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Posts Tagged ‘project management’

Are you part of a non-traditional Professional Services Organization and feeling the staffing data-burden?

Then you are probably experiencing the common demand around deploying groups of staffing managers to manage these applications, yet with limited budgets and the same needs to manage resource supply and demand in order for your organization to stay effective and profitable.

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  • A simpler alternative for Resource Planning
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  • Ultimately “Two For One – Getting It Done!” – Forecasting

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Project Partners, Oracle Platinum Partner, and global leader in optimizing business processes and IT investments within project-driven organizations.

 

 

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 Project Partners Blog Author: Donna Dignam | Principal Functional Consultant 
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In April 2015, FASB (Financial Accounting Standards Board) issued ASU (Accounting Standards Update) 2015-05 to assist entities to determine when a customer in a cloud computing arrangement “CCA” (i.e. hosting arrangement) included a software license.

If a CCA includes a license to internal use software, the software license is accounted for by the customer as an intangible asset.  Basically, the intangible asset is recognized for the software license, and the payments or said license made over time are recognized as a liability.  If no software license is included in the contract, the company should account for the arrangement as a service contract, and the fees associated with the hosting service of the arrangement are expensed as incurred.

The Update did not give any guidance regarding the implementation costs for activities performed in a cloud computing arrangement as a service contract.  Since the FASB guidance in this area was not explicit, the Board decided to issue an Update to specifically address the resulting diversity in practice.

Who Is Affected by ASU 2018-154?

These Amendments on the accounting for implementation, setup and other upfront costs (commonly referred to as implementation costs) apply to entities that are a customer in a hosting arrangement that is a service contract.  Oracle Cloud computing arrangements where a license is sold to the customer along with a hosting arrangement with Oracle Cloud would be one such customer.

Main Provisions of ASU 20184

The Update’s intent is to align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal use software and hosting arrangements that include an internal-use software license.  The current accounting for the service element of a hosting arrangement is not affected.

It is up to the company to determine which implementation costs to capitalize as an asset related to the service contract and which to expense.  Costs to develop or obtain internal use software that could not be capitalized under Subtopic 350-40, such as training costs and certain data conversion cost, also cannot be capitalized for a hosting arrangement that is a service contract.  The company in a hosting arrangement that is a service contract determines which project stage an implementation activity relates to.  Project stages include preliminary project stage, application development stage or post implementation stage.  Costs incurred for the application development stage are capitalized, while those costs related to the preliminary project stage or the post implementation stage are expensed as the activities are performed.

In addition, the company is required to amortize the capitalized implementation costs over the terms of the hosting arrangement.  The term of the hosting arrangement includes the noncancellable period of the arrangement plus periods covered by:

  1. Option to Extend – customer must be reasonable expected to exercise this option
  2. Option to Terminate the Arrangement – where the customer is reasonably expected NOT to exercise this option
  3. Option to Extend or Not to Terminate – where the vendor has control of exercising the option.

Impairment guidance, as if the costs were long-lived assets, and abandonment are to be applied based upon the existing guidance in SubTopics 350-40 and 360-10, respectively.

Income Statement presentation by the entity should be the same line item as the fees associated with the hosting service of the arrangement.  Similarly, classification of payments for capitalized implementation costs in the Statement of Cash Flows are done in the same manner as payments made for fees associated with the hosting arrangement.  In the Statement of Financial Position, capitalized implementation costs are presented in the same line item that a prepayment for fees associated to the hosting arrangement would be presented.

How is This Different and Why is it an Improvement?

Currently, GAAP does not specifically address accounting for implementation costs associated with a HASC.  Therefore, the Update improves current GAAP as it clarifies accounting and aligns the accounting for implementation costs for hosting arrangements, regardless of whether a license is conveyed.

For consulting firms, the new standards present an improved selling point as costs that were previously required to be expensed can now be capitalized.  For capital intensive industries, where cloud applications are being considered and dismissed due to financial considerations around increased expenses (and resulting decreased profitability metrics) due to cloud implementation, the new standard allows a way to capitalize the costs associated to both the license and the implementation and development costs around getting that application stood up.

When Does This New Update Take Affect?

For public entities, the amendments are effective for fiscal years beginning after December 15, 2019 and interim periods within those fiscal years. For all other entities, annual reporting periods beginning after December 15, 2020, and interim periods within annual periods beginning after December 15, 2021 are required.  Early adoption is permitted at any time.

The amendments in this Update should be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption.

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Author: Wendy Lamar | Managing Principal Consultant | Project Partners
Oracle E-Business Suite R12 Project Certified Implementation Specialist


By Jason Ames, PMP

Continuing our discussion from the prior blog article, we are now ready to address success factor number 3 in the Key Drivers to EPPM Success.

Measuring What’s Important

Team members will work to what they are measured against, so it is important to ensure that you are measuring the right things and that management is encouraging the right actions. It does not make any sense for a team to spend lots of money on overtime when cost is the critical factor. Former UCLA basketball coach John Wooden used to say “Don’t mistake activity for achievement.”

When a program starts it is important to establish the measurement criteria. If your project has a fixed budget you should be targeting cost controls and allow your schedule to slip if necessary. If you have fixed deliverable milestones you do everything possible to complete them on time. Too often organizations measure non-value-added metrics.

What should be done to ensure this does not happen? Read the rest of this entry »

By Jason Ames, PMP and Kimberly McDonald Baker

Too often organizations make an investment in an Enterprise Project Portfolio Management (EPPM) system but they fail to recognize the full benefits. One of the reasons is that people fail to see an enterprise PPM solution as more than just a scheduling tool.

When used properly, however, an EPPM system can be a critical factor in driving business value, not only by making sure a project stays on schedule but also via ensuring that the right projects are selected, resources are used efficiently and decision makers have the information they need to drive corporate strategy.

Key Drivers of EPPM Success

1. Top down commitment, bottom up participation
2. All business systems talk to each other
3. Measuring what’s important
4. Determining which projects to start and when to shut them down
5. Finding the bottlenecks
6. Constant learning

This series of blog articles will address each of the above success factors. Read the rest of this entry »

By Jason Ames

Primavera’s Project Portfolio Management suite is known for its ability to help you manage your projects and reduce the risk of project failure. But did you know that with Primavera P6 v7 Web Client you can use predefined workflow templates to request new projects? The project request process is extremely important because each new project not only represents an opportunity to help a company grow, every new project has an impact on every other project occurring in the organization. Each new project utilizes a company’s time, money and resources and should contribute to the company’s strategic goals and ultimately to the company’s bottom line.

Utilizing the Primavera project initiation work flow in P6 v7 web access, you can greatly improve your project selection process via the steps below.  Read the rest of this entry »

 

Challenges

Determine if you have a demand or supply oriented environment

  • Demand resource management is more prevalent with internal resource organizations, i.e. IT organizations. The primary focus is to assure that resources are optimally allocated to projects in keeping with the organization’s stated goals and objectives. Or, in other words managing the problems of “everybody is over-booked” or “there’s more work than resources”.
  • Supply resource management tends to be more attuned to billable professional resources. The primary focus is in balancing staff retention, skill mix and gross margins by assuring that resources are optimized to their maximum capacity. Or in other words “Is everybody billable?” or “Do we have enough analysts or too many designers?”
  • Professional services and other resource intensive organizations may have both issues at the same time Read the rest of this entry »

Introduction

Oracle Projects may be integrated with Inventory and WIP. This integration allows the tracking of project related transactions in Inventory and WIP. Some of those transactions will be interfaced to Oracle Projects. The simplest Inventory transactions that will be cost collected and imported to Oracle Projects are miscellaneous inventory transactions.

  • Miscellaneous Issue from stock to a project,
  • Miscellaneous Receipt from a project into stocks.

Those miscellaneous transactions are imported into Projects from any Inventory organization, whether or not the organization was classified as Project Manufacturing Organization. In a PJM organization those transactions are eligible for cost collection only if the stock locator is of another project or has no project at all.

The following transactions will be cost collected and imported into Oracle Projects only when executed within a PJM organization:

  • Items receipts of a project related purchase orders for inventory destination. The items are delivered into a project locator of the inventory organization.
  • Items issued from a project locator to WIP job (work order) of other project, or from a non project locator to a project work order.
  • Project Transfers transactions which move items from one project locator to another project locator on the same organization, or from a non project to a project locator.
  • Inter Organizations transfers from a project locator or non-project locator to another project locator in the receiving organization.
  • Resources charging WIP work orders, which are project related. Resources may be employees’ labor time, outside processing supplier costs, machine usages etc.

Cost Management invokes the cost processor program for each inventory and WIP transaction, one by one, following their creation order. It calculates the cost amount of each transaction and may generate the accounting lines. When cost processor is responsible for generating accounting, it uses the accounts set up of Cost Groups and WIP Accounting Class. In a PJM organization you assign each project to the organization, and enter the project parameters. Among them you link a project to a single cost group and may link it to various WIP Accounting Classes. Cost Management system also offers some extensions that may be implemented for changing those default accounts.

Accounting Options for PJM Organization

When Project Manufacturing is enabled for all or certain inventory organizations, there are (starting 11.5.10) several alternative options for accounting, which differ in scope and path. On the setup form of a PJM organization you should select one value for each one of the following parameters:

  • GL Posting Option:
    • Manufacturing: All inventory and WIP transactions are accounted by Cost Management process in Inventory, and sent from Inventory to GL. The project-related transactions are interfaced from Inventory to Projects as accounted.
    • Projects: Inventory is not interfacing any material or WIP transactions to GL. The project-related transactions are interfaced from Inventory and WIP to Projects.
  • Account Option: This option is applicable only if GL posting option is selected as Projects.
    • Send Accounts to PA: Inventory and WIP transactions are interfaced to Projects with the accounts defined by the source. However, Projects will interface those to GL.
    • Use Auto Accounting: Inventory and WIP transactions are imported into Projects unaccounted. Oracle Projects is responsible for distributing those expenditures using Auto Accounting rules.

Inventory miscellaneous transactions imported from a PJM organization will always be accounted by Auto Accounting rules in Projects.

Several points regarding these options are worth noting when implementing Project Manufacturing:

  • When selecting the Projects value for the GL Posting option, only transactions that are cost collected into Projects are accounted and posted in GL. All other inventory transactions, which are not charged to projects, will not be affecting any GL accounts. Any inventory transaction that represents a change in the physical on-hand value of inventory without adding or reducing any value to the project accumulated cost will not be cost-collected nor accounted in GL.
  • WIP transactions represent resources adding value to the project-work-orders; hence those are always cost collected into Projects, and always accounted.
  • PO delivery transactions into Inventory or Shop-Floor, and any subsequent correction or return transactions will always be accounted and interfaced to Projects as well. This is true for non-project purchase orders as well.
  • When selecting the Projects value for the GL Posting option you have to enable a project number as a Common Project on the PJM organization setup form. In a PJM organization, users may enter transactions without project and task. By enabling a common project the system will capture any WIP and Inventory transactions with no project data, and interface those to Projects, all assigned to the predefined common project and task.

In the following paragraphs I would like to explain the advantages of interfacing unaccounted Inventory and WIP transactions to Projects.

Many companies use to apply indirect costs on top of direct costs. In Inventory and WIP you may setup overhead rates, and the cost processor calculates the additional cost elements, material overhead and resource overhead. Those overhead materials are cost collected and interfaced as separate burden expenditures. The alternative tool for applying overhead is the burdening functionality of Oracle Projects. Projects will not allow burdening of externally accounted transactions. However, when expenditures are imported as not accounted, Oracle Project’s burdening functionality can process the PJM transactions, and apply burden costs to those expenditures. The ability to use Project Burden allows companies to apply systematically the same burden multipliers on PJM and all other expenditures charged to the projects. For example, employees may sometime charge work order in WIP or charge directly a project and task on their timecard. Using this feature the burden calculation may be shared, and you could save the maintenance of duplicate rates schedules. In addition, Projects’ burdening allows for updates to the burden rates. The ability to re-burden and apply final burden multipliers, replacing the provisory initial multipliers is a unique feature available in Projects. There is no way to revise overhead rates in Inventory. Last point in favor of using project burdening over inventory overhead is the ability to treat differently the burden amounts based on project types. Company may choose to use burden on separate expenditure items (summarized burden items) for contract projects, but use burden on the same item for capital projects.

Some companies also need to account differently for billable versus not billable expenditures. Such feature is easily done in Projects, and is a lot more complex to achieve using the accounting engine of Cost Management in Inventory. You may set up transaction control in Oracle Projects to derive the billability of Inventory and WIP expenditure items. With the expenditure items marked as billable, you can use Auto Accounting rules of Projects to generate the appropriate accounting based on billability.

The accounting generation for project expenditures is easily configured and maintained when you use only Oracle Projects’ Auto Accounting. Companies which need to account for PJM transactions using rules based on project attributes, project organization, project classification, will find the easiest solution is to use Auto Accounting. Alternatively, achieving the same project-based accounting in Cost Management; would require developing the Accounting Generation Extension. This is a separate tool based on workflow engine, which requires extra development and maintenance effort. Even when you are using SLA in Oracle release 12, the configuration of accounting rules for Project’s source transactions is easier than the need to additionally configure similar rules for Inventory’s source transactions.

Sending all project-related transactions to GL through one source – Projects – eliminates the need to reconcile between project costs and their respective journal entries generated and posted by Inventory. Using the single path also eliminates the need to manage the period close of the inventory organization. Since Inventory would no longer be an accounting source, the closing of accounting periods for each inventory organization can be obsoleted.

All the above mentioned factors call for using a unified tool for generating project-based accounting. Those points become clear advantages when meeting the following two characteristics: Inventory and WIP transactions of a PJM organization are mostly project related; and when accounting rules are based on projects flows of revenue versus costs. If, on the other hand, the majority of Inventory cost is non project, you might not use the recommended method above.

In cases where companies require accounting in GL for significantly high amounts of the Inventory Materials asset account, the alternative method may be favorable. In these cases, using the classic Inventory flow for accounting and interface directly to GL has indeed a significant advantage. When there is high value of non-projects transactions in a PJM organization, those costs will charge a single common project. Oracle Projects, however, does a poor job in accounting for the balance of on-hand inventory by the end of each period. Oracle Projects setup at a PJM organization might not be a good solution for physical inventory based accounting.

OPM3® (Organization Project Management Maturity Model) is a Project Management Institute® (PMI) standard much like the PMBOK® Guide that was started in 1998 by PMI.

The OPM3 standard consist of three major elements: Knowledge, Assessment & Improvement and they are described below.

Knowledge: The user becomes proficient in OPM3, the body of Best Practices, the ideas of organizational project management maturity, and methodology of OPM3.

Assessment: The organization compares itself to OPM3 Best Practices to determine its current location on a continuum of organizational project management maturity.

Improvement: Change Initiatives leading to increased maturity can use the results of the assessment as a basis for planning, and move forward to implement the plan while conserving precious organizational resources.

OPM3 Benefits

Advance strategic goals

OPM3 provides a way to advance an organization’s strategic goals through the application of project management principles and practices, bridging the gap between strategy and individual projects

Understand and implement Best Practices

OPM3 provides a comprehensive body of knowledge regarding what constitutes Best Practices within organizational project management Identify maturity

OPM3 assists an organization with the identification of what their current organizational project management maturity is and, thus, forms a basis for deciding whether or not to pursue improvements by Stage and Domain

Plan improvement activities

OPM3 assists organizations with prioritizing and planning activities should improvement decisions be made

In summary

OPM3 is a powerful tool that organizations can use to improve their organization project management maturity, and hence the execution of their projects and achieve strategic objectives of the organization.

A Project Management Office (PMO) is a group within an organization that defines and maintains standards for project management.  A PMO generally bases its project management principles, practices and processes on some kind of industry standard methodology such as PMBOK (Project Management Body of Knowledge) or PRINCE2 (Project in Controlled Environments).

 

Over time, a PMO generally will become the source for guidance, documentation, and metrics related to the practices involved in managing and implementing projects within the organization.

 

There was a study conducted that provided the flowing statistics:

• Organizations with PMOs complete twice as many projects than those without PMOs.

• High-performing organizations outsource 135 percent more than low performing organizations.

• 76 percent of recently surveyed companies reported that they had created a PMO, and the longer the PMO had been in operation, the more project success rates improved.

• Those with a PMO operating for more than four years reported a 65 percent success rate increase.

• The top two reasons for establishing a PMO are improving project success rates and implementation of standard practices.

• 65.8 percent of high performing organizations have enterprise PMOs.

• PMOs can deliver a return in three to six months by providing the visibility needed to cancel, postpone, or scale back unnecessary or less strategic projects.

• As PMOs mature, they are significantly better at meeting critical success factors, including having effective sponsorship, accountability, competent staff, quality leadership and demonstrated value.

• The top two issues for PMOs are forecasting the need for resources and resolving resource conflicts.

 

To have a successful PMO Office the following dimensions need to be evaluated and followed.

 

1.        Benefits:  collective visibility for estimating and tracking financial and strategic project benefits

2.       Selection:  the scalability, clarity and quality of project funding practices

3.       Issues, Risks and Dependencies:  issue escalation and resolution, aggregate risk management, and “air traffic control” over project inter-dependencies

4.       Change Control:  a practical level of business value protection and visibility

5.       Project Planning:  a repeatable, scalable framework for organizing project effort that uses common metrics and deliverables

6.       Financial Visibility:  a financial information framework that incorporates control and accountability without excessive data manipulation

7.       Communication and Reporting:  a procedural and  technical platform to collaborate on deliverables, coordinate schedules and resources, and effectively collect and use standardized project health metrics

8.       Training:  a set of training materials and standards to promote fundamental project management skills, enabled by automated workflows to simplify procedural gate-keeping

9.       Quality:  the criteria for deliverables quality, and the process for monitoring this quality