Why project costing is now a key consideration for FDs

Published : 3 years ago, on 21/06/2021

By Paul Sparkes, Commercial Director at iplicit

Historically, project costing meant setting up a number of spreadsheets and committing to a considerable level of manual work.

Though, without the accurate data coming in from each resource, on each team, within each project, no amount of Excel skills could make up for the shortfalls of input, created by numerous reasons such as forgetfulness, laziness and human input error to name a few.

The work involved was therefore not just the design and general management of the numerous spreadsheets that could be created at the project, team and group level, but also the ‘cat-herding’ required in order to make them useful at all!

Fundamentally, for any system to be really effective, it had to be both accessible and easy to use.

Yet the manual, spreadsheet-based systems are often neither; even if the remote working staff remembered to log their time and expenses when they got back to their desks, there was still the issue of the physical receipts that had to go somewhere.

As a result, many organisations opted for not managing project costing at such a daily / weekly granular level. Instead, many chose a broad-brush approach that would be able to look at total time and spend associated with jobs, on a less frequent timescale, gathering all the data in a lumpier format and inputting all at once.

The cost for doing this broad brush approach was significant; WIP was akin to guesswork and time variances and scope creep part-way through a job were much harder to spot.  Worse still, billing hours could be lost if they weren’t documented correctly, and re-keying the data meant that the opportunity for error was increased.

Changing attitudes

In the last few years, we have seen a change in attitude and the tipping point was the introduction of mobile apps.

Remote workers would no longer have to ‘do the paperwork’ when they got home, or at the end of the week; a simple end-of-day tally, even while still on the job, enabled an efficiency that hadn’t been seen before.

Mobile technology was effectively the trigger for Project Costing to move beyond the domain of construction and contractors and into many other industries that could now benefit from a greater control on costing with projects of any nature.

Another factor that continues to drive the adoption of project costing functionality is that of accountability.

CFO’s aren’t just using the systems to monitor and drive profitability; by their very nature, these systems work by increasing transparency at every level. Whether, geographically, resource-wise or at the project level, the data is available to be able to see what is working and what isn’t.

Rather than this being seen as a sword over one’s head, astute organisations are recognising the value of being able to communicate with such transparency and are, indeed, identifying the increased opportunity to secure more income as a result.

Project costing, within cloud-accounting, provides a competitive advantage. However, it is much more than this, particularly with the advent of remote working.

This functionality enables broader teams to work much more closely together; finance is able to be more informed at the project level, while project resources can be more involved at the financial level.

The right system sets up a win / win / win, for the project, the staff and the client.