Actual cost and effort calculation for a demand and demand task

  • Release version: Xanadu
  • Updated August 1, 2024
  • 5 minutes to read
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    Summary of Actual Cost and Effort Calculation for a Demand and Demand Task

    This feature enables demand managers to accurately calculate the actual cost and effort incurred on demands and their associated demand tasks within ServiceNow. It helps track the real time spent and expenses based on approved time cards and resource hourly rates, providing insight into the expenditure involved in converting a demand into products, features, or enhancements.

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    How Actual Cost and Effort Are Calculated

    • Actual Effort: Calculated by summing the hours reported on time cards for demand tasks.
    • Actual Cost: Calculated by multiplying reported hours by the resource’s hourly rate.
    • The actual effort and cost from all demand tasks roll up to the parent demand.

    The hourly rate for a resource is derived in the following order:

    • From the hourly rate defined in an associated rate model (if present).
    • If no rate model or hourly rate is found, from the default labor rate.
    • If neither exists, from the default system property rate.

    Resource Assignments and Time Cards

    Resource assignments on demands are used for estimation and automatically move to the resulting work entities after demand qualification. However, actual effort and cost recorded via time cards are not reflected in these resource assignments by default.

    If resources spend extra hours not linked to demand tasks, they must submit time cards against the demand itself through the Time Sheet Portal. These additional hours contribute to the demand’s total actual cost and effort but are separate from demand task calculations.

    Data Presentation in ServiceNow

    • Demand Actual Cost: Sum of actual costs for all demand tasks plus extra activities.
    • Demand Actual Effort: Sum of actual effort hours for all demand tasks plus extra activities.

    If a demand has no tasks or assigned resources, actual cost can still be captured through approved time cards, which generate expense lines and roll up to the demand.

    Example Scenarios

    For a demand with three tasks assigned to resources R1, R2, and R3, each working 8 hours, actual costs vary based on the hourly rate source:

    • Scenario 1 (Rate Model): Costs are $1600, $2000, and $1200 respectively; total cost $4800; total effort 24 hours.
    • Scenario 2 (Default Labor Rate): Costs are $1200, $1600, and $800 respectively; total cost $3600; total effort 24 hours.
    • Scenario 3 (Default System Property): Costs are $400 each; total cost $1200; total effort 24 hours.

    Practical Implications for ServiceNow Customers

    This calculation method allows demand managers to:

    • Understand true costs and efforts involved in demand assessments and planning.
    • Track and manage resource expenses accurately based on configurable rate models or fallback rates.
    • Ensure comprehensive accounting of time spent, including extra demand-related work outside demand tasks.
    • Use financial data on the demand form for better visibility and 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. 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 therefore need to 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 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 is not found in the rate model, then the hourly rate is derived from the default labor rate.
    • If an hourly rate is not found in the default labor rate, then the hourly rate is derived from the default system property.

    Do not 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 are not reflected in the resource assignment, as the resource assignments are not associated with the demand by default. The actual cost and actual effort for the demand remains with the demand and are not 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 are not 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 is not reflected in the actual cost and effort for the demand tasks.

    The actual cost and actual effort for the demand as derived from the time card data is added to the total actual cost and effort for the demand tasks. The values in the Demand Actual Cost and Demand Actual Effort fields are calculated as follows:
    • 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 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.

    Table 1. Hourly resource rate
    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.

    Table 2. Rate 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 is not associated with the demand and the resource hourly rate is derived from the default labor rate.

    Table 3. Rate 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 is not associated with the demand and the resource hourly rate is derived from the default system property.

    Table 4. Rate 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.

    1. If the resource rate for demand task is derived from 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.
    2. If the resource rate for 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.
    3. 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.