Project Costing
Guide to tracking project costs, budgets, and profitability in NetSuite.
Cost Tracking Overview
PROJECT COST FLOW
═══════════════════════════════════════════════════════════════════
SOURCES COSTING ANALYSIS RESULT
─────── ─────── ──────── ──────
Time Entries ────► Labor Cost ────► ┌──────┐
┌──────────┐ │ │
Expenses ────► Direct Cost ────►│ Budget │──────►│Profit│
│ vs │ │ or │
Purchases ────► Material Cost ────►│ Actual │ │ Loss │
└──────────┘ │ │
Overhead ────► Indirect Cost ────► └──────┘
Enabling Job Costing
ENABLE JOB COSTING
───────────────────────────────────────────────────────────
Navigation: Setup > Company > Enable Features
Accounting Tab:
☑ Job Costing
Impacts:
• Labor costs calculated from time entries
• Costs post to GL accounts
• Enables project P&L reporting
• Cost center tracking
Labor Cost Calculation
Cost Rate Sources
LABOR COST RATE HIERARCHY
───────────────────────────────────────────────────────────
NetSuite uses this order to determine cost rate:
1. Task-Level Override
↓ If not set
2. Project Resource Cost Rate
↓ If not set
3. Employee's Labor Cost
↓ If not set
4. Default system rate
Employee Record > Human Resources Tab:
Labor Cost: $75/hour
Cost Calculation
LABOR COST EXAMPLE
───────────────────────────────────────────────────────────
Time Entry:
Employee: John Smith
Hours: 8
Labor Cost: $75/hour
Cost Posted:
Debit: Project Labor Expense $600
Credit: Labor Cost Variance $600
Project P&L Impact:
Labor Cost: +$600
Project Budgets
Budget Types
| Type | Description | Use |
|---|---|---|
| Cost Budget | Planned costs | Track spending |
| Billing Budget | Expected revenue | Track billing |
| Baseline | Original plan | Measure variance |
| EAC | Estimate at Completion | Forecast final |
Setting Up Budgets
PROJECT BUDGETS
───────────────────────────────────────────────────────────
Project Record > Financials Subtab
Cost Budget:
┌────────────────────────────────────────────────────────┐
│ Category Planned Actual Variance │
│ ──────── ─────── ────── ──────── │
│ Labor $50,000 $35,000 $15,000 │
│ Travel $5,000 $3,500 $1,500 │
│ Materials $10,000 $8,000 $2,000 │
│ Subcontractors $15,000 $12,000 $3,000 │
│ ───────────────────────────────────────────────────────│
│ Total Cost $80,000 $58,500 $21,500 │
└────────────────────────────────────────────────────────┘
Billing Budget:
Planned Revenue: $120,000
Actual Billed: $75,000
Planned Margin: $40,000 (33%)
Task-Level Budgets
TASK BUDGETS
───────────────────────────────────────────────────────────
Project: PRJ-00125
Task: Frontend Development
Budget:
┌────────────────────────────────────────────────────────┐
│ Planned Hours: 80 │
│ Planned Cost: $6,000 │
│ │
│ Actual Hours: 65 │
│ Actual Cost: $4,875 │
│ │
│ Variance (Hours): 15 remaining │
│ Variance (Cost): $1,125 under │
│ │
│ % Complete: 81% │
└────────────────────────────────────────────────────────┘
Budget vs Actual
Comparison Report
BUDGET VS ACTUAL ANALYSIS
───────────────────────────────────────────────────────────
Project: PRJ-00125 Website Redesign
Summary:
┌────────────────────────────────────────────────────────────────┐
│ Budget Actual Variance % │
│ ──────── ────── ────── ──────── ─ │
│ Revenue $120,000 $75,000 $(45,000) 63% │
│ Labor Cost $50,000 $35,000 $15,000 70% │
│ Expenses $20,000 $15,000 $5,000 75% │
│ Total Cost $70,000 $50,000 $20,000 71% │
│ ──────────────────────────────────────────────────────────────│
│ Gross Margin $50,000 $25,000 $(25,000) 50% │
│ Margin % 42% 33% (9%) │
└────────────────────────────────────────────────────────────────┘
Status: Under budget on cost, behind on billing
Work In Progress (WIP)
WIP Concept
WIP ACCOUNTING
───────────────────────────────────────────────────────────
WIP = Costs incurred for incomplete work
Balance Sheet Impact:
WIP Asset Account: Costs not yet recognized as expense
Release from WIP:
When work completes → Move from WIP to Expense
Example:
Jan: Incur $10,000 in labor
Not yet billed/complete
Post to WIP Asset
Feb: Project complete
Bill customer
Release WIP to Cost of Services
WIP Journal Entry
WIP TRANSACTIONS
───────────────────────────────────────────────────────────
Monthly Accrual (labor costs to WIP):
Debit: Work in Progress (Asset) $10,000
Credit: Labor Cost Clearing $10,000
At Project Completion (release WIP):
Debit: Cost of Services Sold $10,000
Credit: Work in Progress (Asset) $10,000
WIP Report
WIP BALANCE BY PROJECT
───────────────────────────────────────────────────────────
As of January 31, 2026:
┌────────────────────────────────────────────────────────┐
│ Project WIP Balance % Complete Status │
│ ─────── ─────────── ────────── ────── │
│ PRJ-00125 $45,000 75% Active │
│ PRJ-00130 $12,000 40% Active │
│ PRJ-00131 $8,500 90% Near End │
│ ──────────────────────────────────────────────────────│
│ Total WIP $65,500 │
└────────────────────────────────────────────────────────┘
Project Profitability
Profitability Calculation
PROJECT PROFITABILITY
───────────────────────────────────────────────────────────
Project: PRJ-00125
┌────────────────────────────────────────────────────────┐
│ Revenue (Billed) $75,000 │
│ │
│ Direct Costs: │
│ Labor $35,000 │
│ Travel & Expenses $3,500 │
│ Materials $8,000 │
│ ──────────────────────────────── │
│ Total Direct $46,500 │
│ │
│ Gross Margin $28,500 │
│ Gross Margin % 38% │
│ │
│ Indirect/Overhead $7,500 │
│ │
│ Net Margin $21,000 │
│ Net Margin % 28% │
└────────────────────────────────────────────────────────┘
Profitability Dashboard
PROFITABILITY DASHBOARD
───────────────────────────────────────────────────────────
Active Projects Summary:
┌────────────────────────────────────────────────────────────────┐
│ Project Revenue Cost Margin % Status │
│ ─────── ─────── ──── ────── ─ ────── │
│ PRJ-00125 $75,000 $46,500 $28,500 38% ✓ Good │
│ PRJ-00130 $40,000 $32,000 $8,000 20% ⚠ Low │
│ PRJ-00131 $25,000 $15,000 $10,000 40% ✓ Good │
│ PRJ-00132 $60,000 $70,000 $(10,000) -17% ❌ Loss │
└────────────────────────────────────────────────────────────────┘
Average Margin: 25%
Target Margin: 30%
Advanced Profitability
Configuration
ADVANCED PROJECT PROFITABILITY
───────────────────────────────────────────────────────────
Navigation: Setup > Project Management >
Advanced Project Profitability
Configuration:
┌────────────────────────────────────────────────────────┐
│ Row Definition: Item Types │
│ ☑ Service Items │
│ ☑ Non-Inventory Items │
│ ☐ Inventory Items │
│ │
│ Column Definition: Accounts │
│ Revenue: 4000-4999 │
│ Cost: 5000-5999 │
│ │
│ Calculations: │
│ Margin = Revenue - Cost │
│ Margin % = Margin / Revenue │
└────────────────────────────────────────────────────────┘
Cost Categories
Standard Categories
| Category | Description | Examples |
|---|---|---|
| Labor | Employee time | Consulting, development |
| Travel | Travel expenses | Airfare, hotels |
| Materials | Direct materials | Software, supplies |
| Subcontractors | External services | Outsourced work |
| Overhead | Indirect costs | Allocated admin |
Tracking by Category
COST BY CATEGORY
───────────────────────────────────────────────────────────
Project: PRJ-00125
┌────────────────────────────────────────────────────────┐
│ Category Budget Actual Variance │
│ ──────── ────── ────── ──────── │
│ Labor $50,000 $35,000 $15,000 ✓ │
│ Travel $5,000 $3,500 $1,500 ✓ │
│ Materials $10,000 $8,000 $2,000 ✓ │
│ Subcontractors $15,000 $18,000 $(3,000) ❌ │
│ ──────────────────────────────────────────────────────│
│ Total $80,000 $64,500 $15,500 ✓ │
└────────────────────────────────────────────────────────┘
Best Practices
Cost Management
| Practice | Recommendation |
|---|---|
| Budget early | Set budgets at project start |
| Track weekly | Review costs weekly |
| Compare | Budget vs actual regularly |
| Investigate | Research variances |
| Forecast | Update EAC with new info |
Common Issues
| Issue | Cause | Resolution |
|---|---|---|
| No labor cost | Job costing off | Enable feature |
| Wrong cost rate | Rate not set | Update employee record |
| Missing costs | Time not approved | Approve time |
| WIP imbalanced | Incomplete entries | Review WIP accounts |
Related Topics
- Time & Expense - Source of costs
- Charge Rules - Cost rate setup
- Revenue Recognition - Rev rec
- Project Reporting - Cost reports