Actual cost and effort calculation for demands
Summarize
Summary of Actual Cost and Effort Calculation for Demands
In ServiceNow, the actual cost and effort for demands and their associated tasks represent the real time spent and costs incurred during work activities over a given period. These calculations rely on approved time cards and resource hourly rates, allowing demand managers to track the financial and labor impact of progressing a demand into a product, feature, or enhancement.
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How Actual Cost and Effort Are Calculated
- Actual Cost: Computed by multiplying the hours recorded in time cards by the resource’s hourly rate.
- Actual Effort: Directly based on the hours reported in the time cards for demand tasks.
- Costs and efforts from individual demand tasks roll up to provide the total actual cost and effort at the demand level.
The hourly rate for a resource is determined in a prioritized sequence:
- Hourly rate from a rate model associated with the demand (if present).
- Default labor rate if no rate model or hourly rate exists.
- Default system property rate as a final fallback.
Best Practices and Important Notes
- Resource assignments on demand tasks should not be used for allocating resources; they serve only for resource estimation and automatically transfer to work entities once a demand is qualified.
- Actual cost and effort data come exclusively from time cards and remain with the demand; they do not transfer to projects created from the demand.
- Extra hours worked outside demand tasks must be recorded separately via the Time Sheet Portal, and these hours contribute to the demand’s total actual cost and effort but not to individual demand tasks.
- If a demand has no tasks or assigned resources, time cards can still be submitted directly against the demand to capture actual cost and create an expense line.
Practical Example of Cost and Effort Calculation
A demand with three tasks assigned to three different resources demonstrates how actual cost and effort are calculated based on the source of the hourly rate:
- Scenario 1 (Rate Model): Actual cost for tasks calculated using the rate model rates, resulting in higher cost values.
- Scenario 2 (Default Labor Rate): If no rate model is associated, costs are calculated using default labor rates, yielding moderate cost values.
- Scenario 3 (Default System Property): If neither rate model nor labor rate is available, default system property rates are used, resulting in the lowest cost values.
The actual effort consistently sums to total hours worked across all scenarios.
These summed actual costs and efforts are displayed on the Financials tab of the Demand form, providing demand managers clear visibility into the labor and cost expenditures for informed decision-making.
The actual cost and effort are realized cost incurred and time spent for the work performed on a demand and demand task during a specific time period. Calculations are based on approved time cards and the hourly rate for each resource. The hourly rate determines how actual cost and effort vary.
Working on a demand task and demand involves cost and time, which add to the overall expenditure of converting a demand to a product, feature, or enhancement. Demand managers must therefore know the actual cost and effort incurred in assessing and planning activities for a demand. The calculation for actual cost is derived by multiplying the hours reported in the time card by the hourly rate of the resource. The actual effort for a demand task is calculated based on the hours reported in the time card.
The actual effort and cost for the demand tasks are then rolled up for calculating the actual effort and cost for the demand. The calculation of the actual cost and hourly rate for a resource is derived as follows:
- If a rate model is associated with the demand, the actual cost is calculated based on the hourly rate defined in the rate model.
- If a rate model is absent or if an hourly rate isn't found in the rate model, then the hourly rate is derived from the default labor rate.
- If an hourly rate isn't found in the default labor rate, then the hourly rate is derived from the default system property.
Don't create and use resource assignments for allocating resources or groups to a demand task. The resource assignments that you create in the demand are used for the resource estimation of the work entity that would be created from the demand. These resource assignments are automatically moved to the resulting work entity when a demand is qualified and converted.
When you submit a time card for a demand, the actual effort and cost aren't reflected in the resource assignment. Resource assignments aren't associated with the demand by default. The actual cost and actual effort remain with the demand. They aren't transferred to the project created from the demand, even if you manually associate a resource assignment with the demand.
If a resource spends extra hours working on a demand that aren't associated with demand tasks, then this time must also be recorded. The resource submits the time card for recording the extra hours spent on the demand using the Time Sheet Portal. This extra cost and effort is added to the demand but isn't reflected in the actual cost and effort for the demand tasks.
- Demand Actual Cost: actual cost of all the demand tasks + actual cost of extra activities
- Demand Actual Effort: actual effort of all the demand tasks + actual effort of extra activities
If a demand has no task or assigned resource, you can capture the actual cost by submitting a time card against the demand. Once the time card is approved, an expense line is created on the demand. The expense line is then processed and the actual cost of work for that time card is rolled up to the demand into the Demand Actual Cost column.
The following example demonstrates the actual cost and effort calculation for a demand task and its rollup to the demand.
Actual cost and effort calculation based on the demand tasks
For a demand (D1), the demand manager delegates activities such as initial assessment, cost estimate, and effort estimate. To delegate these activities, the demand manager creates three demand tasks (DT1, DT2, and DT3) and assigns resources R1, R2, and R3 to each demand task respectively.
The hourly rate defined for the resources in the rate model, default labor rate, and default system property are listed in the following table.
| Resource | Hourly rate in the rate model | Hourly rate in the default labor rate | Hourly rate in the system property |
|---|---|---|---|
| R1 | $200 | $150 | $50 |
| R2 | $250 | $200 | $50 |
| R3 | $150 | $100 | $50 |
Each resource spends a total of eight hours while working on the assigned demand task and submits a time card.
Actual cost and effort calculation for demand task: The demand task actual cost and effort are calculated and displayed on the Demand Task form. The totals differ depending on the method used to derive them.
Scenario 1 shows how the total is calculated if the resource hourly rate is derived from the rate model.
| Actuals | Demand task DT1 | Demand task DT2 | Demand task DT3 |
|---|---|---|---|
| Actual effort | 8 hours | 8 hours | 8 hours |
| Actual cost | 200 * 8 = $1600 | 250 * 8 = $2000 | 150 * 8 = $1200 |
Scenario 2 shows how the total is calculated when the rate model isn't associated with the demand. In this case, the resource hourly rate is derived from the default labor rate.
| Actuals | Demand task DT1 | Demand task DT2 | Demand task DT3 |
|---|---|---|---|
| Actual effort | 8 hours | 8 hours | 8 hours |
| Actual cost | 150 * 8 = $1200 | 200 * 8 = $1600 | 100 * 8 = $800 |
Scenario 3 shows how the total is calculated when the rate model isn't associated with the demand. In this case, the resource hourly rate is derived from the default system property.
| Actuals | Demand task DT1 | Demand task DT2 | Demand task DT3 |
|---|---|---|---|
| Actual effort | 8 hours | 8 hours | 8 hours |
| Actual cost | 50 * 8 = $400 | 50 * 8 = $400 | 50 * 8 = $400 |
Actual cost and effort roll up to a demand
The Demand Actual Cost and Demand Actual Effort fields on the Financials tab of the Demand form are populated with the sum of actual costs and actual effort of all the demand tasks.
- If the resource rate for the demand task is derived from the rate model (Scenario 1), the value in the Demand Actual Cost field is displayed as $4800. The value in the Demand Actual Effort field is displayed as 24 hours.
- If the resource rate for the demand task is derived from the default labor rate (Scenario 2), the Demand Actual Cost field displays $3600. The Demand Actual Effort field displays 24 hours.
- If the resource rate for demand task is derived from the default system property (Scenario 3), the value in the Demand Actual Cost field is displayed as $1200. The value in the Demand Actual Effort field is displayed as 24 hours.