Project Costing
In ERPNext, each project consists of multiple tasks, and the actual cost of a project especially service-based work—is calculated using Timesheets. Employees record the time spent on each task, and this time is used to compute both costing and billing amounts.
This approach ensures that project costing is directly tied to real work performed rather than estimates, enabling accurate financial tracking of services delivered.
Project cost in ERPNext is dynamically calculated based on employee time logs, activity rates, and task-level work distribution captured through Timesheets.
Key Building Blocks of Project Costing
ERPNext uses three primary masters to calculate service-based project costing:
1. Activity Type
Activity Type represents different categories of services performed by employees, such as design, execution, testing, or communication.
It acts as the base classification for time tracking and cost allocation.
- Defines types of work/services offered by employees
- Used in Timesheets to categorize time entries
- Helps in structured reporting of project activities
2. Activity Cost
Activity Cost defines the billing rate and costing rate for each employee against each Activity Type. It determines how much an employee’s time is worth for both internal costing and customer billing.
- Stores Employee-wise billing rate per Activity Type
- Stores Employee-wise costing rate per Activity Type
- Used automatically during Timesheet entry
When an Activity Type is selected in a Timesheet, ERPNext automatically fetches the corresponding Activity Cost (billing and costing rates) for that employee.
3. Timesheet
Timesheets record actual working hours spent by employees on specific tasks within a project. These entries form the foundation of project costing.
- Records time spent per task or project
- Fetches billing and costing rates automatically
- Calculates Costing Amount and Billing Amount per time entry
The system multiplies time duration with the respective rates to calculate:
- Costing Amount – Internal cost of work performed
- Billing Amount – Amount chargeable to customer
How Costing is Calculated
For each Time Log entry in a Timesheet:
Costing Amount = Hours Worked × Costing Rate Billing Amount = Hours Worked × Billing Rate
These values are then aggregated at both Task and Project levels.
Costing at Task Level
Each Task accumulates costing data from all associated Timesheet entries. This provides a task-wise view of resource consumption and effort cost.
- Tracks total cost per task
- Includes all employee time entries linked to the task
- Helps identify high-effort or high-cost activities
Costing at Project Level
At the Project level, ERPNext aggregates costing across all tasks to compute the total project cost.
- Combines costing from all tasks under the project
- Provides overall service cost of the project
- Supports profitability and margin analysis
Project costing in ERPNext is continuously updated as Timesheets are submitted, ensuring real-time visibility into both task-level and project-level financial performance.
