How to manage tasks payment terms ?

[Jef]

Hello all,

I'm managing a project in which most of tasks are performed by a
partner at fixed cost. The problem is that I have term of payment such
as x% at order y% at delivery z% after final validation. I cannot find
a smart way to manage this. Fixed cost can only be assigned at
accrural start or end. I therefore made subtasks to the work as
milestones corresponding to payment steps (order, delivery,
validation) although I don't really like this approach which does not
allow to manage properly the % complete. Anyway I cannot store
somewhere the cost of the whole task and get automatic calculation of
the cost in subtasks,ie if whole task price is P cost assigned to
"order" subtask should be x% of P. I must calulate and enter it
manually.
I used custom cost fields to store at main task level cost1=ref price,
cost2=x% of ref, cost3=y% of ref and so on. I then linked-copied cost2
of main task in the fixed cost field of "order" sub-task and so on...
complicated and not smart is it ?
Beside I have standard resource follow-up but this is OK.


Did I miss something in MS-Project or am I mistaking wanting to
track all the project costs ? Actually I don't feel like making
duplicate work in Excel it will be a nightmare to keep both aligned
....

Thank you for your feedbacks

JF

 

[Gérard Ducouret]

Hello Jef,
If you attached 3 milestones to the fixed cost task, for the 3 payment
terms, you can use a small VBA procedure which will
break down the amount within the 3 milestones :
I assume that the fixed cost has been entered in the Cost1 field, and that
the 3 milestones are just under the task.

Gérard Ducouret

Sub TermTrack()
Dim No As Integer, TheCost As Double
No = ActiveCell.Task.ID
TheCost = ActiveCell.Task.Cost1
ActiveProject.Tasks(No + 1).FixedCost = TheCost * 50 / 100
ActiveProject.Tasks(No + 2).FixedCost = TheCost * 40 / 100
ActiveProject.Tasks(No + 3).FixedCost = TheCost * 10 / 100
End Sub

 

[Jef]

Thank you Gérard, this helps.

JF

 

[Steve House]

You both have and haven't missed something. Project costs and your accounts
payable and receivable issues are two entirely different things. Project
tracks the former in order to help you estimate the project budget. It
tracks the accrual point to facilitate validation of the budget, estimating
cash flow requirements, and tracking progress against schedule and budget
through earned value analysis. The basic question it seeks to answer is
"how much will this cost our firm and does the ROI justify the expense?"
But it does not pretend to manage, nor in my opinion should one attempt to
use it, to track payables and receivables. Thats the job of an accounting
system, not a project management system. The budget is when the obligation
to pay is accrued, if you will, not when you actually write the check. I
may do a task today that I won't pay for until next week. Or I may have to
pay for a component in advance even though it won't be delivered until next
month. But the budget is hit with the cost today as I do the work or the
component is used - the money is effectively spent during the performance of
the work even though I may still have the funds in the bank for another
period of time or have released them before the work begins.

 

[Jef]

Hello Steve,

Thank you for your input, that is what I feared.
I do not totally agree about the "this is not the job of a project
management system". To my opinion a project management system must
help me managing my projects. I have to manage
tasks,timelines,ressources... and also costs. Not only to make a
budget and provide with ROI calculation before the project starts.
Neither to report "in theory" about budget consomption. I also have to
report on: what have we spent actually up to now? (management seldom
cares about what should we have spent according to schedule) and what
is the money we are going to spend *actually* this quarter or this
year ?
The fact that money is inside or outside the company makes a
difference actually. It is the job of the project management system to
manage schedules. When a task is late another might be delayed and
this slippage can make that the 40% remaining cost on a task is not
going to be paid this year but only next year. Tasks time and money
are closely related.
It is the accounting departement to deal with payables and receivables
and they have systems for that no problem. However they manage data
for 50 projects or so and obviously do not know if mine in on track or
not.
My job is to supply them with cost reporting that they understand
about so that they keep updated.

JF

 

[Steve House]

See below ...

Hello Steve,

Thank you for your input, that is what I feared.
I do not totally agree about the "this is not the job of a project
management system". To my opinion a project management system must
help me managing my projects. I have to manage
tasks,timelines,ressources... and also costs. Not only to make a
budget and provide with ROI calculation before the project starts.
Neither to report "in theory" about budget consomption. I also have to
report on: what have we spent actually up to now? (management seldom
cares about what should we have spent according to schedule) and what
is the money we are going to spend *actually* this quarter or this
year ?

Yes, of course it is part of the PM's job to manage costs, never said
otherwise. But "costs" and "cash disbursments" are two different things.
You are in IT, doing a project for another department in the same company.
You only use resources from your permanent, full time staff. There are no
cheques cut to outside vendors, no incremental additional cost to the firm
for anything. Does that mean the project has no costs? Not at all. There
is an internal chargeback cost for the resource's salaries, overhead,
facilities, etc. that still must be accounted for. Even if there is no
chargeback to the other department, there is still the opportunity cost
associated with the fact that the resources are working on *this* project
makes it impossible for them to do something else. If I hire you to come in
*today* to fix a broken pipe, I've accrued the cost of that work today even
if you don't send me the bill for several weeks. Or on the other direction.
if I give you an advance payment against work to be done in the future, the
cost is actually accrued against our bottom line once again at the time the
work is done, not at the time the cheque is handed to you, because if we
cancelled the work we theoretically could get the money back.

The fact that money is inside or outside the company makes a
difference actually. It is the job of the project management system to
manage schedules. When a task is late another might be delayed and
this slippage can make that the 40% remaining cost on a task is not
going to be paid this year but only next year. Tasks time and money
are closely related.

As you said above, it is also part of the job to manage the budget, ie, the
costs, and of course that includes the projected cash flow requirements.
But that is an estimate of how much and when funds will need to be committed
and available, not when the cheques are to be mailed.