Project Budgeting for Microsoft Dynamics and Other ERPs

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Project budgeting is a task that most companies have to tackle, in some form or another.  This article will address how to financially plan for special projects using Microsoft Dynamics and other ERP systems.

At this point, it probably goes without saying: budgeting is such an important aspect of corporate performance management (CPM).  In some cases, the quality of the budgeting process can be life or death for a company or a public sector organization, especially in today’s post-recession marketplace.  Budgeting and forecasting for an entire organization is a routine process and generally involves many moving parts to come together, linking actual data and projections for the upcoming fiscal year.  However, sometimes a company or a professional will have to budget for a specific task or project.  Whether you are a professional managing one or more projects, a consultant calculating billable hours, or a freelancer putting together a bid for a job, project budgeting becomes a relevant Business Intelligence (BI) term in your job.
Solver COO Corey Barak gives some tips when considering project budgeting solutions.
Last month, I had a conversation with a management consultant who had the task of bringing a company into the 21st century in terms of Business Intelligence.  He was in the beginning stages of the project, and he did not know if he was going to find a comprehensive BI suite of tools for simultaneous implementation that would meet the financial goals of the organization for this initiative.  We got to talking about the structure of budgeting for a consultant of his sort – and that naturally segued into a full-fledged conversation about project budgeting.  He said that, in his experience, most people understand it as a fuzzy art at best, but in practice – and with the right tool, it can be significantly more accurate than widely perceived.

Project budgeting is unique in its structure, not being based on a regular timeline, such as the fiscal year.  In this case of the management consultant, he will work on an analysis of the company’s current BI tools, an evaluation of status quo CPM, complete a search for the right, modern BI solution(s) and help with the implementation for 3-9 months.  His situation functions as a great example of what project budgeting can look like – and what it can mean in the world of BI.  This article will lay out a hypothetical project budget for this management consultant from the perspective of the company seeking out this upgrade in BI tools, including an exploration of what to look for in a tool, including project budgeting.
For the sake of this article, I’m going to call the company, “ABC Enterprises,” and the management consultant, “Bob.”  ABC Enterprises has decided that they need to upgrade their analytics, specifically in regard to their BI tools.  They are still using FRx, but Microsoft has retired the report writer and support for the product.  ABC Enterprises has been happy with their Dynamics ERP system, but they have found the internal dashboards functionality to be somewhat limiting.  In terms of budgeting, they rely on homegrown Excel budgeting, which is also pretty limited.  They are looking to hire a consultant to take on the project of finding affordable ways to upgrade their analytics, from analysis of their needs to implementation of new product(s).  After a friend of the CEO recommended Bob, they went into budgeting mode for bringing him on for this task.
First thing to do when project budgeting involves identifying project costs.  Project costs can be included fixed costs, billable hours, and most times, both.  In our case study, Bob would probably be putting together or at least collaborating with ABC Enterprises regarding primarily billable hours, but it could also include the cost of things involved in the process, like office supplies and technology, travel, training, and development, among other things.  These are sometimes referred to as soft costs, but are also occasionally broken down into other categories, such as direct and indirect costs.  In other projects, other cost categories could include construction costs, contracted work, furniture or equipment, moving and storage, and even budgeting for contingency amount in acknowledgment that projects can be risky and hard to calculate accurately.   In fact, risk is an important part of any budget.
Risk, in the context of budgeting, refers to the give and take of the actual experience, whether that risk has to do with time, money, or resources.  Depending on the complexity and the disparateness of the BI products and processes of ABC Enterprises, Bob might need a lot more time than originally projected to complete an analysis of their BI needs.  If scheduling and final approval of a BI implementation turns into a bottleneck communication nightmare, the time allocated to complete this project can be at risk.  In terms of product adoption, ABC Enterprises has to budget for their management consultant, but where do they add a line item for the software they choose to implement from Bob’s recommendations?
ABC Enterprises can choose to include the cost of the products in the project budget – or they can budget for the direct and indirect costs of Bob and weave the acquisition and implementation costs of new software into the fiscal budget.  In my understanding of the situation from speaking with the consultant, this company has little idea of how much solutions cost, but they have a flexible range regarding how much they want to spend.  Since BI tools generally include training, support, and/or maintenance as annual fees, ABC Enterprises could include this purchase in the annual budget – or include the acquisition into the project of updating the BI tools, but wrap the yearly fees into the fiscal year budget.  Depending on what Bob is trying to find as a response to ABC Enterprises’ needs, the search process could be lengthy and the prices could vary greatly.
Similar to how a lot of financial report writers only produce General Ledger reports, not all budget tools have built-in Project Budgeting functionality because it goes beyond the mainstream fiscal budgeting needs.  In today’s corporate America, consultants, free lancers, and project managers are increasingly more and more prevalent.  When you are looking for the right BI tools to meet company needs, you do not have to hire a management consultant to guide the process.  Just make sure to do your research about what the BI software world is currently offering and cross-reference that with your own identifiable analytics needs.  Solver, Inc. is happy to answer questions and generally review BI360’s easy-to-use Excel, web, and mobile BI tools with both real-time or data warehouse integrated analysis, comprehensive budgeting and collaboration as a way to accelerate company performance management.

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