Enabling Real-Time Project Finance Control for a Large Infrastructure Developer

Overview

About the Client

Our client is a well-established infrastructure development company that oversees 12 simultaneous construction projects, which span roads, residential, commercial, and industrial developments. With a huge subcontractor list as well as intricate retention billing requirements and regulatory obligations that span several jurisdictions of the project, the business was unable to keep an accurate financial record. Budgets for projects were recorded in spreadsheets created by individual project managers. Financial consolidation took several weeks of manual work, and the finance department was unable to create project-specific P&L reports without a long period of data collection from the site teams.

Challenges Faced

• Each project was recorded in an individual spreadsheet. There was no budget structure that was standardised, making the cross-project comparison and portfolio-level reporting difficult.
• Retention amounts due to subcontractors and recoverable from them were tracked manually, which resulted in frequent disputes over billing and delays in cash payments.
• There was no way to identify budget overruns in real-time. By the time they were discovered in the monthly reports. A high cost was already committed.
• The reports on regulatory compliance required for project sanctioning as well as authority submissions were created by hand, taking up significant financial and legal staff bandwidth.
• The CFO had no single perspective of cash flow by project as well as committed costs, or work-in-progress value for the whole portfolio.

Recommendations by Blueflame Labs

Blueflame Labs deployed a construction finance team to conduct an eight-week structured assessment looking at contract structure and billing cycles, subcontractor contracts, and the obligations of regulatory agencies for all 12 projects currently in operation. Our suggestion was to use an ERP focused on project accounting that includes Work Breakdown Structure (WBS) templates and Retention management based on milestones, along with multi-entity financial consolidating. We advised against adapting a generic accounting tool and proposed a purpose-configured ERP environment with construction-specific billing logic and compliance reporting templates built in from the start.

Solution Around ERP

We set up an ERP system that is project-centric, using standard WBS templates for the three types of projects, such as residential, road, and commercial, allowing for the same budget tracking process and cross-project comparison. Retention billing engines were set up in order to compute and distribute the retention amounts automatically, based on milestones in contracts, avoiding the need for manual tracking. Budget alerts for variances were created to alert the finance department and project managers instantly when the committed cost exceeded the acceptable thresholds. A multi-entity financial consolidation program was set up to create group-level P&L as well as balance sheet or cash flow statements in one click. Templates for compliance reports with regulatory requirements were designed and linked with live project data to automatically generate outputs that are ready for submission.

Implementation & Integration

The implementation took 10 months and was organized into four phases: master project data setup and configuration of WBS, controlling budgets and expenses, go live, activation of billing and retention management, and financial consolidation, as well as compliance reporting. Blueflame Labs managed the migration of budget and cost information from 12 spreadsheets for project management, an intricate data engineering task that required a significant validation of the data by project managers. Integration with the tendering system used by the client and the site-level purchase order process was created with a bespoke middleware layer. Training for the CFO level dashboard was offered in conjunction with a special super-user program that was developed to help build internal ERP expertise within the finance department of the project.

Result

• The month-end closing of the financials was reduced from 12 days to 3 days. time from 12 days down to only 3 days through automation of the consolidation process and removing the data collection by the project teams.
• Alerts on budget variances in real-time, beginning on the first day of start-up, allowing the management to tackle cost overruns more effectively.
• The billing cycle of subcontractors was reduced by 35% with automated retention calculations as well as the generation of invoices based on milestones.
• The company was able to pass without a trace in its first regulatory audit post-implementation due to the audit-ready compliance reports and full digital transaction trail.
• Implemented a stronger financial management structure that the CFO recognized as a long-overdue change for the company.