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Why traditional ERPs don’t work for project businesses

(Image credit: Image Credit: Sergey Nivens / Shutterstock)

If your company provides products and services to its customers through projects, you are a Project Business. Think construction, engineering, ETO manufacturing and professional services. Project Business should be considered an industry or sector just like retail and manufacturing because projects are their primary business function. It also means you should think differently about your business systems.

In order to optimise your business for success, it’s important to first identify as a Project Business. Setting up your Project Business structure will give you the foundation to scale, grow, diversify and increase profitability. 

Today’s real-time economy demands automation and visibility into what’s going on inside your company. For project businesses, traditional ERP solutions do not provide the level of automation and visibility needed to be successful.

Unlike traditional business industries where it’s much easier to apply technology to standardised processes and data in order to automate and accelerate production, it’s not so easy with Project Businesses with their unique products and non-standard business practices.

For project businesses, selecting a project-centric software to manage projects, finances and analytics is no simple task. Oftentimes these tools and applications are not built with project businesses in mind. Project businesses need a project-first holistic business solution. This type of system has been referred to as a Project-based ERP, but we like to call it Project Business Automation or PBA.

No matter what you call it, this type of system has business processes set up specifically to meet Project Business requirements.

To find the right solution, project businesses need to look at three distinct areas: Project Management (operations), Project Financials & Accounting, and Project Insight or Analytics; and how these disciplines are integrated.

Project management

When your primary business depends on the successful delivery of projects to your customers, it’s critical to be on point. The lack of real-time insight into your delivery operations will result in increased risk and decreased profitability. Ultimately, this can negatively impact your reputation and relationships with customers.

Project businesses spend a lot of time, money and resources trying to manually translate, consolidate and validate large amounts of project data from multiple point solutions. This manual integration process can lead to mistakes and delays, which can cause important decisions to be made based on unreliable data. Operating in standalone project management applications and tools that don’t communicate with each other only sets you up for failure.  

The fact is project business processes aren’t uniform. They are often left up to individuals who approach specific processes in different ways. This makes it difficult to manage the business functions and establish standard metrics to measure performance.

The key to operational success is to establish scalable and predictable business processes. Project businesses that establish a repeatable business model that yields reliable and actionable KPIs will be able to see an increase in productivity and profitability.

With Project Business Automation (project-based ERP solution), you can:

  • Leverage the project schedule to accurately build a labour budget, time-phase earned value estimates and generate cash flow projections
  • Apply the timeline directly to MRP for production orders, and automatically constrain the schedule based on procurement or production delays
  • Staff projects more efficiently and automatically feed status updates, issues and work estimates back to the schedule from the timesheet
  • Report on the financial impact of schedule changes immediately

A PBA solution not only provides the operational project management capabilities, but allows you to manage the business side of your projects by incorporating project financials. 

Project financials & accounting

It doesn’t make sense to keep your project operations separate from your project financials. Successful project businesses understand the criticality of managing projects from the business level. You need to be able to instantly see the financial impact of operational issues in your projects.

Your average accounting software program can track actual costs and invoices, revenue recognition, accruals and budgets. But project businesses need more than that. When it comes to analysing project profitability and enabling effective decision making, it’s important to track contingencies, productivity, variances, EAC, earned value, cash flow, profitability, etc.

Effective management of project financials requires a purpose-built solution that sets the project centre stage. Mainstream ERP solutions fail to deliver which often results in project businesses adopting standalone point solutions to compliment the ERP system.

PBA allows you to:

  • Align your financials with your operations in real time
  • Leverage the work breakdown structure (WBS) to feed your cost breakdown structure (CBS) with the most accurate cost estimates from the updated timeline
  • Automate the change order process to eliminate manual workloads
  • Evaluate cost-to-complete with real-time work estimates from the schedule
  • Report on the financial impact of schedule changes immediately

Keep in mind, managing project operations and financials is one thing; however, when it comes to projects, it’s not just what you know, but when you know it that really matters.

Project insight

Unlike most ERP solutions, PBA lets you manage project financials and project operations within a single solution, providing truly holistic project intelligence in real time. These project insights allow you to:

It’s no surprise that for project businesses, the most important objective is the successful and profitable delivery of projects. This means not only being able to closely manage a wide range of KPIs across business regions and project portfolios, but also having a high level of visibility into what’s going on inside your company in real time.

Senior management needs to be able to easily and instantly recognise changing conditions. Many common issues in the project life cycle can be resolved by timely detection and intervention. When all your project management and financial data sits in one place, and all the data mining is done for you automatically, you’re able to see the warning signs immediately before there’s a significant impact on your project performance.

  • Instantly understand how your company is performing across a number of financial and operational areas
  • Get real-time, in-depth overview of project health
  • See real-time day-to-day project insight across the organisation from controllers through planners and resource managers to all project team members

Look for an all-in-one solution to run your entire project business

All project businesses essentially operate the same way. Regardless of your industry, your fundamental activity is running projects. Technology can be applied to improve how you govern your business processes, gather and analyse data, and manage your operational workflows. Finishing projects behind schedule or over budget should not be an option when there are solutions that project businesses can adopt to be more profitable and operate more efficiently. Project Business Automation, or Project ERP, will help you gain greater control and better visibility over your projects to deliver better outcomes for your customers.

Daniel Bévort, founder, ADEACA

Prior to founding ADEACA, Daniel was a principal architect of Axapta at Damgaard Data, which was acquired by Microsoft and became Microsoft’s ERP offering, now called Dynamics 365 Finance.