fixed price agreement is a one-sum contract where the service provided/project is completed within the agreed-upon sum. This budget type is mainly used in cases where specifics, requirements and rates are predictable. Forecast's Fixed Price gives you the ability to set the budget price and also recognize revenue for each month that the project is running for.
This article covers:
- Overview of Fixed Price
- Setting a Fixed Price on a Project
- Reviewing your Fixed Price Project’s Budget
Overview of Fixed Price
Fixed price budget is one of the four default budget types available in Forecast. The difference between Fixed Price budget and the other budget types is that a Fixed price project has a particular scope of work that you bill at a set price, no matter how long it takes to complete.
Setting a Fixed Price on a Project
You can set a Fixed Price value directly within your project settings. Once the fixed price value is determined, consider whether you should adjust your rate card associated or keep it as it is. You can also change the value of the fixed price from the project settings at any time.
Setting a fixed price when creating a project
- In your account, click on Projects.
- Select Create New Project.
- Fill out the Project details and then select Advanced Settings.
- Set your Budget Type to Fixed Price.
- Add a fixed price amount within the Price field.
- Assign any relevant rate card for the project.
To update a project’s fixed price
- Click on the project of your choice.
- Click on Settings in the project header.
- Select the Financials tab.
- Click on Change Budget Type to add or remove from the fixed price value.
Reviewing your Fixed Price Projects’ Budget
By using the Fixed Price project budget type, you get access to additional reports and data within your project’s budget. Below is an overview of the additional information available to you.
Fixed Price Projects have access to additional budget details to help you understand if you are on track with your budget, or if you are above or below your set price cap. On top of that, Forecast provides you with detailed information on how those calculations are made. Simply hover over each number to see the formula and the calculations used.
Within the Budget page, you will be able to see for Fixed Price Projects only:
- A fixed price cap: this is added to your budget graph, as a blue line.
- Additional Data to your Budget report: On the right side of the Budget page, Forecasts provides additional data about your project's Fixed Price budget such as:
- Fixed Price Budget
- Actual Spend to Date
- Budget Remaining
- Forecast to complete
- Total at completion
- Variance with budget
- Actual cost to date
- Forecast cost to complete
- Total cost at completion
- Profit at completion
- Profit at completion %
Revenue Recognition in Fixed Price projects
The Fixed Price budget type gives you the ability to recognize the monetary gains for each of the past months in the project, through revenue recognition. Revenue recognition is a fundamental component of accrual accounting, which is automatically calculated for you by Forecast. See Understanding and using revenue recognition, to read more about how it works.
Revenue Recognition Task Report
Fixed Price Projects are provided with an additional Task Report, visible within your Project Budget. This report provides a full overview of your tasks and how revenue is recognised for each. In particular you can analyze:
- Status: the current status of the task.
- Progress: the progress of the task in percentage (%).
- Actual revenue recognised to date: The amount of revenue you have recognised to this point.
- Forecast revenue to be recognised: The remaining amount of revenue forecast to be recognised against the task
- Total revenue recognition at completion: How much revenue is projected to be recognized at the end of the project for this task.
- Variance: The difference between the projected total revenue recognition at completion and the billable time spent on the task.