Thursday 10 February 2022

Green Pie for project budget management

Not so long ago, I talked about the fact that the introduction of a project management information system and a software product for project management should occur consistently. Indeed, first you need to decide on the control of deadlines and only after that proceed to manage the budget of the project. But in life, the customer always needs everything AT ONCE, and my customer is no exception. No sooner had I identified the key checkpoints and launched the first reporting in the ADVANTA system, the management flew in the task of introducing budget control. I needed to do everything quickly, simply and in such a way that the customer liked it. I think I succeeded.


Classic budget mess in project management 

It's common knowledge that people who do finance love order. Surely, everyone has heard stories when the accounting department is looking for a penny until the morning and does not sleep at night to reduce the balance. Financiers are one of the few who welcome the regulations, protect themselves from other employees of companies with detailed forms of requests, approvals and signatures of the GENERAL DIRECTOR. They are responsible for the sustainability of the company, and their main task is to organize budget management so that "everyone has enough": for wages, utilities, taxes, stationery and everything that is necessary for the life of the company. The task is not easy, and to solve it, it is necessary to know in advance not only the upcoming revenues and sales plans, but also to understand who and what is needed in the future, where there are savings, who has already overspent their limits, etc.

Imagine how difficult it is for the financial block with projects, because the error in estimating the budget, even with painstaking and accurate calculation, reaches 5-10%, and with rough it is often close to 50-100%! In practice, this results in the fact that the budget is almost always insufficient, and the required purchases constantly have to be revised. In addition, the development of the project itself brings forced changes - replacement of elements, workarounds, new components, etc. - all this quickly affects the budget.

Without due attention to managing the cost of projects, no one in the company will be able to say exactly how much budget has already been spent and how much money is left, what purchases are in the works and what will be needed tomorrow, what savings there are and where the overspending has appeared. In such a situation, the impossible task of finding the necessary funds and organizing purchases "YESTERDAY" or "TOMORROW" falls on the shoulders of financiers. You have to get out, take risks and go to the violation of some instructions, buy in parts or overpay for renting the required equipment, and no regulations help here.


Procurement management as a first step to order in the budget 

When I got a job in an IT company, I quickly plunged into all the existing problems of IT project management. It should be noted that I came to the company in October, so the regular "extinguishing of fires" appeared before me in all its glory. Despite the importance and priority of the tasks performed by the organization in the absence of a project management system and a project office, project management was applied "as it happens". As a result, the deadlines for projects were delayed all the time, and at the end of the year, as usual, there was a hot time of disputes, conflicts, reduction of functionality and rework.

The classical approach to building a project management system requires a long time. Typical steps for building processes require at least 3-6 months:

  • conduct a survey;
  • define prototypes of processes;
  • conduct staff training;
  • configure management tools;
  • carry out pilot projects.

No one could give me so much time, so this option was absolutely inapplicable. To get the first victories, I had to use the skill of extreme programming, which I used when working as a programmer – "test-driven development". That is, to try the most working management methods on real projects and immediately give project participants and management the opportunity to use new approaches.

The first thing I did to manage projects was to apply the checkpoint method. On the roadmap for all projects, planned results clearly appeared, reports on deviations began to be regularly formed and, of course, questions to those responsible appeared. It turned out that most of the deviations do not occur because project teams do not work well: surprisingly, even without dedicated RP (project managers), the teams really tried to get the result in a timely manner. Judging by the reports, project delays were often the result of the work of the financial unit, and the matter is not at all in the lack of a budget or poor accounting work.

Modern IT projects are impossible without the purchase of software products, the purchase of hardware or the lease of virtual capacities, large tasks are performed with the involvement of contractors and consultants - and all this is procurement. Such purchases are a kind of intermediate control points that ensure the progress of the project and its main results. If the signing of large contracts is delayed, projects are not provided with the necessary equipment in a timely manner and even small-cost licenses and certificates are not purchased on time, then the project stops. Who is to blame for this – are they financiers? Of course not.

A simple approach to managing procurement and putting your budget in order

Procurement, especially for state-owned companies, is a very strict process. For each type of procurement, there is a separate regulation that determines, for example, the procedure and timing of the tender or the dependence of the timing of the procurement on its cost. One wrong step is already a violation of the law. Therefore, strict procurement planning and management is necessary. Neither, as you might guess in my case, was produced, and that's why there were a lot of serious problems:

  • project teams did not submit procurement requests in a timely manner, not understanding how long it took to acquire the necessary software or hardware.
  • the procurement department, not having data on critical delivery dates, did its job and did not consider it necessary to report the status;
  • teams, when remembered about the necessary resources, called the procurement department, trying to explain what they were waiting for;
  • management blamed both for not being able to work.
  • To quickly restore order, it was necessary, at a minimum, to introduce procurement planning and control processes. Said and done. The procurement took only a few days. 

What was done:

We held several meetings with project teams, where we recorded what, for which project it is necessary and when it should be purchased.

I met with the purchasing department and interviewed its staff. The versions of the processes for bosses and simple administrators differed, so I had to make a couple of face-to-face bets. Of course, I asked for regulations, but as expected, real life was very different from the paper version of the process. As a result, it turned out which procurement processes should go by which processes.

In the ADVANTA project management system, I set up the necessary objects, the resulting process variants, created reports for monitoring procurement and for understanding the budget, as well as data collection forms.

Purchases in my system are indicated by the symbol of a small green shop, users for some reason nicknamed it "green pie". It turns out that the project teams order these "pies", and the procurement departments bake them. This is the kind of bakery based on an IT solution for project management that I got.


Separately, I will tell you about how the system works.

Step 1. The project manager (or in our case, the analyst) fixes the required purchases in the project plan. He fills out a separate card "Purchase", in which he records the information necessary for the procurement department. Previously, I used a form in Excel, where all this was entered and sent by mail, I also set it up from ADVANTA: the usual forms that are automatically generated from the system are always liked by users.

Procurement in the project plan

Step 2. An employee of the procurement department receives a special form on a weekly basis, in which he reports the status of the procurement. From the form, he can see the required procurement period, can see the approvals and agreements.

Example of an application collection form

Step 3. An employee of the project office sends the procurement status to all interested parties on a weekly basis. In addition, it generates reports for management from the system that talk about what purchases are coming and for what amounts.

Procurement Register

Such a simple system made it possible to initiate procurement in a timely manner, regularly transfer procurement status to stakeholders and give understanding to management on the required resources.


What's next

Of course, this is not yet perfect budget management, but it is definitely MANAGEMENT. So far, everything is just beginning, but now, after spending a week of time, we got a real planning and budgeting tool. Simple, real, affordable and without unnecessary labor. It remains to maintain the created and develop it in order to simplify the lives of employees and minimize the risks of value management.

The development of my approach is clear to me now. Already now I am trying options for integration with 1C, so that the ADVANTA system automatically learns about the payments made. A couple of days ago, I was given information about income contracts, which also need to be implemented in the processes of the system. In addition, we plan to apply an RPA solution to robotize some processes.

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