We often hear from senior executives and managers that they don’t know if a project is profitable or on budget until it finishes. That’s a problem. This lack of insight happens because there’s no formalized process for reforecasting the projects. When your project financials and operations are managed in different systems, there’s no way of knowing if the project is running on budget until all the costs are transferred and tallied in the financial system/ERP or, more likely, spreadsheets.
Additionally, we also hear from executives that they don’t have a good way to track costs once a project starts. The fact is, it’s impossible to track the costs of operations because they’re not directly tied to the financial system. As a result, it takes time to manually collect the data, report the status of all the tasks in a project and associate the appropriate costs to those tasks.
Project Cost Control in a Generation 3 Project Business System
Project-driven companies need a third-generation project business system that allows them to establish up-to-date reliable project performance projections and increase project profitability with complete transparency.
As part of Adeaca Project Business Automation, Project Cost Control in a third-generation system provides unique capabilities that go beyond other solutions on the market. Due to its integrated nature, cost controls are embedded in the system and relevant stakeholders are automatically notified of exceptions.
More specifically, Project Cost Control in Adeaca PBA provides the ability to embed projects into the costing sheet, facilitating detailed insight into individual components of the engagement as well as the big picture overview of the entire project.
What is Project Cost Control and Problems it Solves
Project Cost Control is the systematic oversight and management of a project’s expenses. To establish reliable up-to-date project performance, the periodic budget review process must take center stage. As part of Adeaca PBA, Project Cost Control introduces a sophisticated costing sheet supporting all aspects of the estimate at completion (EAC) process and month-end budget review.
Project cost controls are often done in spreadsheets which are manually updated and prone to error. Using spreadsheets and other tools to fill the gaps to track project costs is not only cost to maintain, but also produces delays and errors in the data. In addition, most costing sheets are not driven by budget periods, so companies don’t have access to historic datasets or an audit trail to review for future reference and trend analysis. The lack of budget periods also means the cost tracking is not aligned with ledger periods, billing, or revenue recognition cycles.
Project Cost Control in Adeaca PBA controls costs throughout the project lifecycle. During the initiation and planning phases, costs and risks should be identified. The project’s budget and proper cost breakdown structure are established from the outset, and cost control KPIs are identified at this time. During project execution, costs are tracked and monitored consistently and in real time. Project costing is period specific and historic datasets provide a full audit trail of all required metrics for earned value analysis and trend analysis. This codified process enables you to identify deviations faster while recognizing revenue and costs accurately.
Early Detection is Key to Effective Project Cost Control
Project Cost Control in Adeaca PBA allows you project controllers to predict and record variances before they materialize, and in time to take corrective action by having the ability to periodically evaluate cost to complete and estimate at completion. Cost control in a third-generation project business system provides an in-depth view of potential problem areas before they become major problems with early detection.
Project costs are tracked and monitored consistently. As expenses accumulate, costs are monitored and flagged for abnormal values. The budget review process computes updated expectations to project margins and productivity ratios against project deliverables. And since cost controls are embedded in the project business system, key stakeholders are automatically notified of any exceptions.
Integrated Project Cost Management
Successful project-driven companies understand that effectively managing project costs is crucial to their success. The solution is to integrate and track project costs from your operations automatically, so you always know exactly where your project stands financially. The bottom line is better project cost management means better business performance. Govern your project costs through systemized control mechanisms that automatically track and evaluate your costs across all projects.
To learn more about Project Cost Control, download the Project Cost Control Feature Brief.