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The As-Of Date is Crucial For Reporting Project Finances

The As-Of Date is Crucial For Reporting Project Finances

It’s one of those boring details that is frequently overlooked – but ignoring it can cause havoc in project reporting.  I’m talking about the importance of aligning project financial reporting to a specific point in time in order to have any chance at meaningful metrics on the state of the project.  Major projects are steeped in complexity, with a high pace of activity going on every day.  It’s tricky to measure and report on frenetic, in-flight projects like that because putting a halt to things simply isn’t an option, “Hey everyone, just stop what you’re doing so we can get a reading on what’s going on.” That’s just not going to happen.  So, you have to set regular, theoretical, lines-in-the-sand at incremental points, and measure the project at those increments so that you can produce reports, even though things will keep moving on.  It’s a bit like trying to measure the flow of a fast mountain river tumbling over rocks and cliffs – you have to just jump in and go for it while the river keeps pounding on past you.

 

Project financial reporting

This idea of ‘measuring’ prior to reporting is perhaps somewhat unique to project financial accounting since accounting systems (ERP) don’t typically do anything of the like, since there’s no concept of Percent Complete for a company.  Measuring a project is, of course, a key function of project controls and a vital input to project forecasts and status reports.

What, then, is the connection between this idea of measuring the project, and aligning its reporting to an ‘as-of’ date?  It can’t be understated how important it is to align all project reporting to a specific point in time.  A persistent challenge to the accuracy of what’s being reported, is when a report is showing data elements from differing as-of dates.  When comparing, for example, budget (planned value) against incurred cost to date, and against progress, it’s crucial that the report shows those three values from precisely the same snapshot in time.  Otherwise, even if the underlying data is correct, this comparison will most certainly be misleading.   To achieve that data alignment to a point in time, there needs to be some definition as to what that point represents.  It’s these cycles of measuring the project on an iterative basis that become the perfect events for synchronizing project data for reporting.  We at 4castplus refer to this as the “Progress Measurement”.  A progress measurement in 4casplus isn’t just a theoretical idea, it’s an actual thing that is controlled, submitted and approved.  All project data – including budget, actual cost, progress and many other metrics and data elements – is saved as part of the progress measurement.  This, therefore, becomes the focal point for where project reporting data is drawn from.  

The Progress Measurement becomes a bit like a “period close” as found in accounting, except that 4castplus, as part of the progress measurement, takes a comprehensive snapshot of all the data and metrics as of that point in time.  This gives the project team the confidence that the comparative data is talking apples-to-apples and everything is in sync.  It is the most reliable and pure as-of date method possible for project financial reporting.

 

By Charlie Rose | March 05, 2020 | Categories: project accounting software, project cost controls software, measuring project progress, project controls best practices, financial reporting | 0 Comments

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