Levelling Up your Oracle Cloud Deployment – Project Costing

Levelling Up your Oracle Cloud Deployment – Project Costing

Author: Mel Deevy, PPM Consultant at Namos Solutions

In his blog introducing Oracle Project Management Cloud, my colleague Chris Laird highlighted how this powerful and feature-rich functionality offers a well-connected single source of project truth to help support your business in managing your costs and revenue against budgets and forecast, allowing you to make informed financial and strategic decisions.

One of the primary drivers for implementing Oracle Project Management Cloud has always been improved financial management of projects. I’d like to continue our Levelling Up blog series by taking a closer look at Oracle Project Costing, and exploring how it enables effective and efficient project financial management.

Looking from a project manager or project accountant’s perspective, they need a full picture of the project’s costs so they can analyse the project’s financial performance against plan (budget) and provide accurate forecasts to completion.

Project Cost to Accounting

As in the end-to-end process above, they are interested in capturing project costs, managing indirect costs (Overhead, Fringe, G&A), comparing project actuals vs budget, and the ability to investigate and analyse project costs using well-crafted dashboards and reports. And of course, to produce accurate accounting to update into the general ledger for financial reporting and consolidation.

A Foundation for Effective Project Financial Management

The basic purpose of Oracle Project Costing is to capture, account for and report on project costs – but in my mind this is an over-simplification. Oracle Project Costing gives us a tightly integrated cost management solution for all projects and activities across your enterprise, with the ability to cross both currency and organisational boundaries. Whether you’re managing capital or research projects, billing for project work on a T&M or fixed price basis, or tracking internal project or admin costs, Oracle streamlines the process and reduces the administrative burden by automating and simplifying project costing tasks.

Fundamental to this is having visibility of all costs related to the project in one place, including both direct project costs (actual and committed) and any indirect (or internal) costs incurred by the business in supporting the execution/delivery of the project.

So why not just add the project number as a new segment in the chart of accounts, and use the GL to analyse project costs and budget? You can do this, of course, but the generic GL reporting and analysis capabilities are limited, with no granularity to analyse by phase, task, activity, etc. It also means permanently adding codes to the CoA, though these might only be used for a short term.

Capturing Project Costs

Project-related costs can be collected from any source once each transaction has the POET attributes (Project, Organization, Expenditure type, Task) to identify where that cost belongs. This common standard is used across the Oracle Cloud applications. Users are presented with a consistent user interface for costs and commitments, irrespective of their source, including:

  • Timecards
  • Supplier invoices
  • Employee expenses
  • External, 3rd party systems
  • Miscellaneous costs, or “project journals” via Excel
  • Cross-charges from other projects
  • Committed costs from purchase requisitions and orders
Manage Project Costs - Data Flow

You can configure Transaction Controls at project and task level to control what costs are allowed to be booked to what tasks, by whom, and whether they are billable or capitalizable.

Labour Cost

Oracle Cloud PPM, like E-Business Suite before it, uses a standard costing approach for costing labour and other resources. I have often been asked about how to charge employees’ actual payroll cost to the project instead of using a calculated standard cost rate that must be reviewed on a regular basis. Until recently this has been a challenge, involving custom integration or other workarounds. In quarterly release 24A Oracle has begun to address this, and now offers two approaches for capturing labour cost:

  • Timecard-based: Labour hours are captured on timecards in Oracle Time & Labor or imported from other sources. The labour cost is then calculated by applying Rate Schedules of cost rates by person or job.
  • Payroll-based: Actual costs can now be imported from Oracle Payroll. On the back of a customer-submitted idea, Release 24A included the Oracle Payroll Cost Distribution to projects using Labor Schedules feature. This allows payroll costs to be configured for distribution to projects using flexible rules, and sets the foundation for future enhancements using timecards and payroll costing rules to distribute payroll costs to projects, including minor enhancements to be delivered in 24C.

What about indirect costs? How can we capture overheads and other internal costs against our projects?

With Oracle Project Costing, we have two approaches for calculating and applying indirect costs.

  1. Burdening, where burden costs are calculated by applying one or more burden cost components (fringe, overhead, etc) to the raw cost amount of each individual transaction.
  2. Alternatively, using Project Allocations you can allocate various types of costs from one project to others or from the GL to projects. For example, you could allocate labour costs from a Shared Services project to other direct or customer-facing projects, or to allocate rent or facilities costs from their respective GL accounts to projects.

Using either of these methods, or a combination of both, you can get the full view of all project costs, direct and indirect.

Cost Visibility – Making Informed Decisions

Oracle provides comprehensive cost control and visibility into project costs, enabling project stakeholders to forecast expenses, track actual costs, and manage variances.

Standard views allow users to see full details of project costs and financial performance. These are configurable so columns can be shown or hidden as required.

Standard Views

Robust role-based analytical and reporting tools and dashboards provide insight into the financial performance of projects, help identify cost-saving opportunities, and enable financial decision-making. You can also create custom reports to report on all project cost components.

In Summary

Managing project costs can be a complex, time-consuming, and challenging activity. Implementing Oracle Project Costing can significantly reduce the administrative burden of managing project costs. By streamlining the project accounting process and providing a holistic view of each project’s finances without complicating your chart of accounts, Oracle Project Costing allows project stakeholders to focus on making informed financial and strategic decisions.

Get in touch with us at Namos and we’d be happy to discuss Levelling Up your Oracle Cloud deployment with Oracle Project Management.