Project cost control Monitoring the costs of a project by regularly comparing the planned costs with the actual costs incurred is a part of project controlling. In a technical sense, project controlling also oversees the results and the time schedule of a project.
Background
Projects are completed activities that are important to the company and do not belong to the day-to-day business. Each part of a project receives deadlines (milestones) and cost values that may have been incurred until their completion. Regularly, usually monthly, a project invoice is generated. It reviews the milestones and compares the cost incurred so far for the partial tasks to the planned costs. If deadlines or costs deviate, the responsible parties must analyze the reasons.
The controlling department compares planned targets with actual values, seeks the causes of deviations, and assesses their impact. In the case of costs, it distinguishes between price deviations (differences between planned and actual prices of consumed resources) and quantity deviations (differences between planned and actually consumed quantities). A project budget spent alone does not say anything about the project’s success. The earned-value analysis therefore determines a completion value: project budget divided by the percentage of progress made. The progress of work is reported by project and subproject managers. A project controller should, if necessary, verify it. Staff costs can, for example, be included in the project through a calculation rate per person-day (personnel costs plus a flat-rate cost for materials).
Accounting provides the foundation. When recording costs and invoices, it identifies cost items, project numbers, and cost sources. This allows cost accounting and controlling to process the data later. This recording effort can multiply the workload.
In SAP Business One
SAP Business One recognizes two types of projects: the financial project and the project in the Project Management module. The financial project functions similarly to a cost center. Companies submit it using project code (maximum eight characters), project name (maximum 30 characters), and validity period in Administration • Definitions • Finance • Projects. The system collects costs and revenues on the project as soon as they are entered in the journal entries. Users can assign the project to documents without a journal entry, such as a quote, customer order, or purchase order. SAP Business One then processes the project until it is entered in the journal entries. Each document line can contain its own project. Additionally, a project can be stored in the business partner master record (Business Partner Project field) or fixed to account records. The change log of the journal entries makes it possible to trace subsequent changes in the project assignment. Projects and cost items collect costs independently of each other.
For analysis, the transaction report by projects (Finance • Financial reports • Accounting) shows all transactions booked for a project, grouped by account. The profit and loss account, balance sheet, and totals and balances lists can be filtered by project using the „Advanced“ button. The gross profit from the transactions and the inventory purchases then result in the project’s gross profit.
The Project Management module has been available since Release 9.2. Companies activate it under Administration • System Initialization • Firm Details on the Basic Initialization tab. In order for costs and revenues from invoices to flow into the project, the field Financial Project must be filled out in the project window. Depending on the stage or task, users record planned costs. These depend on the planned hours and the hourly cost rate of the performing employee. The Summary tab compares the budget (sum of planned costs) to the actual values: open orders, incoming invoices, and total deviation. A positive total deviation indicates a budget overrun, a negative one a budget underperformance. The Planner revenue (Potential Amount field) is compared by the system with the actual revenues from initial invoices. The Assignment of Invoices window assigns invoices with the same financial project to the project stages. The Step Analysis report provides an overview of all projects, including the figures from the summary.
Link to the post
According to the article, digital accounting solutions create more transparency regarding financial processes, including project cost control. According to the article, performance-based variable costs of outsourced accounting are particularly advantageous for companies with seasonal fluctuations or highly project-oriented operations.
Demarcation
The financial project in SAP Business One collects costs and revenues from accounting. The project in the Project Management module, on the other hand, plans and controls stages, tasks, and budgets. It accesses the documents via the Finance project field. Related entries: Controlling, Project Management, Project Code (SAP Business One), Subproject (SAP Business One), Internal Accounting.
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