Full Sail Partners Blog

The Labor Cross Charge utility of Deltek Vantagepoint is often an underused accounting feature by project-based firms. It is simply not being utilized because users are not quite familiar with the concept and how it could be of benefit. So, first off, the labor cross charge capabilities in Vantagepoint are based on similar theories as multi-company but are focused on the interaction within a project-based company and its organizational breakdown structure (OBS) and only focuses on labor. Before we dive deeper, here are some links to some resources about multi-company functionality and OBS in case you are unfamiliar with these topics.  

High-Level Insight into Cross Charge in Deltek Vantagepoint 

To those unfamiliar with the concept, cross charging is a financial tool that only impacts the general ledger. It does not change project reporting since the time charged to a project remains on the project for billing and reporting purposes. Cross charge is labor-focused and occurs after the timesheet is posted.  

Since Deltek Vantagepoint is project-based, this simply means that time is entered to a project number whether time is spent on a regular, revenue-producing project or an overhead effort. By default, the labor cost follows the project’s organization. If the cross charge process is not configured or run, the labor cost will remain on the income statement of that organization.  

Why Use Cross Charge?  

As financial and operational managers, we know that revenue can only be earned when a cost is incurred. For this reason, cross charge allows project-based businesses to move these elements in and out of various “buckets” within their organization. When a combined income statement is run, all cross charge entries will zero out and the original revenue and cost will remain.  

The cross charge process is used when project-based firms loan and borrow resources at the lowest level of the OBS, which could be:  

• Office - OBS is organized based on the physical locations of your offices  
• Department/Discipline - OBS is structured around different functional areas or departments within your organization 
• Market Sector - OBS is focused on your firm's market sectors   

A good situation for using cross charge would be with a civil engineering firm where projects will be needed for various disciplines. For instance, the survey department would loan their staff to the engineering projects and cross charge would be the financial component to drive and manage the accounting for the labor.  

There are two internal pricing options to choose from when configuring cross charge:  

1. Project Centric – This is when labor remains on the income statement of the organization where the project resides. A multiplier is then used to move some portion of operational/overhead (OH) costs from the loaning organization to the borrowing organization. This factor could be limited to a fringe benefit rate or represent a breakeven OH rate or even include some profit. The purpose is to ensure that the loaning organization has an incentive to keep their staff busy, but they also need to be mindful not to over-extend their resources. 
2. Employee Centric – This works by sending labor back to the employee’s organization. Using typical billing rates, although a multiplier can be used, the revenue is moved from the project’s to the employee’s organization. The purpose again is to ensure the loaning organization doesn’t lose the ability to show a profit by sharing their staff.  

Real-life Application of Cross Charge in Deltek Vantagepoint 

Here is a success story where the operational process and projects are built on the premise that fee and scope drive work breakdown structure (WBS) in a client’s Deltek Vantagepoint database. Under this model, high accountability becomes the first option where phases and tasks within a project are assigned to different organizations based on the portion of the work. Employees charge the phase/task that is assigned to the organization they “live” in. This results in more closely managed projects because the profit accountability is shifted back to the organization supplying the labor. This process eliminates the need for cross charge. 

 However, realizing that in order to run successful projects, there is a necessity to anticipate unplanned needs. This means that the project-based firm must have the ability to borrow an employee from another department for a short-term assignment or a last-minute need. For example, the base building studio decides it needs input from the interior design studio. In this scenario, the client falls back on the project-centric method noted above as a mechanism to facilitate resource sharing and not impede project progress. Furthermore, this is a prime example of a need for cross charge.  

Gain Control of Resources with Cross Charge  

The Labor Cross Charge utility in Deltek Vantagepoint can provide the functionality required to ensure an open and smooth process of resource sharing for your project-based firm. With a thorough understanding and effective implementation, cross charge can provide another dimension in managing your business.  

Interested in more information about using cross charge and how it can help unlock the full potential of Deltek Vantagepoint? Want to learn other ways of ensuring your project-based firm is running as efficiently as possible? If so, Full Sail Partners is happy to offer your firm a Navigational Analysis.