Actual cost and effort calculation for demands
Summarize
Summary of Actual cost and effort calculation for demands
This topic explains how to calculate the actual cost and effort incurred for work performed on demands and demand tasks within ServiceNow. Actual cost and effort represent the realized expenditure and time spent, based on approved time cards and resource hourly rates. These calculations help demand managers track the true investment in converting demands into products, features, or enhancements.
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How Actual Cost and Effort Are Calculated
- Actual Effort: Calculated by summing hours reported on time cards for demand tasks.
- Actual Cost: Calculated by multiplying the hours on time cards by the resource’s hourly rate.
- Hourly rates are determined using this precedence:
- Rate model associated with the demand
- Default labor rate if no rate model or rate found
- Default system property if no rate found in previous steps
- Actual effort and cost for all demand tasks roll up to the overall demand’s actual effort and cost.
Resource Assignments and Time Cards
Resource assignments on demands are used for estimation and automatically migrate to resulting work entities upon demand qualification. However, actual effort and cost recorded via time cards do not update resource assignments directly and remain linked to the demand.
If resources work extra hours outside demand tasks, those hours should be recorded via the Time Sheet Portal as additional time cards. These extra hours contribute to the demand’s total actual cost and effort but are not reflected within demand task calculations.
Practical Example
For a demand with three tasks assigned to three resources, each working eight hours, the actual cost varies depending on the hourly rate source:
- Scenario 1 (Rate model): Uses rate model rates, yielding higher actual costs.
- Scenario 2 (Default labor rate): Applies default labor rates if no rate model exists.
- Scenario 3 (Default system property): Uses a fallback system-wide rate if neither of the above applies.
The total actual effort sums to 24 hours across all tasks, while actual cost varies accordingly (e.g., $4,800 with the rate model, $3,600 with the default labor rate, $1,200 with the system property).
Key Outcomes for ServiceNow Customers
- Enables accurate tracking of actual time and costs spent on demands and demand tasks.
- Supports financial transparency by rolling up task-level actuals to the demand level.
- Allows flexibility in defining resource hourly rates through rate models, default labor rates, or system properties.
- Ensures that extra effort outside demand tasks is properly captured and accounted for in demand costs.
- Clarifies that resource assignments are for estimation and do not automatically reflect actual time or cost.
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. Actual cost and effort are calculated based on the approved time cards and hourly rate for the resources and vary based on how the hourly rate for the resource is derived.
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, as the resource assignments aren’t associated with the demand by default. The actual cost and actual effort for the demand remains with the demand and 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 if the rate model isn’t associated with the demand and 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 if the rate model isn’t associated with the demand and 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 value in the Demand Actual Cost field is displayed as $3600. The value in the Demand Actual Effort field is displayed as 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.