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Estimate At Completion

4 replies [Last post]
Sun, 2009-04-26 23:44
karthick thangavelu
User offline. Last seen 13 years 44 weeks ago. Offline
Joined: 6 Mar 2008
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I am having toubles calculating estimate at completion. I know the formula and the ways to calculate it, but the difficulty i am facing with it is that, the actual values i get from our cost reporting software is too low. the reason for it being too low is that, a subcontract activity gets paid 45 days after the claim is made, which increases the CPI for that month, this leads to a low overall Estimate to complete. Is there any other way to calculate it????? have any of you faced a similar situation.

thanks in advance
Karl
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Replies

Mon, 2009-04-27 03:49
#1
Dieter Wambach
User offline. Last seen 7 years 46 weeks ago. Offline
Joined: 15 Jan 2007
Posts: 1350
Groups: Petro-Chem / Oil & Gas, TILOS
Karl

You are working with different bases for estimation and real. If there is a payment period, you can work with two milestones:
1. The event and e.g. a transfer to SAP to create the invoice, where no money is assigned
2. The milestone with the payment assigned with the due date. Which then will be the basis for CPI.

Regards
Dieter
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Tue, 2009-04-28 00:05
#2
Dieter Wambach
User offline. Last seen 7 years 46 weeks ago. Offline
Joined: 15 Jan 2007
Posts: 1350
Groups: Petro-Chem / Oil & Gas, TILOS
Karl

6000 activities in a well structured project in my opinion isn’t too much to maintain.

Another idea to your item: CPI is project costing, payment is accounting. This should be separated. The payment itself; that’s not your issue - maybe you’ll have to stop work after non payment. If management agrees you can enter income, when the invoice was written, i. e. not regarding the due period. Needs a reliable customer.
The payment is not your item but the work and the result.

Just an idea, maybe it will work.

Good luck

Dieter
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Mon, 2009-04-27 22:35
#3
Safak Vural
User offline. Last seen 4 years 38 weeks ago. Offline
Joined: 12 May 2008
Posts: 117
Groups: Petro-Chem / Oil & Gas
Dear Karthick,

You need to decide all your cost items properties. Are you going to accept them as they performed (Invoiced) or as they paid in cash.

Be aware of that your expenditures will happen same as your income. You will pay mostly a month after you invoice.

My suggestion for a cost control system. You need to plan and monitor the invoices not the money itself. This is the way of creating a budget. Then you can decide the rules of paying and you can have your cash flow from your budget. Ex:

Payments of A Sub-cont. 1 month after invoice.
Payments of X material purchase. Directly @ proc.
Payments of Invoices(Income). 45 days of invoice date

You need to have a budget and a cash plan (flow) which is basis on that budget. You can use activity codes for types of payment and you can create the cash flow in excel or another subproject of your schedule. (At least our system is working like this)

Best Regards,

Safak
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Mon, 2009-04-27 18:50
#4
karthick thangavelu
User offline. Last seen 13 years 44 weeks ago. Offline
Joined: 6 Mar 2008
Posts: 7
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Dieter,

using milestone seems to be a nice idea but the problem i have got here is that, I have got close to 6000 activities in the schedule and 90% of them have cost in it. moreover I have got the subcontractors schedule which i have kept as a aubproject with a one line activity in the master. Adding milestone will make the schedule even more bigger and hard to manage. I am just wondering if change the cost to an expense and distribute the cost to the end of an activity, Would it work?????

Thanks
Karl
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