Contract2Revenue

C2R Latam
Training Material

2018
| Copyright © 2015 Tata Consultancy Services Limited
1
Agenda
No. Of
Name of Chapter Brief description Time
Chapter

1 C2R Overview Objectives, scope and out of scope of C2R service 5 min

2 Classification of projects Nature and revenue recognition of projects 25 min

What C2R reviews, why and how to guarantee

How to submit a project request and
3 request approvals, points to consider by type of 30 min
get approved
WON

4 Q&A Questions and answers 15 min

2
1. C2R OVERVIEW

3
Objectives

Ensure revenue recognition is correctly done as per accounting standards

Guarantee information registered in system is supported by contract and is

properly documented to be checked against, in case of Audits.

Monitor quality of information registered in WONs to support accuracy of

KPIs and financial statements reported to Management

Maintain Management informed through delivery of reports with key

parameters

Act as business advisors, analyzing key contracts to recommend Wons structure,

and guiding project teams on subjects related to the scope of service

4
 Scope of Service

Approvals Audits Advisors

• Creation of New Wons • Support in answering • Guidance and training to

based on contract / queries from internal / project teams in C2R
amendments external auditors processes

• PV/ CB changes based on • Analysis of key contracts

approved documentation and recommendation on
WONs structure

5
Out of Scope

Solve ultimatix errors Raise a ticket in GHD

Manage to get approvals from the

Scalate directly in case of urgency
next level

Solve issues or approve workflows

Contact Legal team in India
in CMS

6
2. Classification of Projects

7
Classification of Projects

Types

Time & Material Job Turnkey

Pure Turnkey Pure Turnkey SL Others

8
 Characteristics of Projects

Time & Material • RR is invoice based at a point Job

in time.
• Staff
Time & Material
augmentation • Process of transactions
• UBR = 0 since Revenue = Job
• Billable amount varies based • Billable amount based on
Billing (except for countries
on executed effort volume of transactions
where draft invoice is allowed)
• PV defined based on rate per • PV defined based on rate per
designation and forecasted transaction and forecasted
effort volume

Others

Pure Turnkey
• Dev / consulting
• Billable amount is fixed • RR is over a period, effort linked
Pure Turnkey project, based on Percentage of Pure Turnkey SL
• PV defined based on
Completion (POC)
milestones • Billing> Revenue, UER
• UBR delivery issues or • Billing < Revenue, UBR
billing milestones defined • Investment projects
in long terms
9
Revenue Recognition – Pure Turnkeys

POC - Percentage
Completion Method

Cost Based  Actual Costs Incurred Till Date

Revenue = X POB Value
Accrued till  Actual Costs Incurred Till Date
date +
 Estimated Cost to Completion)

* Revenue is calculated at POB level and then distributed among Wons as per their weight in total POB value.

10
Characteristics of Projects

Time & Material Job

• Staff augmentation • Process of transactions
• Billable amount varies based • Billable amount based on
on executed effort volume of transactions
• PV defined based on rate per • PV defined based on rate per
designation and forecasted transaction and forecasted
effort volume

Others
Pure Turnkey Pure Turnkey SL
• Dev / consulting Projects • Support & Maintenance
• Billable amount is fixed • RR is over a period in a straight • Billing based on monthly /
• PV defined based on
line basis Pure Turnkey
quarterly SL with
milestones
• RR can be reversed if billing does same fixed values
milestones not take place as stated in billing
• UBR delivery issues or mode
billing milestones defined
in long terms
11
Revenue Recognition - SL

Pure Turnkey SL

Equated monthly amounts over project duration

12
Characteristics of Projects

Time & Material Job

• Staff augmentation • Process of transactions
• Billable amount varies based • Billable amount based on
on executed effort volume of transactions
• PV defined based on rate per • PV defined based on rate per
• designation anddefine
ATS/ AMC period forecasted
the RR transaction and forecasted
which system divides in monthly
effort Others volume
periods
• Milestones created based on • Maintenance of SW /
number of invoices as per contract HW: RROthers
is over a period

Pure Turnkey • SW / HW sale: RR is at a • MilestonesPure Turnkey

created SL
based on
number of invoices as per contract
point in time • isSupport & Maintenance
• Dev / consulting Projects • RR invoice based.
• Billable amount is fixed • • Billing
Sale of thirdbased on monthly
party products should/
• PV defined based on quarterly
be related milestones
to TCS with
implementation
projects
same fixed values
milestones
• For RR of third party products, all
• UBR delivery issues or documentation must be approved
billing milestones defined first in PCM
in long terms
13
3. HOW TO SUBMIT A REQUEST AND GET APPROVED

14
3.1. Overview

Four types of review performed by C2R before WON approval:

Won Project Cost

Setting Value (PV) Budget (CB)

Others
15
3.2 WON Setting: New / Replacement WONs

 Fill template for WON creation, except when information is available at POM.

 WON nature, currency, executing company, billing and client country as per contract.

 Start and end dates supported by contract, otherwise clarified.

Industry Practice and IOU must be correctly classified

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Coverage

IOU Code IOU Name

0779 IS-BFSI-US SE&Latam 1.9-Group9 Latam BFSI
0780 IS-BFSI-US SE&Latam 1.10-Group10 Latam Pichincha
438 IS-Energy and Resources1.4-Group4
459 IS-Manufacturing1.8-Group8
622 CMI LATAM-1Group1
661 NGM-LATAM-Group3-Other LATAM

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3.3 Project Value

 PV must be supported by signed contract / amendment

 If not, partial approval can be made based on document from customer
that confirms billing (e.g. Purchase Order).

 PV must be defined according to contract /amendment

 It must be Net
 In case of various WONs , distribution has to be justified

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3.3 Project Value

 Fixed price projects

 Total contract value should be distributed. UUCV must be justified.

 Billing milestones values and completion dates must be supported by contract .
 Billing milestones must be mapped to corresponding contract/ amendment ID.
 Billing milestones in hold must be justified.
 SL milestones billing mode, period and values must be aligned to contract.
 SL and billing milestones must be aligned.

 Time and Material projects

 PV and CB should be proportional in terms of the approved rate by unit of CB
 Changes of PV must liquidate last approved PV that will not be used

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3.4 Cost Budget : New Wons

 If contract is not signed CB can be approved for allocations, if supported by BC.

 BC should be approved as per policy.

 Designations, effort and non fte must be registered as per approved BC.

 CB should be registered until the end of the project

 In case of late creation of WON, CB should not be registered for months already closed.

20
3.4 Cost Budget : Foreseeable Loss (FL)

 FL is an expected loss on a project that is treated as an expense transaction because it is likely that
the total project cost will exceed the total project revenue

 FL can be the result of

 UUCB since system treats this as future cost, this is solved when UUCB is released
 Actual FL when project had higher cost than revenue, justification and action plan should be
provided and cases are escalated to Management.

21
Foreseeable Loss

Estimated Future Cost

(Minus)
(Project Value (Minus) Revenue Recognized till date)

For Example:
Project End Date: - 31st Mar 2018
Project Value: - $1,000,000
Revenue Recognized till 31st Jan 2018: - $800,000
Estimated cost for Feb – Mar 18:- $250,000
Foreseeable Loss:- $50,000

22
3.5 Cost Budget : Existing Wons

 Changes in CB should be accompanied by proportional changes in PV as per contract

 CB changes with PV unchanged must be justified.

 GM should not drop lower than originally approved

 In case GM is lower than originally approved, new BC should be presented.

 Designations and effort requested must be aligned with current allocations

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3.5 Cost Budget : Existing Wons

POCs Others

UUCB must be PCM PRM

cleaned (1 day allocations Designation Wise
not considered) Allocated Efforts

RR is calculated
UUCB can create FL based on CB

Correct CB
registration and GM
calculation

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3.6 Others
 Remarks to support nature of the request must be registered.

 Indicate cause and estimated date of closure of wons that are expired > 3 months.

 Negative GM or significant drop (> 5 points) must be justified and escalated to Finance and
Management.

 Following indicators must be justified providing cause, action plan and estimated date of closure:
 Account receivables (AR) > 60 days, unless higher payment terms are agreed by contract
 Unbilled revenue (UBR) > 60 days, revenue recognized but not billed yet.
 Unearned revenue (UER) > 60 days, revenue billed but not recognized yet.

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4. Q & A

26
 Thank You

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