Project Partners Blog

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

Continuing our discussion from the prior blog article, we are now ready to address success factor number 2 in the Key Drivers to EPPM Success.

All Business Systems Talk to Each Other

An Enterprise Project Portfolio Management system is one of many business systems that an organization may use to improve its operations, but it must not live in a vacuum. An organization’s projects touch accounting through project costs and expenditures. Projects touch engineering through cost and material estimating, drawing releases and change orders. Service projects are affected when scheduling client engagements. Read the rest of this entry »

By Robert D. Anderson, CPA

An article by Adam Bookman provides an interesting perspective on why about 68% of IT projects fail to deliver the original desired benefits. He quotes from a study done by the Standish Group that identifies three primary reasons:
1. The initiative was outsourced to IT and not owned by the business
2. The right tool drives success
3. Best Practices represent the best starting place

Looking back over 20 years in the Accounting and Finance role at major US firms and another 14 years consulting with large international companies, these findings agree with my observations. The most successful initiatives have always been the ones where people in the direct operational area take full ownership and IT plays a supporting rule. The worst initiatives have been the ones solely driven by IT with no business buy in. 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.

As a project manager not only responsible for managing my project, but also asked by senior management to create a budget at the start of an engagement, and then to submit weekly forecasts showing my anticipated revenue stream, how can I possibly find the time to get this accomplished using Oracle Project Management?

 We implemented Oracle Project Management because it has the robust functionality we need, but the truth is I need to quickly update my numbers and get back to managing my project. It takes me over 20 screens to make weekly updates to my project forecast, and I have to be in the office to do that. In fact, I am in and out of the office, with barely little or no time spent connected to the network.  Most of my time is spent on an airplane or at the client site managing my project. How can I accomplish this quickly and easily without the monthly frustration?

Project Partners UI-Apps was implemented to address this need. UI-Apps provide a simple user interface in a familiar tool (MS-Excel) that allows Project Managers (PMs) to review and maintain project plans at their convenience. It is built to work seamlessly with Oracle Project Management and provide PMs with a simple solution with built-in industry specific processes for Professional Services Organizations. Additionally, only those Oracle Project Management functions relevant to our company are included on our UI-Apps worksheets.

PMs log into Oracle (from MS-Excel) whenever connected to the office intranet, download project information to the UI-Apps worksheets, and save these worksheets to their local machine. They can now go on the road and review and update information into the UI-Apps worksheets at any time – and whenever they next connect to the office intranet, they simply upload the updates back to Oracle.
Additionally, the most recent actual costs can be viewed, (as entered and summarized in Oracle), compared with the current budget, and the weekly forecast can be updated to reflect the situation as it now stands. UI-Apps provide both lump-sum and time-phased planning capabilities, so our PM workbooks contain a lump-sum budget worksheet, and a time-phased forecast worksheet. A convenient summary report allows PM’s to review actual costs as well as planned amounts for rows of tasks by expenditure categories displayed in columns.

In each of the worksheets, PM’s can change dates of tasks and resources, add new tasks, indent, outdent them, or otherwise modify the WBS, add or change resources assigned to tasks, and since UI-Apps has downloaded the appropriate burdened cost rates, and bill rates for these resources, PM’s can make good use of their travel time, and have a complete up-to-date forecast ready to upload when they return to their home-base destination. Even for multiple month engagements, entering time-phased Estimate-to-Complete amounts is easy because of flexible methods for displaying a project’s periods, and a unique spread-method feature which allows entry of total amounts – and the worksheet automatically spreads it over the displayed periods. Certain periods can be modified as needed – with the total being updated accordingly.
 

UI-Apps gives our PM’s the option to update workplans simultaneously while updating their financial plans. In certain cases, for complex engagements, we choose to track workplan progress and with UI-Apps, updating percent complete and entering progress status is easy to do in the same worksheet as we update our forecasts. With one click, the week’s plan is uploaded and submitted into our corporate workflow for approval.

As the IT team implements more UI-Apps functions, or rolls out the latest UI-Apps release, we don’t have to worry about being out of synch with the current code, or missing an update notification because each time we connect to the Oracle instance, UI-Apps checks for the latest workbooks and prompts for download of the latest version if out of synch.
 

There is no doubt that senior management now has a firmer grasp on the profitability of our portfolio of engagements with up-to-date forecasts from UI-Apps.