(Project) Variance Analysis Made Simple with Sage 300 CRE (formerly Timberline)

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1 (Project) Variance Analysis Made Simple with Sage 300 CRE (formerly Timberline) Jeff Gillig, CPA Sage Systems and Consulting 2014 All Rights Reserved 805 King Farm Boulevard Suite 300 Rockville, Maryland P F

2 Presentation Objectives General discussion about tracking and managing project variances along with forecasting future performance Highlight tools in Sage 300 CRE to help with the process 2

3 Why is this Important? Leads to more accurate company financials Early indicator of trouble Helps fine-tune future estimates Identifies trends and opportunities for improvement Estimates are imperfect 3

4 Budget (Estimate) Variance Report Example Is there a problem here? Maybe so when looking at the detail. Can you tell what the final cost will be for Excavate and Backfill? Is it $15,556? 4

5 Calculating Projected Final Cost The projected final cost is $19,321. Although Excavate and Backfill has only incurred half of the estimated cost, this report shows that the projected final cost has increased by $3,766 or almost 25%! Projected Final Cost Greater of Total Estimate, Total Committed, JTD Cost 5

6 Is something wrong with the labor section? Matching Principle The labor estimate includes labor burden, but the costs are split out Solution: combine labor and labor burden into one line to match estimates and costs Projected Final Cost decreased by $896 6

7 Adding Value w/ Commitments and Buyout Added commitment, but no impact on PFC because the commitment is less than the estimate and cost Marked this line as bought out Change from variance to savings/loss calculation to show impact to profit 7

8 Entering Cost at Completion Want to show the labor cost on this report as final Use Misc Worksheets to enter an estimated cost at completion 8

Entering Cost at Completion The labor portion of excavate and backfill is now complete The Project Final Cost column now has this calculation: If Est

9 Entering Cost at Completion The labor portion of excavate and backfill is now complete The Project Final Cost column now has this calculation: If Est Cost at Comp (ECAC) <> then ECAC otherwise: If category is bought out then total commitment otherwise: Max (total estimate, total commitment, JTD cost) 9

10 Sample Labor Production Report Factor = number of production units placed per hour Requires tracking of production units 10

Taking a Closer Look at Labor Productivity Current factor calculations (rate of production) Estimated factor (cuyd/hr) =est units to place/est hours =2,278/748 JTD factor (cuyd/hr) =JTD units

11 Taking a Closer Look at Labor Productivity Current factor calculations (rate of production) Estimated factor (cuyd/hr) =est units to place/est hours =2,278/748 JTD factor (cuyd/hr) =JTD units in place/jtd hours =2,100/642 Required factor (cuyd/hr) to catch up to estimate rate =(Est units in place-jtd units in place)/remaining hours =(178)/ Does this make sense? 13

Forecasting Labor Based on Production Units Requires estimated and in place production units Remaining hours (based on current productivity) =(est units to

12 Forecasting Labor Based on Production Units Requires estimated and in place production units Remaining hours (based on current productivity) =(est units to place-jtd units in place)/(jtd units in place/jtd Hours) =remaining units/jtd factor =178/3.27 =54.43 This is the future production rate to stay on track 14

13 Forecasting Labor Based on Production Units Cost to Complete (based on current rate of production) =remaining units/(jtd units in place/jtd Hours)*actual cost per hour =178/(3.27)*$22.52 =54.43*$22.52 =$1,225 15

14 Forecasting Labor Based on Manual % Comp Projected Hrs to Comp =actual hours-(est hours*manual % comp)+remaining hours =642-(583.44)+106 = This formula assumes that productivity for the remaining hours will be based on estimated rate of productivity Manual % comp (added in Report Designer for illustration of example) 17

15 Forecasting Labor Based on Manual % Comp Projected Hrs to Comp (alternate) =(actual hours/manual % comp)-actual hours =(823)-642 =181 Manual % comp This formula assumes that productivity for the remaining hours will be based on the current rate 18

16 Where to Start What s important to track? Focus on high value items (80-20 rule) Be careful of tracking too much Garbage in/garbage out Must be consistent in coding > match estimates and cost Be realistic Is it really possible to get the information from the field in a timely manner? 19

17 Where to Start Know your business Reality check: costs don t necessarily hit when work is performed Materials delivered and stored, but not installed Mobilization costs Learning curves Labor productivity tends to pick up as a job progresses 20

18 Where to Start Track at the lowest level possible Cost type/category vs. cost code Take into account the duration of the project Does it make sense to track progress variances for a 3-week project? 21

19 Critical Components Work Breakdown Structures (WBS) Common systems are CSI and Uniformat (Extras, Divisions, Cost Codes, Categories) Estimated and actuals Costs Units (hours) Production units (cubic yards placed) Manual entries (Percent complete and ECAC) Status of completion 22

20 Data Entry Options Misc Worksheets Name field Setup Misc Worksheet Add field to reports Field Reports Sage Office Connector Commitments and buyout 23

21 Out of the box Sage 300 CRE reports Project Management Production unit cost report Production unit cost report by cost code Job Cost reports: 24

22 Ongoing Analysis Conduct consistent/timely project reviews Ask questions, don t assume If it doesn t look right, it probably isn t Be prepared to take corrective action Either on this project or for future projects Have regular reporting periods Monthly? Weekly? Depends on the type of work Communicate across project team Estimators, superintendents/foreman, accountants, project managers, upper management 25

23 Questions Jeff Gillig (301) Thank you for your time. 26