Associate employee expenses to an ongoing project P&L

Description

This requirement involves tying all relevant employee-related expenses, inclusive of salaries, travel expenses, or benefits, directly to a project's P&L. This process provides a comprehensive, accurate reflection of the true project cost, supporting better management of resources and more informed decision-making.

Example Use Case

Scenario: A construction company is involved in several projects concurrently. Each project incurs varying employee-related expenses, including salaries, equipment costs, and travel expenses. The challenge lies in capturing these expenses accurately against the projects to understand their profitability correctly.

Solution: The company uses CPM software that pulls in data from their project management tool and general ledger, associating each expense incurred by an employee to a specific project P&L. As a result, an employee's salary can be allocated proportionally across different projects they are engaged in, and any equipment or travel expenses will be charged directly to the corresponding project's P&L. This approach gives a more accurate depiction of each project's financial performance.

Considerations

To make this work, the CPM tool must consider project data (usually from a project tool or spreadsheets), general ledger data, and payroll data. These three components usually include the bulk of employee-related expenses. These must be mapped to the appropriate location in the CPM tool to reliably blend them and compare with projected expenses which would have been in the initial project budget.

Merging multiple data sources will be challenging for just about every system on the market due to the complexity of the mapping process. Check with the vendor to see if they can support projects in the first place before pursuing something more detailed.

Questions to Ask a Vendor

• Assigning Expenses: How straightforward is it to associate employee expenses with a specific project's P&L within your system? Can this be done automatically with some setup, or will we be required to do some manual work each month?
• Allocation Methodology: How does the software proportion an employee's salary who is involved in multiple projects?
• Project Changes: How easily can the system adapt to any changes in the project, such as adding or removing new expenses or projects?
• Data Sources: Are you able to map and import project data from our systems and automate the process?