If you’re a project-based company looking at traditional project accounting solutions to manage your project financials, you’re going down the wrong path. Effective financial management of projects requires much more than what mainstream project accounting and ERP systems provide.
In the first blog in our eight-part blog series comparing Microsoft Dynamics 365 Finance and Operations (D365F&O) project management and accounting to Adeaca Project Business Automation (PBA), I discussed why D365F&O was not built for project businesses. This blog will take a deep dive into comparing a specific project functionality: budget management.
Microsoft Dynamics 365 Finance & Operations
Let’s start off by acknowledging the fact that we love Dynamics! Adeaca PBA Project Financials is built on D365F&O, providing an enterprise ERP solution specifically tailored for project businesses.
However, the fact is that for project-based companies, D365F&O is like a glorified general ledger. It does everything traditional accounting systems and ERPs do, but just not for projects. Budgets are entered in a flat journal-like format, completely detached from any hierarchical context to a project.
Budget entries are referenced to Work Breakdown Structure (WBS) activity numbers as the WBS serves as both the financial and operational hierarchy of the project. This is the major financial and budgeting flaw of D365F&O for project-based companies.
It is imperative to detach the cost and work breakdown structures. Companies attempting to manage projects financially and operationally using a single hierarchy (the WBS) are setting themselves up for failure. A single hierarchy contains insufficient details for operational planning and is too granular for budget, estimation, cost collection and variance management. Therefore, companies compromise on both sides and performance suffers as a result.
Adeaca Project Business Automation (PBA)
Unlike D365F&O, Adeaca PBA has a dedicated financial multi-level hierarchy, the cost breakdown structure (CBS). This is the central planning structure against which all financial activities are planned and managed.
The CBS allows you to define the exact level of details required to efficiently and effectively manage a given project or contract. In order to provide one cohesive construct with the necessary level of granularity, the CBS manages and tracks:
- Change orders
- Revisions and transfers
- Estimate at completion
- Progress and productivity indicators
All budget positions are processed within dedicated budget versions against the CBS. Budget versions are subject to approval, capturing cost and revenue estimates, as well as cash-flow projections.
You can create project budgets using the built-in templates and formula driven estimation tools. Any changes to the original budget are processed as revisions, change orders or transfers. Adeaca PBA provides a full audit trail of all budget versions including estimation of deliverables, contingencies and undistributed budgets for rolling-wave planning.
Project Financials for Project Business
Remember, effective management of project financials requires a purpose-built solution that sets the project center stage. Mainstream ERP solutions do not work for project businesses and often, these companies end up adopting standalone point solutions to compliment the ERP system. While D365F&O might be enough for companies in the manufacturing and retail industries, it was not designed with project businesses in mind.
However, Adeaca PBA was built for project-based companies and engineered to meet the specific demands of financial project management all within a single integrated solution. This allows no time-lapse or data translation between the source accounting transaction and the financial management tools.
When all project business processes are inside the ERP supporting the entire project business value chain, you have more control, lower risk, and better outcomes.