Budgeting automation in construction companies
The article focuses on corporate information systems intended for management accounting and budgeting (MAB) in projectized construction companies. The author argues that the successful implementation of such systems requires a comprehensive approach involving the development or the adaptation of MAB philosophy taking into account the software functionality and related business processes. The author demonstrates that ERP software is the most effective technological platform for corporate MAB systems of projectized companies. This is explained by the fact that the ERP systems have both sufficient functionality for project management automation and appropriate tools for management accounting and budgeting. Relying on this analysis, a comprehensive approach and appropriate solutions for developing corporate MAB systems in projectized construction companies are proposed. The methodological solutions proposed in the field of MAB design take into account the specific nature of a contractor who carries out construction projects for external customers. In particular, the following methodological solutions are presented: establishing temporary project-based profit centers in the construction company’s financial structure; using administrative quasi-projects and the “direct costing” method for fixed overheads costing in certain departments; establishing temporary profit centers related to production departments (internal subcontractors). This paper also shows how such a financial structure may be used in the SAP ERP system relying on the end-to-end “project” attribute. A budgeting structure with two versions of the corporate master budget is proposed. The first version of the structure is based on the contracting plans and the second – on the last approved project budget versions. The paper shows that monitoring implementation is necessary for both master budget versions. The main assertions and results of the paper are applied in the implementation of a corporate MAB information system based on SAP ERP in a construction company. The results of the system’s implementation and operation have shown significant improvement in the key financial indicators of the company, including profits, rate of return and net cash flow.