Project management and costing

Somewhere along the line we changed into a real business...not my fault! Now it seems I have to be accountable to the books with "capitalization,
depreciation, allocation of resources, tracking, time lines, pert charts and such. It used to be we just expensed most everything but now I'm directed to toe the line.
One of the engineers wants to adopt "Microsoft Project" but my fear is more time will be spent working the software than making chips. Another wants to guess percentages of time divided among projects. Is anybody familiar with this type of problem and would make recommendations?
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On Thu, 12 Oct 2006 03:38:07 GMT, "Tom Gardner"

Many years ago, and in the silly service too, if you please; the bean counters decided that they needed better accountability in our monthly time reports to the point where every project was broken down into ten categories of work and these into at least five sub-categories. After about six months of everyone in the branch showing six hours against projects and 1.5 hours "filling out silly forms" every day, the requirements were relaxed to some degree, although time billing did carry on. By the time I retired, the monthly report always had me at the top of the list with billable time at 98% or higher. What this meant, in reality, was that I was the best damned liar in the branch. Gerry :-)} London, Canada
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ms project, or a similar tool can help you with a project that is complex enough that you can't do it all off the top of your head by letting you establish schedule and dependencies - to control the amount of time, just specify how much time should be allocated to this - a 10% management overhead would not be unreasonable for a small project (say, half a million $ or so), and maybe 20% for a larger one - in the single digit hundreds of millions. If you are below that, reduce overhead accordingly -

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MS Project is a good way of keeping capital projects on time and subsequently, within or under budget. 85%-90% of what I currently do is capital projects. It really pays off when there are different crafts, contractors and suppliers in the mix of a project. If you lay it out with *real* duration times, lead times, etc then you have a *real* picture of what has to happen when, how long it will take, and who is responsible for it. Doing a gnatt chart up front allows you to better schedule and will reduce project time overall. Having dependency links shows you what tasks have to be completed in what order, and what tasks can be done simultaneously. It will take some time to set up the chart properly, but you will get a return on the investment in better project management and reduced project time to completion, less errors, and reduced overall project costs.
Capital money is treated entirely different than expense money in the accounting world. You also should delve into what constitutes capital expense and what can be actually expensed. There are some hard/fast definitions when it comes to machine projects and you really should know what those rules are. For example, you wouldn't want to buy inserts with capital money, since you will be paying for those for the next 8 years in depreciation.
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Anthony

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It is a useful tool. If nothing else it makes you think about the work flow, identify critical points (points where the dead line will shift if certain points are not met on time). If you have multiple projects going and each engineer or manager in their personal vacuum assumes certain resources are theirs to use, you will alsosee this in the resource allocation.
I've used it for projects at work that I was in charge of and for building a garage at home. It keeps you honest and makes you think about the time line. If you do decide to use it all consumers of internal resources need to use it for data to be valid.
Wes S
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I used MS Project in the construction business. The first time I used it, it took me all of 2-3 hours to get the hang of it another 6-8 to complete a schedule for a 3.5 million dollar retail remodeling job. It is an intuitive and easy to use program for scheduling. Tom

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On Thu, 12 Oct 2006 18:39:21 GMT, with neither quill nor qualm, "Tom

I just ordered a copy of JobView for my new handyman business. We'll see how it performs, but it has job costing as its main thrust. $40 delivered on eBay. Supposedly, every office of the SBA runs on it. I also picked up a free copy of Peachtree Pro Accounting on a quick trip through Staples the other day. $170 - $30 instant rebate - $140 mail-in rebate = $0 final cost.
---------------------------------------------- CAUTION: Driver Legally B l o n d (e) http://www.diversify.com Web Database Development ======================================================
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On Thu, 12 Oct 2006 03:38:07 GMT, "Tom Gardner"

.............................. There is the famous lament of the bankrupt machinist: . I made it in the shop, but I lost it in the ledger. .
It was also said of him "He could make anything but money!"
.
Society has allowed [or caused -- your choice] most human activity to become so complicated, arcane, baroque, and esoteric that we have created a series of Frankenstein's monsters, than no one understands and no one can control.
To be sure, there are some of us who are exceptionally talented, gifted intellectually, and lucky enough to have obtained the required education to understand one small aspect of one particular monster (such as the cuticle of his left pinkie toe), but sooner or later, the huge fraction of the monster we don't understand, turns on us, and we are taking early retirement or looking for a second career, along with the people at General Motors, Ford, Enron, IBM, Delta, Arthur Anderson, etc. etc.
IMNSHO most businesses would be far better off if they did expense everything possible, however this seriously reduces the current period paper income and thus the taxes paid. Thus, both the IRS and "performance metric" compensated management have a selfish interest in capitalizing rather than expensing every possible business cost.
Capitalization is "magic" in that it turns most [or even all] of a business expense into an "asset," improving the book value of the company, and increasing paper profits. Note that these business expenses do not have to be hard/physical assets, but can include R&D expenses (just how much is 8-track tape player technology worth?) and even "Good Will" from an acquired [widely detested] company. It also results in paying far more in income and other taxes, and "executive compensation" than what the actual performance/profit generation of an operation justifies. A large number of business executives and accountants are currently enjoying all expense paid 5 to 10 year retreats at "Club Fed" to meditate on "why I shouldn't outta' done that."
There are several different aspects to your very good question/observation, that rapidly increase in importance and potential financial impact as the size and scope of a business increases beyond one man / one machine / one product, which unfortunately escapes the people on the floor as they are still "one man running one machine making one product,"(there's just a lot more of them)
There are basically two separate types of organizational activities, and these will require different data, software, accounting assumptions, and managerial mindsets: (1)    Normal/routine operations; and (2)    Special one-time events or projects.
MicroSoft Project and similar project tracking software works well, but require someone with an understanding of project management/CPM-PERT to set up and administer for meaningful results. The WBS [work breakdown structure] and accurate/timely information are critical. The WBS is the critical item and requires a knowledgeable person to develop, particularly in what sequence the tasks are to be performed, and what must proceed what. The task managers, if correctly selected, will develop accurate projections of times required. GIGO [garbage in - garbage out] still rules, and the first time a responsible task manager "fudges" their percent complete estimates, or the task time estimates are "revised," especially in response to some suit's ranting about the "critical path," its over.
Perhaps even more critical, because it is ongoing and continuous, is "cost accounting."
Frequently it is discovered when formal cost accounting is introduced in a shop that some operations/jobs are highly subsidized by other shop operations/jobs. This is frequently not direct machine time but rather excessive setup time, excessive tool consumption, excessive demands on QC for inspection/paperwork, or even a PITA slow-pay customer. Honest allocation of time, materials, tools, etc. is required for meaningful results, and again as soon as suit starts ranting about excessive set-up time, excessive tool consumption, etc. the numbers will be "cooked" to look good, the suit will pat himself on the back (and get their performance bonus), and the company will continue to "tape a 5$ bill to every part that goes out the door," ala Delphi. [FWIW - if you are losing money on every part you make, you can't "make it up on the volume."] One suggestion is to include consumable tooling on the BoM, and to track/update.
Accurate financial information including cost accounting, asset allocation/depreciation and project management [time and money] are vital management tools but are too often these are turned into "bongs" where the suits get a "hit" to lift their spirits and income, at least until the creditors put the company in chapter 11, and the DoJ files charges.
For maximum impact, try sharing as much cost information with the people in the shop as possible. One example, do your operators even know what a tap or end mill costs? [Be sure to add purchasing and tool room burden to the PO price.] You can't expect people to be aware of, and take into account, factors (such as tool costs) about which they know nothing and which management won't tell them. Another thing you might try is to have the tool room price and display the previous day's broken or over-run tools at the check-out windows or cafeteria. Generally a real eye opener for everyone.
Good luck, and I hope your management is smart enough to not shoot the messenger, although this will indeed stop them from hearing any bad news.
Unka George (George McDuffee) ............................. I sincerely believe . . . banking establishments are more dangerous than standing armies, and that the principle of spending money to be paid by posterity, under the name of funding, is but swindling futurity on a large scale. Thomas Jefferson (17431826), U.S. president. Letter, 28 May 1816, to political philosopher and Senator John Taylor
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Tom Gardner (nospam) wrote:

Microsoft Project is an incredibly powerful tool. As others have stated, it's not particularly hard to use for basic scheduling.
The real power is in resource management(manpower, equipment), but this is a little less straightforward. Using this effectively you can see if you will have a peak in workload requiring overtime, extra shifts. Or a a lull in resource utilization to see if you should find a short run job to fill a window. Or a are you running at 95% capacity and should consider an extra X.
As for time dedicated to projects, unless you can say that Joe is doing this and John is doing this, that will require actually tracking and understanding your resource utilizations currently. Do employees have timecards with designations for jobs? Or just a basic time punch? In one shop I work with, all shop employees have designate what project they spent what time on. This of course requires that someone then enter this information into some tracking system and make sense of the data. They use a large system that I am sure you aren't interested in, but I would think an Excel workbook would give you some baseline for estimation.
JW
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Is there any good (cheap) software accounting programs designed for a one man show with input for cash expenditures?
I currently use Quickbooks Pro 97, but its clumsy, is weighted for checking accounts or plastic, of which I seldom use the checking account and own no plastic. Its very hard to enter expenses, gas and so forth.
Something capable of faxing invoices as part of the program would be nice too.
Gunner
Rule #35 "That which does not kill you, has made a huge tactical error"
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I too am looking for a reasonably priced accounting program for my gunsmithing business. I use checks and plastic for most expenditures. I tried Quickbooks once a long time ago and didn't like it. Tom
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snipped-for-privacy@sbcglobal.net says...

I use Quickbooks version 6, which dates back to 1998, and have always been happy with it. I have not heard good things about more recent releases. Here's a copy of V6 on ebay... http://offer.ebay.com/ws/eBayISAPI.dll?ViewBids&item30038874459
It does run fine on NT, win2000, and XP. One thing that would concern me about a NOS copy of V6 is whether Intuit will issue a registration code for such an old product. Another worry is whether it'll get stuffed by some future Windows release.
Oh, I do have one complaint, and that is that the IRS revised form 941 (quarterly reporting) not too long ago, so the printed form that my Quickbooks generates is no longer acceptable.
Ned Simmons
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On Sat, 14 Oct 2006 06:29:25 GMT, Gunner

Hi Gunner,
This should be required reading for anyone still using Quickbooks:
http://72.14.203.104/search?q che:rRDu7waxgEoJ:www.gripe2ed.com/scoop/story/2003/8/22/201447/891
and
http://72.14.203.104/search?q che:GRnxJrxeNmYJ:www.gripe2ed.com/scoop/story/2004/9/17/82751/2423
There was a few other gripes too, but these should be sufficient to get the idea. Scan the comments on these pages. There are several recommendations made for other software that might be worth checking out. Peachtree is commonly mentioned if I recall correctly.
I haven't used any of them, just read about people complaints...
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A long time ago when I ran a tiny business I used gnucash. Its Linux (UNIX) only however.
It was a bit clumsy but probably more because I wasn't really used to running a business.
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19:44:46 -0700, snipped-for-privacy@gmail.com wrote:

Their site says: "GnuCash is personal and small-business financial-accounting software, freely licensed under the GNU GPL and available for GNU/Linux, *BSD, Solaris and Mac OSX."
From the FreeBSD port info:
Description:    Quicken-like money and finance manager Its features include: * Ability to import Quicken files ( a must ) * Reports, Graphs, and all of those goodies that you find in Quicken. * Gnome compliant ( if that is the correct way to put it ) * Separate the GUI from the actual "account/transaction engine" * Multiple accounts ( Check, Credit, Cash, Mutual Funds, etc.. )
http://www.gnucash.org /
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I have to ask the question: Are you in need of job shop costing (setup and run costs with ovehead allocations) so you can bid production jobs correctly (and profitablily) or do you want to do project management so you can get a handle on when those new machines you are always building will come on line and how much they really cost to get there????? Different software.
Tom Gardner wrote:

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The new machines need the accounting attention. We don't do job shop stuff...thank God!
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Like I stated earlier Tom, I build / retrofit machines most days (18 so far this year, will be 24 by year end.) There are 5 of us doing this work: The boss (Engineering Coordinator), who usually handles the MS Project charts and sets up the budgets with input from the rest of us. Myself, who does the engineering for the project/process, and I also actually do quite a bit of the physical build-out, along with the machine/robot programming and most of the parts ordering. (No, I'm not a dress shirt, slacks kinda guy, more the blue jeans and an old work shirt, because I'm not going to ruin good clothes on a daily basis just to look good for 10 minutes at the start of the day). The technicians coordinator who helps with the physical build-out and does the scheduling of other crafts needed (Electrical, millwrights, mechanical maintenance and Electrical contractors), as well as scheduling the day to day activities of the technicians and he helps me with ordering parts and with process ideas. This guy has tons of knowledge of our processes. Then we have two technicians. We have an Electrical Engineer who works with us on each project, but we get assigned one from either Electrical Maintenance or the 'official' machine building dept. (Technically, we are 'production engineering', so along with all these machine build-outs, we have to do tooling, production support, process improvements, and a dozen or two other hats.) The scheduling is where project really comes in handy, especially with the scheduling of the other crafts needed. Those crafts work for the entire facility (3 buildings and numerous departments), as well as the contractors who also work for other depts. As with us, project will most likely be a big help in your situation.
--
Anthony

You can't 'idiot proof' anything....every time you try, they just make
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OK, and are you looking for upfront management of the project, or backend accounting (with proper buckets for capitalization, depreciation, etc) for what already happened?
BTW: In spite of the fact that you don't do job shop work, each of your production runs of a given product really should be treated as a job shop run for cost purposes. Just that you can schedule it when YOU want to. Most shops are not very close when it comes to knowing what your actual product costs are.
Tom Gardner wrote:

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Interesting. I do have good costing on production except for that nefarious overhead number. Historically, we've built one major machine a year but we're aiming for three this year. I've kept spreadsheets on purchased parts and material and have just assigned a percentage of each person's time. We're really small, 17 employees and only three are doing projects while they aren't firefighting. We do enough right that fires are rare now and we need to increase capacity by creating new work cells. The biggest problem I have is that nobody, including me, can come up with realistic time estimates to design and build a new machine. I often change design elements as better ideas come to mind and it's difficult to estimate machining and build times especially if I don't know if a system is even going to work. I'm getting a lot of pressure to predict when product will be available to my customers and my guesses haven't been very good.
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