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Handling Write-Offs the Right Way

Posted by Lisa Ahearn on February 15, 2024

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In a perfect world, professional services firms could invoice their clients for every charge to every project, and the clients would pay every invoice. However, in reality, nearly all professional services firms have write-offs. Write-offs can occur when your firm and your client agree that they don’t have to pay an invoice, when the client is unable to or refuses to pay an invoice, or when your firm is unable to bill all project charges to the client.

While writing-off charges is necessary sometimes, the good news is that each of these types of write-offs can be easily handled in Deltek Vantagepoint. Since write-offs impact the firm’s financial statements, it is crucial to have clear guidelines as to the accounting period in which they should be created/posted. In this blog, let’s talk a little bit about how to handle write-offs the “right” way to make the process as painless as possible.

Firm and Client Agree to a Reduction in an Invoice Amount

Did you accidentally invoice the client too much?  Did you send an invoice for a change order before it was fully approved? Or did the client argue about a portion of the invoice, and you agreed to a reduction in the invoice amount? 

When the client does not require a revised invoice, you may choose to do an invoice adjustment through the transaction center. It is recommended to use the original invoice number and date, and the WBS2/3 level from the original invoice. Doing so will result in the adjustment being applied to the original invoice, making receipt more efficient. One thing to consider when using this method is that if you keep invoices on file, the PDF invoice stored on the project will not show the adjustment. If the PDF invoice was later needed, it could be confusing that the total no longer matches the invoice amount that shows in the system.

If the client requires a revised invoice, or if you prefer to make sure the invoice on file matches the amount the system shows as billed, you may instead choose to void and reissue the invoice through Interactive Billing in Deltek Vantagepoint. Voiding an invoice reinstates the charges that were included with the invoice (which allows you the option to hold or write-off charges) and you would issue an invoice for the new amount. When voiding an invoice, it is best to post the void before running the revised one.

It is important to note that voiding an invoice will affect the financial statements, so be sure to void in a current, open accounting period. Another consideration with issuing a revised invoice is what invoice date to use. If it is agreed that the payment terms can start on the date of the original invoice, you can change the invoice date in the billing session options.

A Client is Unable to or Refuses to Pay an Invoice

Did your client go out of business? Did a portion of your work fail to meet expectations? And, did it result in the client refusing to pay?

Many professional services firms track an Allowance for Bad Debts against Accounts Receivable. When a client cannot or will not pay an invoice, it is likely that you will want to put the write-off against the allowance. The most efficient way to do this is to process a zero-dollar cash receipt. Select the invoice as though you are paying it, then enter an additional line in the cash receipt and select either the bad debt contra-asset or expense account.

Many firms use an indirect account for a bad debt expense. But, if your firm prefers bad debt expense to be a direct expense, you could set up a project as a regular charge type and a direct expense account to be used exclusively for recording bad debt.

If your firm reports on a cash basis, and you do not want to show any revenue or expense, Deltek Vantagepoint can accommodate that as well. In AR Mapping accounts, set up your Allowance for Bad Debts as an invoicing account (leave all other fields blank unless you also want a separate AR column). Then when you need to write off an AR invoice, process a negative invoice transaction using the original invoice number, WBS level(s), invoice section(s), and the Allowance for Bad Debts account.

If you do not have a bad debt allowance, you can void the invoice as explained previously and write off the transactions (explained in the next section). You could also choose to do a credit memo. The credit memo function reverses the invoice but does not reinstate the charges to Interactive Billing.

The Firm is Unable to Bill All Project Charges to the Client

There are several reasons you may not be able to bill all the charges on a project to the client including inefficiencies during work performance, going over budget, training new staff, and resource turnover. GAAP guidelines indicate that potential losses are to be recognized as soon as known. When it is known that charges cannot be billed to the client, use the write-off function in Interactive Billing.

This function will cause the items to be excluded from invoicing, thereby not recording revenue. If your professional services firm uses revenue generation, then to exclude write-offs, make sure the formula is set up accordingly. Using the write-off function for charges will not remove the charges from project reporting, except in cases where you choose to exclude charges to be written off such as on the Unbilled Summary report.

On reports where you can select to show the billing status of charges, items that have been marked for write-off have a status of W, and items that have been written-off have a status of X. If tracking/reporting of write-offs is desired, you could choose to use the project detail report. Then on the options tab, only include charges with the X or W status.

Visibility Around Write-Off Amounts

Using Deltek Vantagepoint, there is visibility around write-offs. As mentioned, to see the specific items written off, you can use a report such as a project detail and include only items with the X or W status. Since typically no revenue is recognized for written-off items, there are other areas that you can see write-offs and their impact as well:

  • As negative profit on the Project Earnings and Office Earnings reports when run at cost
  • As a negative variance on the Project Earnings and Office Earnings reports when run at billing
  • In Project Review at cost and billing in the profit/variance box

Use Deltek Vantagepoint to Manage Write-Offs

As discussed, there are several reasons that professional services firms experience write-offs. When write-offs are necessary, know that Deltek Vantagepoint can be set up and used to process them the “right” way, while also providing visibility so that your firm has a handle on its financial statements. If your professional services firm needs assistance in this area, don’t hesitate to contact us for more details.

 

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What is the Difference Between Project Backlog and Project Forecasting?

Posted by Scott Seal on December 07, 2023

12-06-23 Backlog and Forecasting_BannerIf you're neck-deep in the world of professional services consulting, you know that staying on top of your financial game isn't just about counting beans; it's about smart planning and even smarter execution. That's where getting cozy with project backlog and project forecasting comes into play. They're like the dynamic duo of the project management world, and if you're in charge of the purse strings or the big decisions at your professional services firm, you'll want to give these two the attention they deserve.

So first off, let’s break each of them down:

  • Project Backlog: This is your bread and butter—it's all the work you've already won but haven't done yet. Think of it as your safety net; it's work that you can bank on in the short term. And it's a gold star for your marketing or business development team, too, because it means they've been doing something right. But here's the kicker: it's not just about having a backlog; it's what you do with it. Manage it well, and you're looking at a smooth road to profit town. Mismanage it, and well, it's a bumpy ride.
  • Project Forecasting: Forecasting, on the other hand, is your crystal ball. It's a bit more elusive, a cocktail of educated guesses and wishful thinking. The business development and marketing folks have their ear on the ground, listening for the rumble of potential projects. They're not sure bets like your backlog, but with a savvy mix of hope and pragmatism, they plot out what could be coming down the pipeline.

Now, when you put backlog and forecasting together, you get a killer combo that gives you the full picture: cash flow in the immediate future and what your workload might look like down the line.

Leveraging Project Backlog and Project Forecasting for Optimal Performance

Mastering your backlog and forecasting is crucial for various roles within your professional services firm:

  • For Project Managers: Clear visibility into the project backlog means you can allocate resources effectively, prevent scheduling conflicts, and maintain optimal workflow. Deltek Vantagepoint, for instance, can provide the granular insight you need to ensure that projects are adequately staffed and that timelines are met, minimizing the risk of underutilization or bottlenecks.
  • For Business Developers: Your backlog is your success story in numbers—it's proof of performance that you can showcase to potential clients. Knowing what's in the pipeline helps you strategize new business pitches and align offerings with market demand. When it comes to forecasting, having a robust prediction tool allows you to prioritize pursuits based on the likelihood of project acquisition and future revenue potential. Deltek Vantagepoint's pipeline management tools ensure you're targeting the right opportunities at the right time.
  • For Marketing Teams: Backlog data informs you when to double down on lead generation efforts or refine targeting strategies. It's a barometer for market engagement, guiding you on when to accelerate awareness campaigns or capitalize on high demand. With Vantagepoint Marketing Campaigns, you can gauge campaign impacts on your forecast and backlog, enabling data-driven marketing decisions.
  • For Financial Controllers: Backlog and forecast reports are not just numbers; they're predictors of your firm's financial health. They validate if revenue projections are on track and highlight discrepancies that need attention. The accurate and detailed reports from Deltek Vantagepoint can assist in adjusting financial strategies, whether it’s scaling operations or tightening budget controls.

By integrating tools like Deltek Vantagepoint to manage backlog and forecast, every role from project management to business development can benefit from increased visibility, better decision-making capabilities, and a stronger strategy for sustainable growth.

How to Implement a Backlog and Forecast Strategy

It is not complicated. The project backlog and project forecasting process needs only to provide a standard tool for company-wide project planning and review. Use the following three steps to initiate a project backlog and project forecasting process.

Step 1: Begin with a Detailed ‘Bottom-up’ Forecast

Project managers, your weekly routine should include a thorough review of your project backlog. Prioritize the projects with more than a 60% likelihood of commencement. Allocate your team members, estimate the required hours, and plan out the next eight weeks. It’s a practical exercise in resource allocation and workload management.

The benefits?

  • You'll balance team capacity against project demands, considering downtime for vacations or training.
  • You’ll monitor project progress and ensure you're on track with milestones.
  • You’ll forecast potential revenue by aligning upcoming work hours with billing rates.

Step 2: Consolidate Insights at a Management Level

Once project managers provide their data, it's time for leadership to analyze it. This aggregation step allows for spotting trends, potential resource sharing, future revenue projections, and early detection of budgetary issues or hiring needs.

Step 3: Validate Your Forecast

Compare your projected outcomes with the actual data. This step verifies the accuracy of your forecasting and provides a basis for adjustment and improvement.

With Deltek Vantagepoint, you can streamline these processes, enabling your leadership, project management, finance, business development, and/or marketing teams to detect trends, identify efficiency opportunities, and enhance decision-making with data-driven dashboards.

This approach is about more than just numbers; it's about using data to tell the story of your professional services firm’s trajectory, making informed decisions, and navigating your firm's path forward with confidence. Let’s get started on making backlog and forecasting integral parts of your strategic toolkit.

Ready to Navigate Your Firm's Future with Clarity?

Chart a course for success with Full Sail Partners. Our expertise in working with professional services firms and Deltek Vantagepoint positions your firm to master both project backlog and forecasting, transforming data into actionable insights. Connect with us to see how we can help you optimize your operations and elevate your project management strategy.

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Deltek Vision and Vantagepoint Year-End Preparedness - Are You Ready?

Posted by Scott Gailhouse on November 16, 2023

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As we approach the end of 2023, there is no time like the present to prepare for the year-end close which marks the final accounting process to wrap up the fiscal year. Advanced planning and organization can significantly ease this process for your accounting team, assuring a seamless transition into the new year. In this blog, let’s go over some of the most important items to help ensure a smooth transition to the new fiscal year in Deltek Vantagepoint and Vision.  


Document and Organize Your Procedures

Start by meticulously documenting your year-end procedures, encompassing not only tasks performed in Deltek Vantagepoint and Vision but all accounting functions. This comprehensive reference guide will not only assist your team this year but also in the years to come. Additionally, when creating your accounting calendar, ensure that it covers a wide spectrum of financial activities, not just limited to year-end tasks. This holistic approach is key to ensuring that all aspects of your financial management are well organized. It is also essential to share the accounting calendar with the entire staff so that they understand expectations. This is particularly necessary, especially surrounding timesheet and expense report deadlines.

Common Year-End Tasks

Year-end tasks are crucial for maintaining financial integrity. Here are some common practices among professional services firms:

  • Reconcile All Cash Accounts: This crucial task ensures that your financial records accurately match your bank statements. It's a good practice to not only verify transactions but also check for any unusual or unexpected entries that might need adjustments.
  • Credit Card Reconciliations: In the digital age, credit card transactions are commonplace. Ensure that you capture all credit card transactions, making expense reporting a priority. An accurate representation of these expenses is vital for your financial health.
  • File Reconciliation Report: Regular monitoring is the key to catching discrepancies between your general ledger and subledger reports. A monthly check helps in identifying issues early, making year-end reconciliation smoother.
  • Final Invoicing: Efficiently processing all client invoices ensures that you're not leaving any revenue on the table. It's the last opportunity to capture income for the fiscal year.
  • Review Outstanding Accounts Receivables: Diligently following up with clients who have outstanding accounts receivable beyond 30 days can improve your cash flow. Sending past-due statements and making personal contact can expedite collection efforts.
  • Review Unbilled Detail: Properly addressing time and expense transactions that cannot be invoiced helps in accurately reflecting your financial position. Writing off these unbillable expenses is an important step to keep your records accurate.
  • Fixed Assets: Beyond the regular tasks, don't overlook the assessment of fixed assets. Verify their ownership and depreciation, making necessary adjustments. This action ensures that your balance sheet reflects the current state of your assets.
  • Employee Expenses and Accounts Payable: Ensuring that all accounts payable vouchers are recorded accurately is vital. Making contributions to retirement plans and paying vendors and employee expense reports promptly is also a best practice for year-end.
  • Notes Payable: Maintaining alignment between your balance sheet and lender statements is essential. This step can prevent errors or discrepancies in your financial statements.
  • 1099 Forms: Ordering 1099 forms is just the beginning. Make certain that you have collected W-9 forms from vendors or contractors who met the $600 threshold during the year. Timely mailing of 1099 forms is important for compliance with tax regulations.
  • W-2s: If you handle payroll, don't forget to order and mail W-2 forms by the January 31st deadline. Timely distribution of these forms ensures that employees can file their taxes without delays.
  • Budget for Next Year: Setting up your general ledger budget for the upcoming year is a crucial financial planning step. It helps in aligning your financial goals with your operational strategy.

Deltek Customer Care Access

Each year Deltek puts together a year-end guide and checklist. Authorized users would log into Customer Care. Under the section "Learn", click on the option called Year-End Resources. You will then select your product, Vision or Vantagepoint and press "Go". There are Year-End Documentation and Year-End Videos. These complimentary, informative year-end videos are available on-demand viewing 24/7. The training sessions will guide you on how to perform year-end closing for general ledger, accounts payable and payroll, troubleshoot any issues that may arise during the year-end close process, and answer frequently asked questions. 

Be Prepared to Close Out the Year

Ensuring a smooth transition to the new fiscal year in Deltek Vantagepoint and Vision is an important part of the process. When opening the first period of your fiscal year, you're simultaneously launching the new fiscal year.

Several initialization utilities are required based on your professional services firm’s accounting calendar including Open New Period, Open New Benefit Year, 1099 Initialization, and Open a New W-2 Quarter/year. It's important to follow through with these utilities meticulously. If your firm’s database is configured for Multicompany, these utilities would have to be performed in each active company.

Be on the lookout for Deltek's Year-End update at the end of December, which contains tax updates for payroll users. Additionally, refer to Deltek's Vision and Vantagepoint Year-End guide for more detailed information on the year-end closing process. Planning and organization are key to ensuring a smooth year-end close and preparing for a successful start to the new fiscal year. With these additional tasks and tips, you'll be well-prepared for a seamless year-end transition and can confidently set your sights on the financial year ahead.

 

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How to Measure a Project’s Financial Health

Posted by Theresa Depew on June 22, 2023

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When it comes to assessing the financial well-being of our projects, we know that relying solely on project invoices is like gazing at the tip of an iceberg while missing the grandeur beneath the surface. At Full Sail Partners, we understand that true success lies in exploring a variety of analytics and statistics. Let's dive into the world of project metrics and discover the key to unlocking financial prosperity. 

The Essentials to Determining a Project’s Financial Health 

To begin with, there are a few essential components we must consider when determining a project's financial health. Every project should be documented with: 

  • Current and Accurate Fee: A clear understanding of the project's fee is vital. It serves as a baseline for evaluating profitability and making financial decisions throughout the project's lifecycle. 
  • Work Breakdown Structure (WBS): A well-defined WBS that aligns with the project's fee and scope helps us accurately allocate costs and resources. It provides a framework for tracking expenses and ensures that financial evaluations are aligned with the project's objectives. 
  • Proper Revenue Recognition Method: Selecting the appropriate revenue recognition method is crucial for accurate financial reporting. It ensures that revenue is recognized in a manner that reflects the project's progress and performance accurately. 

Understanding the Components of a Project's Financial Health 

To truly focus on the financial success of a project, we rely on job-to-date (JTD) as our measurement of time. Now, let's explore some key statistics that can be found or created using Deltek Vantagepoint’s Project Earnings Report: 

Profit or Variance  

This metric allows us to compare revenue/earnings with costs incurred. For projects billed on time and materials (T&M), a zero variance indicates profitability, as the project profit is built into the billing rates. However, a negative variance suggests the need to write off charged time. For fixed fee/lump sum projects, the goal is to minimize costs while still delivering on scope and quality. 

Projected Profit or Variance  

Calculating this metric involves updating and managing the estimate to complete (ETC). By combining the ETC with the JTD cost, we derive the estimate at completion (EAC). Comparing the EAC to the Fee allows us to gauge the project's health upon completion and identify potential scope creep. By analyzing actual and projected profit together, we can establish four scenarios and develop a matrix approach for reviewing a project's financial health: 

  • Scenario 1: JTD shows a profit, but there is a projected reduction in that profit moving forward. This indicates the need for careful cost management to maintain profitability. 
  • Scenario 2: JTD shows a profit, and continued or increased profit is forecasted. This demonstrates a healthy financial trajectory. 
  • Scenario 3: JTD shows a loss, but some or all of that loss can be mitigated moving forward. This calls for identifying and addressing the factors contributing to the loss and implementing corrective actions. 
  • Scenario 4: JTD shows a loss that will continue or grow. In this case, it is crucial to evaluate the project's viability and explore strategies for minimizing further losses. 

Direct Labor Multiplier 

This metric is crucial for managing a specific project and aligning with the firm's overall goals. It measures how much revenue is generated per labor dollar charged. The estimated multiplier is determined at the project's inception, and it's important to have a basis of comparison when evaluating this statistic. 

Work in Process (WIP)  

WIP is calculated as the difference between project revenue and the amount invoiced. Monitoring WIP helps mitigate any potential risks to project earnings. If revenue is accrued, it's vital to consider the time associated with billing and collection. Deferring revenue can minimize or mitigate risks effectively. 

Backlog  

This metric indicates the remaining revenue to be earned, representing the future available revenue stream. When combined with all projects, it forms a significant line on our Key Performance Indicator (KPI) graph. Additionally, it reflects the required full-time equivalent man-hours to complete and deliver contracted work. It's worth noting that backlog can be derived from the ETC, showcasing the interconnectedness of these metrics. 

It's crucial to note that all these metrics work in tandem, complementing and informing each other. For instance, backlog can be derived from the estimate to complete (ETC), demonstrating the interconnected nature of these indicators. By considering them collectively, we gain a comprehensive understanding of a project's financial health and can make informed decisions accordingly. 

Measuring a Project’s Financial Health is Multifaceted and Continuous  

At Full Sail Partners, we believe that measuring the financial health of a project requires a multifaceted approach. By relying on a variety of analytics and statistics, we gain a holistic understanding of the project's financial landscape. Project invoices, while important, are just one piece of the puzzle. 

To make our projects truly profitable, it is essential to continually measure and monitor their financial health. By utilizing a range of metrics and closely tracking project milestones, you can proactively identify potential shortcomings and take corrective actions before they escalate. This approach empowers project managers and the entire team to drive success, deliver value to clients, and optimize financial outcomes. 

Deltek Vantagepoint: Empowering Project-Based Consulting Businesses for Financial Success 

In conclusion, measuring a project's financial health goes beyond relying solely on project invoices. By leveraging various analytics and statistics, including key performance indicators, milestones, and specific metrics like profit or variance, projected profit or variance, direct labor multiplier, WIP, and backlog, you gain a comprehensive view of a project's financial status. This comprehensive approach allows you to make informed decisions, mitigate risks, and steer projects toward profitability.  

So, embrace these valuable insights, keep a close eye on your project's financial well-being, and unlock the path to sustainable success in your project-based consulting business. To see how Deltek Vantagepoint supports good project financial management, watch the webinar below!  

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4 Really Good Reasons Your Professional Services Firm Should Automate the AP Process

Posted by Theresa Depew on April 27, 2023

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Accounts Payable (AP) is one of the main tasks performed daily in a professional services firm’s accounting department. The process can be labor-intensive and very manual, especially when a firm has not embraced new technologies.  It’s hard to determine why so many professional services firms have not made the jump to a paperless accounts payable process. Maybe it’s the daunting fear of errors, or simply the fear of changing the process? Let’s review the benefits of automating the AP functions for your professional services firm and try to put any fears to rest!   

1. Going Paperless and Reducing Errors 

Generally, as with many professional services firms, accounts payable has been a paper-heavy process that has required printing, copying, filing, and retrieving paper. Additionally, the task itself has been a labor-intensive manual process that can already fall prey to human error. With errors already being something that may happen without automation, this proves that using automation is nothing to be feared by your professional services firm. By automating the AP process, invoices are stored digitally, reducing paper costs and reducing the time needed to process AP. So, automating AP at your professional services firm all the while saves money and actually increases accuracy. 

2. Improving Employee Productivity 

As mentioned before, Accounts Payable is a repetitive and time-consuming manual task. The process typically involves first receiving the paper invoice, then sending it for manual signature approval, and then data entry of all data into the accounting software. However, when automation is embraced by your professional services firm, invoices can be uploaded directly into the database, then electronically approved, and invoices posted. Thus, using automation and reducing AP task time, allows employees to focus efforts on more profitable pursuits instead of spending time on repetitive tasks. 

3. Gaining Control of the Procurement Process

Enforcing purchasing policies can be a struggle if there is no way to approve them before the purchase is made. Using an automated AP solution allows professional services firms to set up an approval process based on the firm’s policy for procurement. With automation, accounting team members can ensure the policy was followed and speed up the time it takes to have a purchase order approved. Gaining control of the procurement process allows for full transparency, with no more receiving vendor invoices without knowing the details being given about the purchase.  

4. Working Smarter with Vendors

A final plus of using AP automation at your professional services firm is that vendors can submit invoices to a designated email or webpage. This in and of itself greatly reduces the risk of lost invoices and allows for easy upload into the accounting system. Furthermore, receiving digital invoices for processing ensures on-time payments, which of course makes the vendor happy and reduces the number of communications back and forth. Fewer communications back and forth with vendors additionally saves your professional services firm further time and effort which is working smarter, not harder. 

Automate Your Professional Services Firm’s AP Process 

Hopefully, after now realizing the benefits of automating your professional services firm’s Accounts Payable process, you can fully understand that automation is not something to be feared. It’s clear to see that automating AP will reduce errors and save money, and what professional services firm doesn’t want that? So, knowing that automation can save money and reduce errors, is your professional services firm ready to embrace technology and start automating your Accounts Payable Process?  

 

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Underused Accounting Features of Deltek Vantagepoint

Posted by Scott Gailhouse on April 27, 2022

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Believe it or not, but there are several applications in Deltek Vantagepoint that go unused simply because end users really don’t understand the concepts behind them. Labor Cross Charge, Consultant Accruals and Overhead Allocation are a few of those applications. This high-level overview is intended to make the user more informed about useful accounting features within Deltek Vantagepoint. These features are designed to provide the user the best view of a project’s overall health as well as the health of the professional services firm as a whole. 

Consultant Accruals

When invoicing clients each month on percent complete or lump sum type projects, oftentimes the percent complete billed on behalf of subconsultants does not really reflect what the subconsultants have actually invoiced the project. Consultant Accruals is a way to account for the differences. The Consultant Accruals account shows the difference between what the prime firm has billed the client versus what the subconsultant has billed the prime firm on the balance sheet. 

Consultant Accruals uses either the Project Budgeting Worksheet or Project Plan as the budget source to calculate accruals. The user must complete the Expense Costs tab of the Project Budget Worksheet for each subconsultant at the lowest level of the WBS. When the user receives an invoice from the subconsultant, it is entered in the Transaction Center, AP Vouchers using the same expense chart of account number and WBS level that is set up on the Project Budget Worksheet.  

When posted, the user will see a debit for the voucher amount to the expense chart of account (COA) number and a debit to a COA number called “Accrued Consultant”. Prior to running Consultant Accruals, enter the percent complete for each vendor on the Expense Costs tab of the Project Budget Worksheet or the ETC or EAC percent if using the project plan to calculate the accrual. 

Once Consultant Accruals is run, Deltek Vantagepoint will adjust the original posting to the expense COA number if there is a difference between the percent complete entered in the project budget worksheet and the amount entered in AP for that subconsultant. An adjustment will also be made to the Accrued Consultant COA number with an offset entry to the Consultant Liability account. The “Accrued Consultant” account will show the difference between the percent billed on their behalf and the amount the subconsultant billed the firm.  

Usually running the Consultant Accruals routine is part of the month end processes. 

Overhead Allocation    

Professional services firms have a variety of Key Performance Indicators (KPIs) used to closely manage a firm’s financial and operational performance, and profit margin should be one of them. The Overhead Allocation utility in Deltek Vantagepoint is used to assign indirect costs to regular, revenue producing projects to measure net profitability. 

Overhead Allocation must be configured in a firm’s Vantagepoint database and should be run on a timely basis – usually after timesheets are posted or at month end. Overhead Allocation can give the user a true understanding of a project’s profitability. 

There are two options for applying overhead to projects – multiplier or proration. Overhead can be applied to a project’s revenue or direct labor. 

The multiplier method applies a multiplier that is determined to every dollar of direct labor spent on a project. The proration method uses a firm’s actual, year-to-date indirect expenses. Firms generally prefer the multiplier method because of its consistency. Project managers always know how much overhead is being applied to their projects. The proration method, because it is based on actual indirect expenses, will change month to month. Deltek Vantagepoint uses total overhead expense divided by total direct labor to determine the multiplier used when Overhead Allocation is run. 

There are a number of reports including the Project Progress, Office Earnings and Project Summary report that when run at cost will display overhead. Running the Overhead Allocation process will return a report detailing the amount of overhead applied to projects and the actual overhead rate of the firm. 

Overhead allocation can be run anytime as it is used for reporting purposes only. 

Labor Cross Charge 

Firms using organizations within Deltek Vantagepoint, may want to consider using the Labor Cross Charge utility. A cross charge occurs when an employee in one organization works on a project owned by another organization. The professional services firm can choose a revenue share, where the borrowing organization is charged revenue based on an agreed upon price by the loaning organization. In this scenario, the loaning company would see an increase in revenue and the borrowing organization would see a reduction in revenue.  

A firm may also choose to bill the borrowing organization indirect cost reducing the loaning organization’s direct/indirect expenses and increasing the borrowing organization’s direct/indirect expenses. By default, when time is posted, the labor cost follows the project’s organization. The user may choose to have the labor cost transferred back to the employee’s organization during the labor cross charge process. 

Labor Cross Charge can be used on Regular type projects or both Regular and Overhead type projects. Labor Cross Charge is run as part of the month end process after billing to clients has been completed. Having a clear understanding of how these applications work in Deltek Vantagepoint will help the firm decide if it could benefit from their use. 


Get the Most out of Deltek Vantagepoint 

Deltek Vantagepoint was designed with project-based users in mind. So, it is important for users to be knowledgeable about all the helpful accounting features within Vantagepoint that can provide them with an overall picture of firm projects. For professional services firms seeking guidance on how to get the most out of their investment, Full Sail Partners offers a complete Navigational Analysis. Click the image below to learn more.  

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A Few of My Favorite Things About Deltek Vantagepoint Reporting

Posted by Terri Agnew, CPA on April 06, 2022

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In my prior experience as a Controller of Architecture and Engineering (A&E) firms, I was often the “go-to” person for creating reports for PMs and Executives using Deltek Vision. Over time, I learned exactly which tab(s) the options were on for the various reports, which navigation menu item to choose to find the report base I needed, and even which color names were my favorites to use for the group headings.  Now with Deltek Vantagepoint, report creation has been made even easier with a few excellent enhancements. So, with the musical the Sound of Music in mind, let’s highlight the Deltek Vantagepoint report upgrades as “A few of my favorite things” …about reporting!  Feel free to “sing” along. 

Favorite Thing #1 - Organization of Reporting Menu

My first “favorite thing” may not be as pretty as “raindrops on roses” but it sure will save time!  Unlike Deltek Vision, Vantagepoint has only one Reporting option on the Navigation menu. All the standard base reports are now found on one “Reports” tab within Reporting. Likewise, all Saved Global/Personal reports will be listed on one “Favorites” tab. Instead of navigating through a dozen + menu items to find the report needed, now simply search for the report by name on either tab or filter by the type of report if you choose.    

For example:  Don’t scroll through the full list searching for the Time Analysis Report. Using the name of the report, start typing “time” in the search bar and “voila”, the report will populate.   

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Just even knowing the type of report rather than the name of the report, it can be filtered based on report type and list just those reports. This filter is like navigating the reporting menu tree in Vision.  

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Favorite Thing #2 – No more than 4 Option Tabs!   

Unlike the many “whiskers on kittens”, there are no more than four tabs to review for reporting options.  In Deltek Vision, some reports had two tabs, and some had up to seven! In Deltek Vantagepoint, at most there are only four tabs. 

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Columns & Groups:   Always start by deciding how the report should be grouped/sorted and which columns are wanted on the report. Keep in mind the headings of the columns can still be changed just like as in Deltek Vision but now there is only one header, not a header line 1 and line 2.   

Options:  This tab contains all “other” options for the report selected. Time selections, activity options, budget options, financial detail options – if the report has the option, this is where to find them all!  Having all the options consolidated to one tab makes it easier when creating a report as the user can simply skim through the options available from top to bottom.  There is no need to go from tab to tab any longer! 

Chart:  Not all reports have the ability to utilize charts, so this tab is not always an option. However, if the report data makes sense to also be shown in a bar, pie or line chart, this is the tab to set it up. 

Layout:  This is the tab with the choice to override the report defaults for report layout (portrait vs landscape), paper size, font, borders, headings & footers.  Advanced tip:  If a user has special options for a report, consider adding the options selected as a note in the footer for a reference as needed. 

Favorite Thing #3 – Easy Searching for Columns & Groups  

My third “favorite thing” is how easy the column and group options can now be selected in Deltek Vantagepoint. This may seem basic but having one quick and easy selection area is as satisfying as some “crisp apple strudels” with my coffee. 

Does the user want to know part or all of the name of the column or to add YTD data columns only? Does the user want all columns for hours? Use the filter! It will save time as there is no need to scroll through the long list of column options. 

Fav_Things-04Favorite Thing #4 – Colors for Grouping & Headers, now Actual Colors not Words!!   

Let’s face it, sometimes data is boring and can be hard to read if there is too much of it on one page!  Adding some color to grouping labels can help the eye focus in on a particular detail.  The new color selections in groupings & headers are related to my favorite thing #2Want a blue like “blue satin sashes”? In Deltek Vision, to figure out if that blue was cornflower blue or light steel blue, the user had to select the color by name, preview the report and decide if it was the color desired. Now the color selection actually shows the true color visually! 

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Another great place to use colors to brighten up a report is in the Column Heading. This option can be found on the “Layout” tab of reporting. Use a nice bright color to liven up what used to be a basic black & white report. Better yet… does the firm have an approved color palette? Find out the color codes for the firm’s colors and type in the code of the color to use in reports. Now reports will match the company branding. The user doesn’t have to be limited to the 140 colors shown in this grid. Here is a website that shows more color options:  Color Hex Color Codes (color-hex.com). Select a favorite color or the company’s brand color to liven up those reports! 

Favorite Thing #5 – Select Report Options, Records and Save the Report - All from One Screen! 

My last favorite thing about Deltek Vantagepoint reporting reminds me of “brown paper packages tied up with strings”. Deltek took three areas from Vision reporting and combined them to one page. In Deltek Vision, users had to go to one screen for Options, go back to the main reporting page and navigate to a second screen for the records selection, navigate again to the main reporting page and go to a third screen to save the favorite report. In Deltek Vantagepoint, all three of these reporting functions are executed from this main reporting screen! 

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Two more quick reporting tips… (1) don’t miss that the report title can be changed directly from this screen as well! Simply click on “Project Earnings” and rename this report to whatever makes sense for the organization.  (2) Users can also email the report directly from this main screen from the “Other Actions” options. 

Enjoy the Enhancements of Deltek Vantagepoint 

While Deltek Vantagepoint users cannot all sing with the voice of Julie Andrews in the Sound of Music, they can certainly benefit from this list of “my favorite things.” In fact, users may discover more to add to this list! In the meantime, let these Deltek Vantagepoint enhancements make reporting a lot easier because like Maria said when feeling sad, “I simply remember my favorite things and then I don’t feel so bad.”   

 


Click the image below to learn how to add the powerful, feature-rich ERP to your toolbox and get your team working on the same page of the same book.

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Seeking Perfection in an Imperfect World - Optimizing the Accounting Calendar

Posted by Rick Childs on March 02, 2022

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In a perfect world for project-based firms, as soon as a task is performed for a client, money would appear in the firm’s bank account. After all, the firm is contracted to provide services for a fee, and services were performed. End of story, right?  

Well, my bad! In the real world, that performance of services requires a good bit of help along the way, in order to get that payment in the bank. So, the story needs to expand a little to reach this ideal end game. That’s when having and implementing a good accounting calendar becomes a necessity. This routine cadence of work and accounting functions helps firms be able to rely on a regular schedule of deposits for work performed. 

A Good Accounting Calendar is a Necessity

Over the past 30 years, I have worn many hats and filled many roles involved in every step of the revenue process, including being a manager and being managed. I have learned that one of the greatest necessities is a good “Accounting Calendar” because it is essential to control the process and to have a schedule for the activities involved. Furthermore, for this to work, there must be planning, knowledge and “buy-in” by every level and department in the company from executive to “boots on the ground.” There also must be an individual overseeing the activities. That responsibility generally falls within the duties of the controller. 

Venturing back to my “perfect world,” or a reasonable facsimile thereof, if professional services firms setup and work within a good accounting calendar, they can achieve success, lower overhead, reduce billing time and collect payment for services quickly. Moreover, getting the team to follow a schedule is not a “dream.” It can, has been and is being done every day.  


Overview of the Evolution of Revenue

Below is what I call the “Evolution of Revenue.” It walks through from when the work has been performed through money in the bank. The evolution steps include:  

  • Performed Services = Unrecorded Time 
  • Recorded Time = Unapproved Time 
  • Approved Time = Unrecognized Revenue 
  • Recognized Revenue = Unbilled Revenue 
  • Billed Revenue = Uncollected Revenue 
  • Collected Revenue = Money in the Bank 
  • Money in the Bank = Gives the firm options for expansion and compensation… and that’s a whole other story! 

As the “Evolution of Revenue” shows above, it all starts with work being performed and work being recorded. The first tool to be used is a weekly timesheet. Why weekly, you may ask? Weeks don’t coincide with months or years, and firms publish monthly, quarterly, and annually! Granted, but firms are talking about scheduling, efficiency and supervision, therefore, weekly timesheets work the best. Believe me, I have tried them all, and firms can still publish monthly financials. So, let’s look at a sample schedule based on the weekly timesheet: 

  • Work Week is Monday through Sunday. 
  • All time is to be recorded daily. This provides the project manager the opportunity to review, approve and report on work as it is performed – up to the minute budget vs. actual. 
  • Monday - All time for the previous week must be inputted and submitted for approval by noon on Monday. 
  • Noon on Tuesday - The project manager and managerial review of time must be completed by noon on Tuesday. 
  • Close of Business Tuesday - The accounting and human resources review for overhead, benefits, OT, etc. must be completed by close of business on Tuesday. 
  • Wednesday Morning - Time is posted Tuesday afternoon or Wednesday morning. 

So now the firm has time in and posted each week. What then? Well, for one thing, if the firm is using Revenue Recognition – which it should be – it can publish Revenue figures for the previous week on Wednesday morning, along with Employee Utilization figures and Project Management Reports. 

Next Steps in the Evolution

So far, we have covered the first four steps in the Evolution and moved from Performed Services to Unbilled Revenue. Given that, let’s fast forward to Month-End where the Revenue evolves from Unbilled to Billed. Let’s review a couple of thoughts surrounding managing receivables. 

Let’s make the following assumptions:  

  • The billing month-end is the last Friday of the month. 
  • The accounting month end is the last day of the month. 
  • Preferred payroll is bi-weekly. 

Below is a sample of how this schedule lays out on a calendar in Q1 of 2022, spanning 2 weeks and 10 business days. This model has been used successfully with the buy in of project management, billing and accounting and provides principals with revenue by week and for the month on the Wednesday following the last Friday of the month. 

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Once the invoices have gone out, the responsibilities for follow-up vary by client and role. For clients that are being billed for the first time, the billing department follows up three days after bills are emailed to ensure that the proper individual received the invoice and to see if there are any changes that need to be made to the delivery instructions. For existing clients, billing is responsible for follow-up on accounts receivable (AR) up to 60 days past due, project management is responsible for AR up to 120 days and departmental management gets involved after that. All responsible parties receive auto-generated AR emails weekly so that all are on the same page as to who is on task.

Optimize the Accounting Calendar to Realize the Dream

As John Lennon once said, “You may say I’m a dreamer, but I’m not the only one.” Having a solid billing and accounting calendar is not a dream, it is a necessary and doable reality. Every firm has a plan and the thing that generally separates the dream from the reality is taking on the responsibility of enforcing the schedule and the deadlines. No one should be exempted from completing their assigned tasks at the time.  

Click the image below to find more accounting and finance resources. 

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Red Flags There’s an Accounting Problem

Posted by Nicole Temple on February 16, 2022
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The month-end closing process is a very important practice for the accounting department at professional services firms. Part of the close process is to ensure that one can document and justify the balances on the financial reports. This involves either keeping spreadsheets and/or printing multiple reports and ‘ticking and tying’ the balances. These processes take time and increase the chance of errors.

To assist accounting departments at professional services firms with verifying commonly used balances, Deltek has created some useful tools. There are two such tools in Vantagepoint that accountants can use to monitor activity and know when to raise the red flag to address accounting problems. So, what do these tools look like and how do they benefit accounting?

Financial Analysis Report

The financial analysis report (Analysis/GL Reconciliation/File Reconciliation Report) provides a big picture of the general from the standpoint of the firm’s income statement and balance sheet vs. the supporting sub-ledger reports. Deltek Vantagepoint has implicit entries that happen automatically in transactions based on configurations as well as explicit entries which occur by user entry in the transactions.

For example, when entering an AP voucher, the user selects the expense account (explicit entry) for the voucher but does not select the Accounts Payable account (implicit entry) – the Accounts Payable account is captured in the AP Liability code (which is set Settings/Cash Management/Accounts Payable/Liability Accounts).

The areas covered in the Financial Analysis are:

  • Accounts Receivable Accounts (Set in Settings/Billing/Accounts Receivable) = Open Accounts Receivable (My Stuff/Reporting/AR Aged)
  • Accounts Payable Accounts (Set in Settings/Cash Management/Accounts Payable/Liability Accounts) = Open Vendor Balances (My Stuff/Reporting/Voucher Ledger)
  • Unbilled Revenue Accounts (Set in Settings/Accounting/Revenue) = Office Earnings Report or Project Earnings Report (My Stuff/Reporting/Office Earnings or Project Earnings)
  • YTD Revenue Accounts (Set in Accounts/Chart of Accounts/Type) = Office Earnings Report (My Stuff/Reporting/Office Earnings)
  • YTD Reimbursable/Direct Expense one report that can be used is the Project Detail to total direct and reimbursable expenses.
  • YTD Indirect Expenses one report that can be used is the Project Detail to total indirect and expenses.

The reports listed above can be run to verify the balances on the sub-ledger, and the Financial Analysis Report will provide a professional services firm with a quick snapshot to know if there is a problem immediately. It is recommended to review this report as part of month-end processing, although it can be reviewed at any time during the month.

 

Upon viewing this report for the first time, looking for the differences in AR, AP, revenue, and unbilled of when the out of balance initially began is the first step. There are several reasons an out of balance can occur - for example, making a journal entry directly to a GL account that is linked to an AP Liability Code. Once red-flagged by this report, working with a knowledgeable system consultant to determine which entries caused the out of balances and learning how to correct them is advisable.

Bank Reconciliation

Another critical month-end activity is reconciling the bank account. However, with phishing and echeck technology, it is recommended that bank reconciliations be performed at the very least weekly, if not daily. Vantagepoint allows a professional services firm to create ‘Bank Codes’ for every bank account used by the firm. Each ‘Bank Code’ is linked to a single general ledger account number to track and report transactions for the bank code.

The bank reconciliation process allows for the user to ‘clear’ transactions as they ‘clear’ in the bank. The transactions that show in the bank reconciliation are only those that are entered via a cash transaction type (Cash Receipt, AP Disbursement, Cash Disbursement, AP Vouchers, AP Payment Processing or Expense Payment Processing). The reviewer will know if the transaction type is a ‘cash’ transaction type as they will be asked for a ‘bank code.’              

Any transaction entered against a General Ledger account that is linked to a Bank Account code that is not a cash transaction, for example, a journal entry, will not be available in the Bank Reconciliation feature and could cause a difference from the reconciled bank balance to the general ledger account balance if not added to the misc. tab of the bank rec.

When working through the bank reconciliation process each accounting period it is recommended to compare the “reconciled GL balance” on the printout of the bank reconciliation to the balance sheet GL account that is tied to the bank code. The calculations on the bank reconciliation report are:

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If the reconciled GL balance does NOT tie to the trial balance, research is needed to find the entries that caused the out-of-balance and correct them. Here is another red flag that can help accounting address problems.

An out-of-balance between the reconciled GL and balance sheet can happen and can still show that the bank reconciliation ties to what was deposited and paid from the bank. This is because the reconciled GL is a calculated balance of cash transaction types and not a balance from all transactions being entered against the GL account. Internal processes should be set up so that all cash-related transactions are entered via a cash transaction type.

Close Efficiently and Effectively

Accounting departments at professional services firms need to have efficiency in their month-end closings. Justifying balances on financial documents is a crucial component of closing out the month. With both the Financial Analysis Report and Bank Reconciliation tools offered in Deltek Vantagepoint, accountants can quickly identify red flags in their accounting processes allowing for expedient and effective resolution of accounting problems.

CTA Bank Reconciliation

Outgrowing QuickBooks – 5 Reasons Professional Services Firms Need More

Posted by Joel Slater on January 26, 2022

QuickBooks serves as a logical starting point for SMB professional services firms. For good reason - it’s affordable, popular, and easy to use accounting software. Though, on the downside, it provides very little flexibility and accommodation for how a business actually needs to run 

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Simply put, QuickBooks isn’t designed for project-based companies. It’s an entry-level accounting system, with purposefully generic functionality, intended to serve a diverse client base that spans various industry types. Consequently, the basic and straightforward nature of the product, which perhaps is viewed as a positive, can quickly become the opposite. Many professional services firms will eventually reach a point where the limitations of QuickBooks can hinder future growth. 

When might a firm reach that point? Below are 5 top reasons clients are choosing to trade in QuickBooks for an industry specific ERP that is purpose-built to meet the needs of a growing project-based business.     

Cumbersome Invoice Creation 

For a project-focused professional services firm, getting client invoices created and out the door can be considered one of the most critical functions. This process may have once been easy, but as the business has grown, projects have likely become more complex. With that means more complicated, multi-part, client invoice requirements.  

What used to take a couple of hours is now taking over a week, and accounting staff is burdened with cobbling together invoice-supporting data from various disconnected, error-prone sources. Not to mention the challenges of even getting the project management team to complete their timesheets in the first place. Once those bills have finally been painstakingly created and issued to clients, they still may not be correct.   

Incorrect invoices going out the door can slowly erode the trust of clients and lead to unnecessary, time-consuming, back-and-forth. On the other hand, accurate invoices, which are processed and paid quickly by clients, can provide various benefits to include reduction in DSO (days sales outstanding) and increased cash flow.  

Limited Visibility into Project Reporting

Do Project Managers and professional services firm leaders have a consistent and reliable source of truth to monitor the overall health and status of projects? For many who rely on QuickBooks, the answer is no. Just like on the invoice creation side, the necessary data to support project reporting is scattered among various spreadsheets. Answering what should be a simple question related to project status could take days to assemble a response. By the time of that response – odds are, the data is already out-of-date, and often irrelevant. The thought of any ‘real time’ project status, to include capturing data such as committed costs, may likely seem impossible when operating within these sorts of system-related confines.  

Not having a proper visibility into project timeline, budget, and other KPIs has consequences. It can quickly eat into profit margin and limit a professional services firm’s ability to make informed decisions in support of its projects and business.   

QuickBooks Lacks Support for the Entire Project Lifecycle 

Everyone needs an accounting system. However, even a relatively small, basic operation may quickly find that it needs more tools at its disposal. There are obvious functions like time keeping & employee expense reports, providing the ability to seamlessly allocate those costs to projects in support of invoice creation and project reporting. Additionally, perhaps there is a need to link the front and back-office operations to better manage the complete ‘project lifecycle’ (from initial lead pursuit through to project close-out). This includes a CRM (customer relationship management) module, or the ability to do more detailed project planning and resource scheduling.  

These are all areas and functions that a professional services firm is undoubtedly already actively performing, but just manually and “offline,” using spreadsheets and email to manage. The purpose of an ERP is to combine multiple functions within a single fully integrated solution that spans the entire business. More specifically, a project-based ERP is designed to do the same, but with functionality specifically geared towards a project-oriented company. 

Sure, QuickBooks capabilities can be expanded using external and 3rd party add-on tools that make initial claims around 'integration'. Yet, the result for many who go down that path can be a clunky, frustrating software experience – leaving many wishing they instead invested their time and resources into the lower-risk approach of just implementing a Deltek product.   

QuickBooks Can Limit the Ability to Pursue Projects

For many of the reasons already stated, professional services firms shy away from pursuing new projects they fear may be too taxing and burdensome on their existing accounting system. Simply stated, they don’t have the tools in place to responsibly graduate to the next level. Passing up new business opportunities can be painful, but unfortunately necessary, for those firms who are not equipped with the internal systems to support growth. 

Take WBS (work breakdown structure) requirements, for example. This means breaking down a more complex project into smaller components and deliverables. Many times projects require an invoice to reflect the way the project was bid. Providing a WBS ensures the estimate is managed and billed the way it was proposed. Unfortunately, QuickBooks limits the ability to pursue projects with more advanced requirements because it cannot easily track efforts in this manner. For many professional services firms, this is essential functionality needed to initially price/propose, manage, deliver, and invoice these projects.   

QuickBooks Hinders Growth 

The idea of a more ‘open ended’ system experience that can truly conform and adapt to evolving business requirements becomes more appealing. Those cascading menu options, check boxes, and configuration screens that may have once been viewed as intimidating and inaccessible may quickly start to make more sense. Deltek can easily accommodate growing firms. This is why 80% of AEC firms use Deltek. It has all the utilities, under the hood to handle the needs of future growth. As a professional services firm grows, its bookkeeping system should be able to scale and enable that progress, versus introducing hurdles and limitations.  

Grow Quicker with Deltek 

To reiterate, there is nothing inherently wrong with QuickBooks. If there were, it probably wouldn’t be the widest-deployed entry-level accounting system in the market. But the unique requirements of a professional services firm can still quickly create situations where to bring a firm to the next level, it needs to be re-tooled with industry specific solutions.  

ERP is not just for the ‘big guys’ anymore. The introduction of cloud-based applications (relieving clients of internal IT requirements), and also packaging and implementations catering to small firms, has opened many doors over the last several years. In fact, a majority of current day Deltek clients could be considered SMBs, who previously came from QuickBooks.  

Have additional questions? Full Sail Partners and Deltek got it covered. Deltek Vantagepoint is an industry-leading project-based ERP designed to support the entire project lifecycle. Having extensive experience with new system implementations (to include data migration, system configuration, and product training), Full Sail Partners has helped hundreds of clients graduate from QuickBooks. Please contact us to start a discussion.  

Image button link to the Project Lifecycle of Deltek Vantagepoint webinar

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