Many CFOs and Controllers are reluctant to accept that there is financial activity going on in their organization that’s occurring outside their ERP finance system. While this is an understandable sentiment, the reality is that, for any company whose primary source of revenue is project-driven, there will always be project-based financial activity going on outside the ERP.
You have to expect that, from the very beginning, nothing ever plays out exactly to plan on major construction projects. Things change. Scope changes. Drawings change. People change. There are hundreds of factors that can surface at a moment’s notice – including mistakes, anomalies and unforeseen predicaments – that can cause setbacks and overages.
Being able to react quickly and nimbly to the jams and messes that project managers face on a daily basis, is the glue that keeps projects humming relatively close to expectations and plan. Major projects are big and complicated. There’s a mountain of activity going on every day that requires careful oversight to ensure things don’t go completely off the rails. With the amount of money and risk on the line, organizations clearly have to keep a tight ship or risk significant financial consequences; along with potential erosion of trust and reputation of your organization.
Approvals are deeply woven into the fabric of any financial software solution, and 4castplus is no exception. The challenge with designing complex, multi-stage approvals workflows however – for key items such as purchase orders, change orders, timesheets, invoices, etc. – is that they can quickly bog things down, and introduce delays as approvals get stuck waiting for individuals to get around to dealing with them. Approvals can drone on and on and keep critical-path items stuck on hold for days or weeks, wasting time and money, if not attended to properly. This is what we refer to as “Approvals Bottlenecks” and they can be a massive drain on the efficient management of project finances.
And bottlenecks can be very bad for business.
The team at 4castplus recently completed a key productivity advancement with the new 4castplus “AP Automation” module. Anyone familiar with accounts payable (AP) knows that the effort that goes into matching, validating and approving vendor invoices can be incredibly time consuming and labor intensive. The new AP Automation module takes away as much as 70% of that effort by eliminating most of the manual, human involvement that goes into the matching and approval of vendor invoices. Instead, the system automatically, electronically matches and approves invoices.
A significant part of the burden on AP is rooted in the accounts payable staff not having easy access to either the original receipt, the PO commitment, or other corroborating evidence to match the invoice against. This lack of information causes unnecessary churn with AP personnel chasing down people, documents, scanned receipts, etc. to confirm the accuracy of the invoice. Then, once the substantiating information is found, matching and approving the invoice is largely a case of verifying that what’s on the invoice agrees with what is on the associated receipts. The thing is, vendor invoices are mostly bang-on accurate, so for the AP staff in those cases, it becomes a relatively tedious routine of stamping the invoice as approved. With the 4castplus AP Automation module, accounts payable can let the system handle the dull grind and heavy-lifting of matching invoices so that they can reduce their costs and focus their efforts on more high-value work.
When it comes to project controls, budgeting and cost tracking, the Cost Breakdown Structure (CBS) plays an integral role in the management of construction projects. For many organizations, designing a standardized CBS can present a number of challenges as there aren’t a lot of models and standards out there to draw ideas from. The reality is, you’re kind-of on your own to define how you want to break down your project’s costs into logical buckets for careful management of its finances.
When it comes to general terminology in project management, project controls and procurement, not all organizations use the same terms when describing the same common concepts. For one simple example, some may refer to the lowest level of the Work Breakdown Structure as the “Activity”, whereas others may call it the “Task”. As a provider of project-driven software, we at 4castplus need to always provide a consistent and standardized lexicon for all terms that are used in the software platform; and ensure those terms, where possible, are based on industry standards. It is our policy to adhere to standard terminology, formulas and workflows where such standards exist. Despite our efforts however, not every term out there has a standard or a standard meaning, so we’re forced to go forward in some cases with terms that, to us, make the most sense, or appear to be most widely used.
The funny thing is, even when there are standards, people and organizations are nevertheless free to use whatever terms they choose to mean whatever they want. This works fine of course as long as they’re working in isolation; but it can cause confusion and misunderstanding when it comes time to communicate to the outside world. Similarly, when it comes time to adopting a standards-driven solution like 4castplus, organizations will often go through a translation in terminology that takes place to normalize people’s use of core terms in the software.
Getting daily real-time data from the Jobsite on your construction projects is like finally driving with the lights on. Having detailed information today on costs, activities and progress that happened today, gives you tremendous power to act swiftly on that information.
Making mistakes is a normal part of life. Equally, mistakes are a normal part of business. Mistakes, however, shouldn’t be perceived as somehow a failure or a sign of incompetence – they should instead be met as an opportunity to learn and grow; to strengthen your team and tighten your processes. Clearly what I’m saying isn’t any new wisdom, as mistakes are as old as dirt and great thinkers over the millennia have been preaching about how to spin them to the positive. Dozens of old expressions like “Fail-fast-forward”, “Corrective Action”, and “Lessons Learned”, point to a common theme about the constructive management of when things go wrong.
A key corporate value that separates a well-run business from a not-so-well-run business is in how they handle mistakes, errors and failures. An important business mantra to live by is that, “They’re only mistakes if you keep making them”. Doing the same thing over and over expecting a different result is not just a sign of insanity, but a sign of a business improvement opportunity. For example, a company that is consistently under-performing on their projects, or not achieving profitability targets on their projects – and does little to correct that but hope for better results next time – is obviously not learning from their mistakes. Hope, as they say, is not a strategy. What is a strategy, is to examine and rethink processes and systems and apply corrective action towards eliminating chronic mistakes.