As the individual responsible for ensuring that the financial results of the company have been prepared according to certain accounting principles and guidelines, the CFO requires that these are met with strict financial and internal controls to certify that the financial data is timely, accurate, consistent and reliable. These financial results are communicated to shareholders, banks, management, investors, etc., so there is a lot at stake for the CFO to safeguard that the systems that the company uses to provide this data are built and managed in a way that allows for clear sign-off on the company results. The bulk of this activity takes place in the corporate finance system or ERP, which provides the CFO with a platform where key financial controls are designed to meet the exacting requirements to support the CFO’s objectives and manage critical financial data. The CFO and the whole finance team are heavily dependent on the trusted data that resides in the ERP and treat it as the protected vault of corporate financial information.
For companies that are project-based, where their bread and butter is earned in the execution of profitable construction projects, there is a lot of financial information that resides outside the ERP in systems used by the operational project teams to manage and control project costs. Initially, this operational system might be a homegrown solution made up of spreadsheets & word docs. However, this eventually leads to the project teams searching to evaluate a dedicated project cost management solution to make them more efficient, organized and profitable. It’s reasonable that the CFO might not be comfortable with the prospect of all this financial activity taking place outside the ERP if he or she is not familiar with the financial controls available in the system being evaluated. Their tendency, therefore, is to want to use the project management or job costing extensions available with some ERPs like SAP, Oracle and Dynamics rather than allowing the project teams to choose their own system. While on the one hand this is an understandable reaction since the CFO is so invested and reliant on the ERP – on the other hand, if they have their way in influencing the tools used by the project teams, it almost always leads to a catastrophic failure.
In the same way that the CFO has exacting requirements for the design of the ERP, the project teams also have their set of requirements to meet their needs for careful management of complex construction projects. Many CFOs may not be familiar with the requirements for good financial project controls needed by the project team, so may make the assumption that what the ERP comes with is just fine for them. The reality, however, is this: there is not an ERP out there that has the depth in project cost management capability to meet the needs of what’s truly required to effectively manage major projects (for more on this, check out this article). Especially if the goal is to maximize project profitability. These differing agendas can then lead to a deadlock in whose needs take priority: the project team’s or the CFO’s?
It doesn’t have to be that way of course. So, by choosing the right project cost management solution, the needs of both can be easily achieved, and a catastrophic failure can be avoided.
The CFO Doesn’t Want to Compromise Corporate Profitability
The last thing a good CFO wants to do, is to make it difficult for the project team to successfully manage their projects and thus compromise project profitability. Because project profitability means corporate profitability – so the CFO’s goals are clearly in the best interest of the company as a whole and not solely the interests of his or her own department. Right? Well, maybe. Despite their best intentions, the CFO is in fact compromising profitability if they impose their influence on the choice of software system used by the project team.
What’s a CFO to do? Get Involved.
At 4castplus, it’s very important for us to work with the CFO, Controller and whole finance department to make sure that what gets implemented for the project teams is complimentary and adds value to the finance team and the ERP. Our goal is always to streamline, automate and integrate information to achieve an efficient enterprise view of corporate financial data from operations to finance and back. It’s critical therefore, that the CFO participate not only in the software evaluation, but even more importantly, the integration design between the two systems.
While the project teams are evaluating a cost management system, the CFO and finance team need to be consulted to ensure that the system that gets chosen possesses the depth in financial controls and data security that meet their expectations. It’s also critical for them to be involved in the design of the data exchange between the two systems. Important decisions around the following must involve the finance team:
- Jobsite time and cost tracking for Labor, Equipment, Materials and other expenses
- Project Procurement (for more on this, check out this article)
- Vendor invoice matching and accruals
- Customer invoicing for AR
- Master data – customers, vendors, currency, labor resources, taxes and more
Get Involved in the Integration Design
To achieve that enterprise information view, the system integration between the project cost management system (4castplus) and the ERP must be designed carefully to protect the information integrity across the enterprise. At 4castplus, we provide standard integration templates that have been carefully designed to maximize the information value on both sides, while minimizing the complexity, effort and cost of the integration. The finance department should be at the table to review the ultimate integration design to confirm that what is being designed satisfies their requirements.
4castplus and Finance
This is one in a series of articles intended to build a strong relationship between the needs of the project teams and those of the finance department. An implementation of 4castplus necessarily has implications for both, and it is thus our intent to ensure the participation of all parties is known to be vital for the successful deployment of this critical enterprise solution.