Are ERP systems failing at project cost control?

With all the PMOs we work with month in and month out, one surprising trend has emerged. Almost none are relying on their ERP system for project cost control. Come again? Aren’t ERP systems designed to control costs? Aren’t they the source of record for all things financial in a company? To this former CFO, they certainly should be! Instead, we find client after client using excel spreadsheets to track planned and actual project expenses. And our Daptiv clients are using Daptiv applications to the same purpose.

So – why are these PMOs (both IT and non-IT, btw) using unofficial and sometimes kludgy tools to manage project finances when the source of record is readily available? Turns out there are two main causes of these “workaround” financial systems.

1 – The information is too late. That’s right, while purchase orders and invoices are both entered into ERP systems as they hit accounting, project managers don’t see this data for up to 45 days. Why so late? Data extracts sent to PMs and other managers tend to come out after the books close. In most companies, this is a 15 day cycle after month-end. So, a PO that was issued July 1 won’t show up until the Aug 15 report. Way too late to take any corrective action!

2 – Finances categories are useless to PMs. While finance wants to slice and dice costs by cost centers and accounts, project managers need different categories. Typical would be hardware, software licenses, software maintenance, contract labor, etc. Many ERP systems do not have their account structure set to reveal this valuable information.

So – what’s the frustrated PMO and project manager to do?

 My first suggestion is to ask finance to run the purchase order and invoicing data out on a weekly basis. When they balk that the data is not yet official and/or those documents are not yet approved, simply let them know you are using it for planning, not official reporting.

As to how expenses are categorized, it is important that standards be agreed and set for project cost accounting, and these implemented in the ERP costing structure. After all, and Enterprise Resource Planning software should be used as a planning tool – not just a financial record keeping tool.

If the latter fails, at least get your data feeds from finance more frequently, import them into you tool of choice, and slice and dice from there.

What’s your experience with project cost control and ERP? Is it working for you, or do you have a “workaround”  system in place? Please share your thoughts and approach so we can all learn from your valuable experience!

Dave B.