In search of the project costs

Project management software is a dime a dozen. Software for controlling is also widespread. A "fully integrated solution for controlling and Project controlling within an ERP system" is rather rare. However, there is one piece of information that should really be of interest: the project costs.

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Actually quite simple

Project or service providers, as well as service companies - all have service in their name, as that around which the added value of such a company revolves.
the Services are mostly equipped with a Performance which are provided by one or more persons. These services are then what is invoiced to the customer. So far, so banal ... or so you think.

What it costs

...how much effort and costs are involved in the billable services.

In order to be able to invoice your services, you first need to record them. Once recorded, you can prove the service to the customer by issuing an invoice. After all, the customer does not want to pay for everything we do as a service provider. Activities that were not carried out exclusively for them, expenses that were caused by the fault of the service provider or services that were not contractually agreed: The EffortThe costs are incurred by the service provider, but they cannot charge anything. This is everyday life for companies that service and services - and yet many find it difficult to quantify exactly how much effort and project costs there are in relation to the billable services.

The one small difference

Why is that? Again, there is a fairly simple answer to this. It is not recorded separately. It is true that there are as many different performance recording systems as there are different projects. However, the vast majority have a common origin: they come from the corner of organisational tools. They are masterful at organising (at least some) projects, allocating them to resources, measuring project progress and sometimes even managing project budgets. Strangely enough, most of them lack a component at the very beginning of the recording process: the distinction between billable and non-billable Performance.

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The field for the project costs

At first glance, you might think that this can't be a problem. Instead of just one field in a data entry screen for the time worked, there has to be a second one: For the time worked that cannot be charged to the customer. However, the value alone is not enough. The structure that receives this value must also be set up for it.
The service provider charges the customer a fixed hourly rate per unit. This hourly rate is based on a contractually agreed condition. This is offset by the costs of the employee who provided this service. And there must be a cost rate behind these services to determine the costs: For the Invoiceable and non-billable Services. These costs can vary depending on the project, employee, activity, time, etc. And the same resource can cost different amounts in different projects.
And while we're on the subject of resources, it's not just cost-causing people and their time that are used. Equipment, machine hours, consumables, travelling expenses and so on are also included here.

Excursion into cost accounting

Cost units (projects) are the answer to the question of what the costs were incurred for - while the cost centre answers the question of where (in which department) the costs were incurred.

This is precisely where many project management-tools the playing field. Reference is made to cost accounting. Here cost centers capture the costs of the projects and make them analysable. However, a cost centre was and is not intended for this purpose. The original idea of the cost centre is to represent a part of the company (department, branch, etc.) in an object. A project, on the other hand, is a cost centre. In other words, the entity that bears the costs of a product or project. Cost units therefore tell us what costs are incurred for. Cost centres show where these costs are incurred.

Once everything double

Another loophole often used is a kind of double counting. For each actual service, you have two services - the billable and the non-billable performance. Apart from the fact that this doesn't exactly make it easy to record services, such an approach naturally invites forgetting and errors. It also makes another cost dimension difficult to analyse: the cost type associated with this one specific service.

There is also the trappings

In order to find all project costs that a project bears, all costs (not associated with the realisation of the project) must also be found there. These can be directly related costs from the run-up to the project. In particular, sales expenses to win the project in the first place. You may also want to distribute overheads from the company's activities to the projects.

At this point at the latest, a deep integration into the business (software) solution landscape.
Simple interfaces are quickly overwhelmed.

More than thought

On a second and third look, you realise where most project management tools are lacking: the "marriage" with cost accounting.
However, if such integration exists in the business management of a project-driven company, real gold treasures can be unearthed. The effort required to create cost transparency is significantly reduced. And this kind of transparency is the indispensable basis for a company's success.

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