Unique Project Costing Challenges for Architecture & Engineering Firms
by Lucas HaydenAEC, Project Management
Jul 09, 2021
For architecture and engineering firms, proper project costing is essential for success. Projects are the business, and without profitable projects, there is no business. At the center of project profitability is an accurate picture of project cost. Project Costing is the practice of correctly planning and tracking the resources needed to complete a project, and their associated cost. True project cost is paramount to understanding your project financial performance and that requires maintaining laser-focused control over your projects. It is only by gaining clarity and insight into the financials of a project that teams have key information that allows them to monitor project status in real-time so that the project stays on budget. And while it may be obvious why this is so important; project costing can be a major roadblock for AE firm success. AE firms face unique project costing challenges. It is well-known that many projects fail to finish within the initially set budget. Key challenges and the unfortunate repercussions specific to AE firms include: Unplanned financial adjustments mid-project Every project kicks off with what are believed to be reasonable expectations, but very often surprises arise. This can usually be traced back to the team not having access to necessary information mid-project, which leaves them grasping for straws and coming in late and over budget. Resource course correction At the start of every project, firms assign resources based on anticipated needs, but often a project gets derailed when teams realize that those allocations were off target; and if the team does not have visibility into this during the project, the project can fail. Disorganization leading to errors Throughout the project lifecycle, it is essential to be organized. This requires constant monitoring of financial metrics and the latest information, but in the absence of this kind of visibility, errors often occur. Client relations Invoicing clients at set intervals throughout the project is protocol and being accurate and timely reinforces your valued client relationships. When the project costing system is not in sync with your billing and invoicing clients receive errant invoices, placing your cash flow and client experience at risk. Lack of visibility into the whole picture The best way to ensure accounting best practices is with 100% visibility into every aspect of the project. However, when teams rely on archaic systems to help steer the project, they cannot see the full picture, leading to costly mistakes. Lack of accountability Projects keep moving when the people managing them are held accountable for their tasks, but when these people struggle to obtain real-time information, maintaining accountability becomes much harder, and the project—and the company’s financial health—can suffer. What is project success and how does project cost management play a role? Project costing is critical for firms needing to achieve clear objectives to meet both internal objectives and client expectations. It is paramount for project cost management to be a clear priority, as it is foundational for profitability. For a project to be deemed successful—for both the organization and their clients—it must meet clear expectations for timing and budget, as well as be delivered with superior quality. And while all these elements are essential, project cost management is at the core. For every project, the firm begins with determining a budget; the rest of the project, from timing, to resource allocation, to selection of materials is based on that budget. Having real-time insight into every aspect of the project every step of the way is critical. Despite knowing how important this is, it more than often seems projects can spiral out of control. Too many moving parts and disorganized systems disrupt a clear, real-time view of progress or lack thereof. On top of that, there is no real understanding, once the project is in motion, of the possible need to change direction, re-evaluate resources or navigate potential unexpected new costs. The good news: unique solutions for distinctive challenges AE firms have been trying to manage project costing without the needed resources for years. The results can be devastating to the firm and its clients, and yet it has continued to be widespread practice for firms to keep using spreadsheets, along with archaic software, in hopes projects come in on budget. The problem is this simply does not work; project managers and executives keeping their fingers crossed is not the solution. The good news is that AE firms can have project profitability at their fingertips with real-time data available in a seamless, interactive dashboard that allows everyone to access information minute-to-minute through an ERP (Enterprise Resource Planning) system. By doing so, teams: Accurately and quickly measure project profitability Implement project costing methodologies that really work Gain flexibility, agility, and efficiency Boost project profitability with powerful, accurate time and expense tracking Through a seamless, automated, real-time ERP, teams gain control over budgeting, estimation, and resource planning, all of which are necessary for accurate project costing. An ERP helps firms address each of these areas with ease and accuracy. Project Cost Budgeting and Control Creating and effectively managing the budget throughout the life of a project is essential for staying on course and coming in on budget. Both are needed so firms can keep control of their margins and better plan for future projects. Project Cost Estimation A lot of information is required to estimate project costs, especially given the often-large number of resources required. An ERP helps serve as a guide as project managers go about the task of allocating resources, as well as determining the amount of time and the appropriate materials they will need. Project Resource Planning An ERP helps project teams take in needed data, easily determine requirements, review past schedules and output, and more accurately allocate resources for projects. The reality of project costing for AE firms is that they need a trusted system to plan and complete successful projects and overcome the unique challenges of the industry. An ERP is an effective tool to help firms meet those challenges head on. For more information on project costing, including maximizing profitability, download this free guide.
Why Project Accounting Benefits Architects
by Lucas HaydenArchitecture and Engineering, Project Management
Apr 28, 2021
Project accounting is—or should be—the lifeblood of all project-based organizations, but architecture firms are a special breed. Because these firms balance multiple complex projects at once, many of which have different costs associated with them, proper project accounting often provides an extra challenge—and extra reward when done correctly. What is project accounting for architects, and why is it so important? In this blog, we will take a closer look. What is Project Accounting? Project accounting includes monitoring the finances, profitability, and resources of projects. Every direct or indirect cost should attribute directly to a project. Project accounting must be done at every stage of the project lifecycle, from initiation to execution to closeout. There’s a lot of overlap between project accounting and project management; the finances of the project hold a direct line to the status of the project, and more and more, Project Managers are expected to keep a pulse on the finances of projects, not just the logistics. The Benefits of Project Accounting for Architects Turning the corner and beginning to put project accounting best practices into place is certainly an adjustment for your business—but it’s well worth it. Why? As an architecture firm, projects are your business. When project teams are confident in knowing where each project stands, they’re confident in knowing where the financial health of the entire firm stands. Let’s walk through the smaller benefits that come together to form this big picture. Clarity and Control Over Projects Far too many projects start out with good intentions and what seems to be reasonable deadlines, then surprises and adjustments occur. The project team didn’t have the information available to predict or suggest these unexpected events and are left scrambling. Before you know it, the project is totally derailed, and it ends up being late and over budget. But, when project teams take the time to manage the financials of a project, it unlocks a new world of insight for your stakeholders. Project Managers and executives now have all the information they need at their fingertips to closely monitor project status. They can see current project costs, upcoming expenses, and how profitable the project is at any given time. They can see when the project is starting to creep into the red and quickly course correct to bring it back from the brink. An integrated, project-based ERP tool with real-time dashboards and custom reporting puts all project accounting information in one system and makes it even easier to get this crucial real-time data in front of your stakeholders. We will talk more about the role an ERP plays in achieving the benefits of project accounting later in this blog. Assigning the Right Resources at the Right Time An architecture firm’s most important resource is its people. They make projects come to life—both in conducting the actual project requirements and organizing the project accounting and logistics. Whether a project succeeds or fails is all about getting the right people staffed and funded accordingly. With accurate project accounting, Project Managers will know exactly how much money is set aside for staff salaries and other associated costs. This enables them to compare how many people they think they need for a project with how many they can reasonably hire and take action accordingly. Even better, they can understand the staff budget in context with the profitability and financial status of the entire project. They may discover the 30 employees they set money aside for might actually be too many and they can course correct and choose to allocate the extra money to strengthening other parts of the project. On the other hand, they may suddenly discover that the project is understaffed and can assess the status of the entire project to determine if and where they can pull money from and resolve it or if they need to have a larger discussion of adjusting the project scope. Cloud ERP solutions with project accounting functionality enable businesses to optimize their critical resources while forecasting future demands, costs, and planning capacity—helping to take the guesswork and manual effort out of resource management. Reduce Errors and Redundant Work Proper project accounting requires strong organization and regular monitoring of all projects. Once a firm gets into the habit of updating the project financial status as soon as changes happen, it provides key project stakeholders with the latest information and can reduce errors. For example, once an outstanding invoice receives payment, it should be marked as paid and the income should be reflected in the project reports right away. This will help reduce the chance of the Project Manager reaching out to the client again asking for payment and either causing tension with that client or resulting in payment being sent again. Project-based ERP systems are helping to automate project accounting for architects. Project teams can rely on automated calculations and data updates, helping to reduce data entry errors and redundant work. How a Project-Based ERP Brings it all Together Acting on project accounting best practices and transforming your firm’s processes might seem intimidating, especially for firms that manage their projects and financials in spreadsheets or legacy solutions. Proper project accounting requires that teams see the whole picture—not an easy task when they have to navigate a dozen spreadsheets and even more versions of the truth. Project-based ERP solutions open businesses up to a new world of automated project management, financials, and project accounting. Project data across the organization is captured and stored in a secure, central database that’s easily accessible by authorized users from any connected device to eliminate wasted hours spent updating and managing individual spreadsheets or hunting for information. By managing transactions, costs, and revenue in one single solution, every dollar is tied to a project and is updated in real-time, so stakeholders have visibility into the architecture firm’s health on demand. “We’ve achieved return on our investment in Unanet A/E with efficiency improvements alone – we can get the detailed financial data we need quickly, right when we need it. Unanet A/E has also added visibility and accountability. Now, every Project Manager knows exactly how much money is in their project budget and how much they’re spending, which is critical when you’re working big projects with tight budgets.” —Joseph Courtade, Director of Finance & Administration, Mueser Rutledge Consulting Engineers To learn more about project profitability and how a project-based ERP can automate the process, download our white paper.
Helping A/E Firms Get a Better Grip on Project Cost, Profit
by Lucas HaydenA/E, Project Management
Sep 17, 2020
Newly published article by Unanet’s Lucas Hayden details how firms are realizing new efficiencies by gaining a clearer picture of overhead and job costing. As timely and helpful as government aid has been for many architecture, engineering and construction (AEC) firms during the COVID-19 crisis, our firsthand work with these firms tells us that firm leaders are well aware they won’t be able to rely on stopgap government programs forever, and thus must find sustainable ways to manage their businesses and their resources more efficiently. With the right ERP and analytics capabilities, uncovering and capturing meaningful new operational efficiencies is well within reach for AEC firms, Unanet’s Lucas Hayden explains in an article published in August on the PSMJ website. In particular, the right ERP and analytic tools can help firms gain a better handle on key factors like overhead and job costing so they can more accurately track and predict the profitability/financial performance of specific projects. That, in turn, enables firms to more efficiently manage their resources and plan for the future. In the article, Hayden details three capabilities that are proving particularly valuable to AEC firms in today’s volatile business environment: Integrated ERP tools that give firms flexibility in how to capture job cost.The ability to quickly and accurately track overhead by project is more critical today than ever before. The job cost rate/burdened pay approach and the overhead allocation approach are the two main methodologies for doing so. In the article, Hayden explains how each approach works, and how to determine which is best for your firm. Analytics to glean deeper data insight. Advanced analytics capabilities can elevate the depth and timeliness of the insight a firm gains from its data. Instead of basing decisions on outdated information and only using analytics to look at the past, the latest breed of analytics tools give firms a clearer picture of the future for forecasting, planning and the like. Interactive dashboards to make analytics insight more digestible and actionable. When a firm can package data from across the organization in interactive analytics dashboards, they gain the power to see key project costing information and other important data from various perspectives to uncover insights, anomalies and nuances they may not otherwise find. Hayden details some of the interactive dashboard features and functionalities that can maximize the insight gained from overhead data. To read the full PSMJ article, click here.
In Pursuit of ZERO Training
by Lucas HaydenA/E, Project Management
Jan 13, 2020
In my previous posts, I have tried to unpack a bit of our ‘untold story’ related to how powerful the Unanet A/E powered by Clearview engine is. Now let’s shift a bit to the end-user experience. We have learned so much from the many transitions we have done for clients moving from Deltek and BST. With this knowledge, we have created some amazing tools to speed up the migration and adoption process. In our initial meetings with firms – what we call our ‘Strategic Planning Summit’ – it was increasingly clear that firms had struggled with user adoption with previous software amongst their teams.In particular, those outside of accounting (think business development, project managers, and executives) just never really embraced their past systems. No matter how many box lunch training sessions took place, the legacy systems just weren’t intuitive. The “just go down to the project area, then to the 9th tab, then to the 24th field, then enter…..” learning model was just not working. Add to that the fact that these team members may only perform that one task occasionally, and frustration came quick (both for the end-user and indeed, the folks tasked with training everyone). Listening to that story over and over really led us to develop what we call ‘Interactive Actions’. What does that mean? Let me give you a few examples that may bring that point home: In pursuit of zero training: Recently, an engineering firm told us they wanted “Turbo Tax for Engineers”. They had used Deltek Vision for more than a decade and wanted something that would allow their end-users to interact with the system without learning database terminology. They wanted all of the complex logic and business rules of their business hidden behind easy, English based questions and responses that could be understood by even the newest member of their team. We worked with them to develop a feature that we eventually named “Interactive Actions”. We always had what we called Actions in Unanet A/E – wizard-like tools for quickly adding projects, clients and the like. With Interactive Actions, we took that to a whole new level and the user response has been overwhelming. Ask end-users simple questions and, based upon their responses, lead them down a path of questions and/or actions that are specific to their responses. Reduce the noise: Keep your end users laser-focused on the task at hand and don’t make them wade through screens and fields that don’t apply – or that don’t apply right now for the task they are trying to accomplish. For instance, maybe you ask a project manager that is creating a project a few basic questions and, when they select a particular market sector like Higher Education, you then ask them specific questions related to Higher Education and not another market sector. Maybe users are required to enter the number of students served, square footage, and/or put in additional information if the project is over a dollar threshold. The options are endless. That said, since we primarily work with professional services firms – and particularly, architecture and engineering firms – we see commonalities and continue to add those Interactive Actions to our ‘Starter Kit’ that we can deploy when we first migrate a firm off of one of the legacy systems in the industry. You can always adjust or add to what we provide as well and the personalizing of your Interactive Actions seamlessly moves forward with updates/releases too. Better Software. Better Company. The world increasingly works from a mobile construct and having your end users wait until they get back to the office to kick start a task/process just slows things down. In a worst-case scenario, they may completely forget about the task/process they wanted to finish or kick-off. You can leverage Interactive Actions from a mobile phone and/or tablet while out on the go. Remove the hurdles and barriers getting in your way. Increase your velocity and responsiveness. Better Software. Better Company. So now that you have made your end-users life easier, what’s in it for the administrator and operations team? A whole lot! Interactive Actions has the potential of drastically reducing your security settings (ie lots of security roles, options, and ongoing maintenance). Add to that the fact that data quality increases dramatically so you don’t have to constantly check and re-check whether the data was entered properly. If you have the right Interactive Action, the end-user can’t make a mistake. They win. You win. Better Software. Better Company. Give me a call and I would be glad to show you how Interactive Actions can revolutionize your business. There is a real sea of change happening. We would be honored to earn your business and have you join our rapidly growing list of customers. Thanks for your time and consideration.
On-site Project-Based ERP Training with Dunham
by Lucas HaydenA/E, Project Management
Jan 09, 2020
I have had the great privilege of watching more than 2,000 Architectural/Engineering firms operate over the past 25 years. In that time, I have gained great respect for firms that have the culture, discipline, and indeed, passion, to ‘walk the last mile’ and put in detailed project budgets, schedules and manage resources. Dunham, out of Minneapolis, is one of those firms in constant pursuit of project management excellence. At the same time, they recognize the need to not distract everyone with busy work and keep the project delivery and client satisfaction in focus at all times. Recently, Dunham wanted to give their project managers access to our VP of Services, Jason Bivens. Jason not only manages our support and services team he works daily in the project management and resource scheduling tools as we manage our projects with our own system. Jason provided tips on best practices and how to use our task dependency features to easily move out entire project schedules with ease. When a task start date slides out six weeks, simply click the taskbar and drag it to extend. All schedule resources are automatically moved with it. For critical path you can set and view task dependencies. We love showing how our software can dramatically increase your end-user adoption with low or zero training interfaces that make daily life easier for everybody. We always look forward to working with A/E firms who have a passion for excellence in project management, accounting, and of course architecture and engineering. Clients like Dunham help us move the ball forward and are continuously helping us identify ways to innovate our software and business overall. We enjoy meeting with our clients and hearing about how they utilize our software to build amazing projects around the world.