In fact it is truly a survival competence; significant deviation from a large budget can threaten the very survival of the entire enterprise. This means that the integrity of financial information used to manage projects must equal that used to manage the company’s business as usual operations. Not only that, but these two ‘parallel worlds’ must become one. The reality of much of today’s business is that it is the project world where most of the business gets done, where most of the change happens and where most of the risks are. Yet it is astonishing how loose the relationship is between this world and the core financial management of most enterprises.
This may seem obvious. However in practice tight integration is extremely difficult to achieve. The core financial systems are designed to prioritise the production of the annual accounting view in a particular legally prescribed format. At the other end of the management information spectrum is the annual budget view which reflects entirely the format dictated by the company’s strategy. In the middle, between a rock and a hard place, an army of management accountants attempt to provide the managing director’s of business units with the information they need. To do this they use output from the core financial systems, ‘Project Portfolio Management’ software and a quantity of spreadsheets. The constant processing of information from different sources is inefficient, slow and prone to error.
Atlantic Global’s customers have prioritised the need to improve the ‘Financial and Resource Forecasting’ process. Closer integration to the Atlantic Global ‘Project Portfolio Management’ solution and to the core financial systems is key to providing the integrity of information required for the managing director’s of business units.
Limitations of ‘Project Portfolio Management’ solutions
‘Project Portfolio Management’ solutions are used to manage the delivery of programmes of work. They can provide some but not all of the data necessary to produce an accurate financial forecast.
As shown in Figure 1, ‘Project Portfolio Management’ solutions provide a single central data source for all project related work. It is a critical collaboration platform for everyone directly or indirectly involved in the project delivery process.
Achieving an accurate ‘Financial and Resource Forecast’
The management of projects is just one dimension of running a typical business unit. Budgets are often adjusted or transferred within and between departments. There is a need to account for overhead costs and ‘On the Bench’ resource costs. Finally, ‘Project Portfolio Management’ solutions do not reflect the impact of mergers, acquisitions or transition within the organisation.
Figure 2 illustrates the close relationship between the organisation and the project worlds. Having the ability to ‘flex’ the shape of an organisations budget in a system that it is fully integrated into the programme office, ‘Capability Management and Financial Functions’ ensures a greater level of flexibility and accuracy in ‘Financial and Resource Forecasting’. For logical completeness, the project world should be viewed as a subset of the organisation world since the later contains all of the project world but additionally certain more static business as usual components.
Both worlds are intrinsically linked where the solution provides a single holistic view which automatically reconciles the project/delivery world to the financial reporting environment. For example, when changes are made to the availability of resources in the organisation budget, they will simultaneously be visible in the ‘Resource Supply Forecast’ in the project hierarchy.
To achieve this today, most organisations do ‘one off’ exercises where data is extracted from a variety of systems and processed using spreadsheets. It requires specialist skills and knowledge, is very labor-intensive and can be prone to error. It can sometimes take several weeks to complete the exercise at which point the data is often out of date. The Atlantic Global ‘Financial and Resource Forecasting’ solution provides this information in real time with the added benefit of being able to focus in on specific areas of the business.
Having all of your budget and resource data stored in a single solution is extremely powerful, particularly if you are running one or more change programmes. When you add volume, complexity and people to the equation together with the need to maintain performance, it is understandable why many organisations shy away from embracing change and consequently fail to realise the benefits of improved integration.
The benefit of Atlantic Global’s ‘Financial and Resource Forecasting’ solution is in the choice of direction in which organisations can manage and model change in either the project world or the organisation world without having to reconcile the two.
The solution has sufficient flexibility to allow a cost centre manager to delegate the management of the budget into discreet department and team budgets without having to consult finance. This cost centre ‘micro-structure’ is used to plot planned expenditure by nominal code and resource headcount by role. However, it always rolls up to the cost centre structure which provides alignment to the core finance system.
From a resource management perspective, the ‘Financial and Resource Forecasting’ solution monitors progress in terms of staff recruitment and actual spend against budget by cost centre and nominal code. It references data from the ‘Project Portfolio Management’ solution to assess the productivity of each team against project financials and deliverables.
Model the impact of change across the entire organisation
In conclusion, the key benefit of a completely integrated ‘Financial and Resource Forecasting’ solution is the ability to fully model the impact of change on the entire enterprise, not just a project, programme, department or division. This enables the business, finance and project communities to see and act together in order to minimise risk and to make the best from opportunities in the market. By enabling senior management to improve their strategic business understanding the Atlantic Global ‘Financial and Resource Forecasting’ solution forces a deeper understanding of their individual and joint contribution to the company strategy.
Please contact Eugene Blaine, CEO, Atlantic Global PLC Tel: +44(0)1274 863300 or email Eugene.blaine@atlantic-global.com