19-04-2014, 04:15 PM
Project Management Accounting
Project Management.pdf (Size: 915.96 KB / Downloads: 162)
INTRODUCTION
In today’s business world, we often hear the terms ‘‘strategic align-
ment’’ and ‘‘mission and objectives.’’ Usually these terms are used
in phrases such as: ‘‘We must ensure that our business units are strate-
gically aligned with our mission and objectives.’’ In many companies,
large and small, it often seems that one area of a company does not
know what is happening in other areas; in some cases, one area may
even be working against other areas within the same company. Quite
often there is a large gap between what the top levels of the organiza-
tion are saying and what is happening at an operations level within
the company.
In our last book, The Essentials of Strategic Project Manage-
ment, we spoke about the STO model.1 STO stands for strategic,
tactical, and operational. These three levels of operation inherently
have typical communication problems that many companies need
to deal with (see Exhibit 1.1). Each level of the model represents a
different level of a company. Strategic is the executive level, where
decisions are made about the purpose and direction of the organi-
zation. Tactical is the management level of a company, where deci-
sions are made as to how to carry out strategy. Operational is the
lowest level of the company, and represents where people actually
execute the work.
Project Initiation
The project charter contains high-level information about the project,
including deliverables, stakeholders, and, in particular, the definition
of success for the project. That definition ought to include a descrip-
tion of the financial success of the project and how it will be
measured. This definition provides the guidelines by which project
performance may be judged.
Work Breakdown Structure and Project Schedule
The Work Breakdown Structure (WBS) contains a description of each
deliverable that makes up the final project deliverable along with the
tasks that must be performed in order to create each deliverable. Each
task also has a description that defines the inputs, outputs, materials,
and resources required to complete the task. The task description also
defines how long each resource must work to complete the task as
well as how much of each material is required.
The project schedule arranges each task in its proper order of
execution and indicates the order in which the tasks must be done.
The project schedule also defines task dependencies, that is, which
tasks must be completed before other tasks may begin. Based
on these calculations, project managers know when tasks must be
carried out and what the end date for the project is, as well as what its
critical path will be.
Project Cost
Chapter 4 covers the notion of cost as it affects a project. It is impor-
tant to understand the difference between cost and expense. The
notion of cost deals with what must be given in exchange for the
value that the project creates. For example, the hourly rate or salary
of resources employed is a cost to the project. The way that resource
cost accumulates will have an effect on the value created. For
example, a contractor charging an hourly rate to a project will affect
cost differently than a salaried employee.
Resource and Procurement
The resource plan and procurement plan contain estimates on
resources, including the skill sets needed, as well as a list of the
actual resources and materials needed to complete the project. The
resource plan also describes which internal resources are available
and what resources will be needed from outside the organization.
It also contains information about the source of resources and an
estimate of the cost. This information is important in developing
the project budget.
The procurement plan is very similar to the resource plan, except
that it covers other materials that are needed for the project, along
with estimated costs. The procurement plan addresses timing and de-
livery and indicates whether there are any special situations, such as
volume discounts. In a manufacturing or construction environment,
the procurement plan is of great importance; it is much less important
in some service industries.