Buying new resource or keeping old one?

When you have a lot of resources (hundreds or thousands), you usually have a problem with detail analysis. Maybe, the most important question is when you have to buy new resource? I know, the new resources is prettier, but are you really need new resources. Is your old resource still good?

Using “smart” analysis in BI4Construction, you can make a right business decision. You can make smart comparison of actual costs of each resources per hour (or mileage, or…) in each cost group with cost of e.g. loan or leasing installment costs.

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You can see what maintenance cost analytically for old resources is. You can also see what is you additional fuel or oil cost for old resources in comparison with new one. You have realistic cost of staying time for old resources because maintenance periods…

With all of these details, you can always make a right decision. This is usually requirement for big construction companies with lot of trucks and other machinery.

Posting operational work (resource costs/price calculation) – part 6

Using NAV4Construction, we can use specific resource cost or price models. When we post resources, we have next quantity fields:

  • Quantity – total time of resource engagement
  • Waiting time – time when resources do not make usage, because poor site organization
  • Extremely Stagnation Time – time when resources do not make usage, because force majeure
  • Effective Time – calculative field = Quantity – (Waiting time + Extremely Stagnation Time)

In NAV4Construction, we use Cost field for actual resource cost and Price form internal resource cost (transfer price for internal needs). Cost and Price are not calculate in the same way. Definition of them are placed on:

  • Quantity:
    • Cost – ‘Direct Unit Cost’ on Resource Card
    • Price – ‘Unit Price’ on Resource Card
  • Waiting time:
    • Cost – same as Quantity Cost
    • Price – ‘Standby Unit Price’ on Resource Card (using of this price depends of setup)
  • Extremely Stagnation Time:
    • Cost – no
    • Price – no

Cost Calculation

Cost Calculation is always the same. This calculation is based on resource usage and we calculate it by next pattern: Direct Unit Cost X ( Quantity – Extremely Stagnation Time )

If we want to use total quantity in calculation, we need to put ‘Extremely Stagnation Time’ blank.

Price Calculation

Price Calculation is more complex and depends of setup in ‘Res. Utilization Margin %’ field at Construction Setup. In this field we need to configure what is ‘acceptably utilization’ for us. In our example I will define that it is 70%. That means that if (Quantity-Waiting Time) is 70% or more in regard to total Quantity, this is good usage. Based on this, we have two different models of price calculation (we will use factor 0,7 instead of 70%):

Model 1: ( Quantity – Waiting Time ) >= 0,7 X Quantity

( Quantity – ( Waiting time + Extremely Stagnation Time ) ) X Unit Price

Model 1: ( Quantity – Waiting Time ) < 0,7 X Quantity

( ( Quantity – ( Waiting time + Extremely Stagnation Time ) ) X Unit Price ) + ( Waiting time X Standby Unit Price )

These Costs and Prices are the base of Construction Position cost and price calculation, based of their actual consumption.

Posting operational work (posting differences) – part 5

What is a main difference between using Output Order and Job & Position Journals?

As I wrote in my first post for this theme, we can post the operational work on next ways:

  • Using ‘Output Order’ – posting of Construction Position output work and Resource and Item consumption per Project in the same time;
  • Using ‘Position Journal’ – posting only Construction Position output work per Project; we need to post consumption separately;
  • Using ‘Job Journal’ (standard NAV functionality with some specific customizations) – posting only Resource and Item consumption per Project; we need to post output separately;

Advantage of the first method is that we can post all entries with the one document. We get posted document with ‘Navigate’ functionality. Also, this method enables us to have complete statistic of cost per every Construction Position for each Project.

As we look up in Construction Position Statistic for position posted using Output Orders, we can see Using (position cost), Sales (position revenue) and Profit:

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On previous picture we see position cost for each period.

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In previous example, I presented Construction Position Statistic from NAV, and this is shown only costs, revenue and profit, without analytics. Also, if we use Output Orders for posting, we can make deeper analysis with complete analytics of resources and items cost or quantities, as picture bellow (from BI4CONS):

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Failing of this method is that if we have many complex position works per day, it is too complicated to make evidence and post it.

If we choose posting without ‘Output Order’, we get simply procedure for posting. We use ‘Position Journal’ for evidence of work per all Construction Position we have and separately we use ‘Job Journal’ for evidence of consumption all Items and Resources, not linked with Construction Positions. On this way we get simpler method, but we lose connection of consumption with Construction Position output. Using this method of posting, we know revenue for each position on project, but we don’t know position cost and profit. We could know cost and profit only per complete project or combination project and project task, and of course we will know this data per required period. As we look up in Construction Position Statistic for position posted using Position and Job Journals, we can see only Using (quantity, not a position cost) and Sales (position revenue):

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On previous picture, we cannot see position cost.

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Position sales data (previous picture) are the same as when we use Output Orders. But when we try to see profit, we will get a wrong data with 100% margins.

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We cannot get all things and we must to decide what method we want. Good thing is that we can choose different method for each project, depend of complexity and project requirement. Good thing is also that we can set filter on Position Statistic and we can see complete data for position posted using Output Order on each project.

Posting operational work (Recurring Journals) – part 4

If you do not use Output Order and you have many similar entries for posting, you can use Recurring Journals. There are Recurring Position Journals (NAV4Construction functionality) and Recurring Job Journals (NAV standard with customization). You can use them, when you do many days the same works. E.g., you can make many days one-by-one, on first building-site excavation, on second building-site wall building, on third building-site concrete works. If you do this the same works for e.g. 10 days, you can use recurring functionality. You need to input these position works by projects at one Recurring Position Journal and resource and item consumption, again by projects at one Recurring Job Journal. Everything you need is to fill quantities for each day and post it.

Recurring Journals has the same columns as standard Journals, except two fields:

  • Recurring Method – The recurring method determines what happens to the quantity on the journal line after posting. For example, if you use the same quantity each time you post the line, you can reuse the same quantity after posting as the same main data (Type, No., Position no., Description, Location Code, Work Type Code, Ongoing Code, Division Code, Division Type…). If you want to use the same accounts and text on the line, but the quantity varies each time you post, then quantity should be deleted after posting. There are two recurring methods:
    • Fixed: The amounts (Unit Costs, Unit Prices, Standby unit cost and/or Position price) on the journal line will remain after posting as all quantities (Quantity, Waiting Time, Extremely Stagnation Time, Ongoing Quantity, Mileage).
    • Variable: The amounts (Unit Costs, Unit Prices, Standby unit cost and/or Position price) on the journal line will be deleted after posting.
    • Recurring Frequency – Enter a recurring frequency if you have indicated in the Recurring field in the job journal template that the journal is a recurring journal. The recurring frequency determines how often the entry on the journal line will be posted. The field must be filled in. For example, if you want the journal to be posted every month, enter 1M. After every posting, the date in the Posting Date field will be updated to the same date in the following month. The codes for recurring frequencies are:
      • D (day)
      • W (week)
      • M (month)
      • Q (quarter)
      • Y (year)

If you want to post an entry on the last day of every month, you should post the first entry on the last day of a month and enter the formula 1D+1M-1D (1 day + 1 month – 1 day). With this formula the program takes into account the different number of days in each month.

After posting, we get the same data as posting standard Job Journals or Position Journals.

Posting operational work (Construction Management) – part 1

In NAV4Construction, we can post the operational work on next ways:

  • Using ‘Output Order’ – posting of Construction Position output work and Resource and Item consumption per Project in the same time;
  • Using ‘Position Journal’ – posting only Construction Position output work per Project; we need to post consumption separately;
  • Using ‘Job Journal’ (standard NAV functionality with some specific customizations) – posting only Resource and Item consumption per Project; we need to post output separately;

Advantage of the first method is that we can post all entries with the one document. We get posted document with ‘Navigate’ functionality. Also, this method enables us to have complete statistic of cost per every Construction Position for each Project. Failing of this method is that if we have many complex position works per day, it is too complicated to make evidence and post it.

If we choose posting without ‘Output Order’, we get simply procedure for posting. We use ‘Position Journal’ for evidence of work per all Construction Position we have and separately we use ‘Job Journal’ for evidence of consumption all Items and Resources, not linked with Construction Positions. On this way we get simpler method, but we lose connection of consumption with Construction Position output. We cannot get all things and we must to decide what method we want. Good thing is that we can choose different method for each project, depend of complexity and project requirement.

Output Order

New ‘Output Order’ we get with ‘New’ command on the ribbon. We need to put Project and Task we work on them and choose Construction Position for posting. System will make automatic filter for positions and we get only positions we define on Bill of Quantities.

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If we eventually must post position out-of-BoQ, we can press ‘Show All’ and we will get complete Construction Position code list. After that, we need to fill ‘Quantity’ field with output quantity for this position in presented Unit of Measure. If this is not first posting for this position on this project, we can see previous posted quantity for this position. We also can see contracted position quantity from BoQ. On this way, we have control before posting this values. If we want to see what we post for this position previous, we can press on ‘Position Executed Quantity’ field and we will get complete evidence from Position Ledger Entry.

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We can fill another specific filed, depend of construction type (civil-engineering, building construction, road, maintenance…), but I will explain this in some other posts.

When we fill all necessary header fields, we have to fill lines with consumption data. We can fill lines automatic or manually. Results is the same, but automatic can make work easier if we have good normatives for construction positions.

Automatic fill process can be started by the ‘Import outputs’ command. System will use all normative lines for position in header, recalculate consumption quantity with position quantity on header and fills it. I have to notice, these are planned quantities and I am sure, we need to change some of them.

If we have manually input of data, we need to choose line Type (Resource or Item) and choose desired Resource/Item. After that, process is different depend of line type:

Item

For Item, we need to fill ‘Location Code’. We can get default location code for project if we make this setup on Project Card. We need to fill item quantity, as well and this is all. All costs and prices for the item will be filled automatically.

Resource

For Resource, we can fill more fields. There are not all mandatory and this depend of setup for company and/or project. It is necessary to fill quantity per Unit of Measure and we can choose ‘Work Type Code’ for different Unit of Measures/Cost/Price. If this is people type of resource, this is enough and as items, costs and prices will be automatic filled. But if we choose machine resource type, we can fill more fields.

First of them are ‘Waiting Time’ and ‘Extremely Stagnation Time’. ‘Waiting Time’ is time when resource did not work because bad organization. System will be calculate cost for all quantity time, but price for (‘Quantity’ – ‘Waiting Time’) if ‘Waiting Time’ is acceptable. If this time is not acceptable, system will calculate price based on specific formula (this is very complex setup, and I will explain it in independent post). ‘Extremely Stagnation Time’ is time we use only for evidence. This is a time when we was prevented for work (nasty weather or some other force majeure).

We can fill ‘Mechanization Resource Code’ if we know exactly what machine is worked. System can propose only machines for choosing resource. If we in advance know what machine worked, we can fill this field, and ‘Resource No.’ will be filled automatically. If we have configured machinist for mechanization resource, this field will be filled automatically, but if we have not it, we can choose ‘Employee No.’ for machinist from filtered employee list only from departments who use machines.

Know we know what time machines spend for making position, but we don’t know what they are worked exactly. Because of that, we have ‘Ongoings Code’ where we can define what our machine really do. ‘Ongoings Code’ list has Unit of Measures and they are configured depending resource types. When we choose this code, we need to fill ‘Ongoings Quantity’.

If our machine is the vehicle, we can fill additional fields: ‘Mileage’ and ‘Tour Quantity’.

This is only base story about this process and I will detailed explain some specifics in some new posts.

Posting

Before posting, we need to change status. Changing status make checking of all necessary fields input. NAV will make evidence of username, date and time for making document and for status changing, because these are very important data.

After that, posting process is simply. For each posted document, we can make storno (correction) document very easy, but I will explain it in later posts.

Cost Accounting for Resources (reporting) 4/4

Resource Cost Accounting has stay in many reports and analysis. These reports from Quantity Surveyor Section (in Bill of Material calculation), to Construction Management (actual costs per project) and Mechanization Management (detail costs of finer level of resources – each mechanization/vehicle resource).

The most of reports can make cost breakdown from total amount or amount per unit to amounts per cost types (depreciation, fuel, oil, maintenance…) for each capacity plan or usage in Job Ledger Entry or Resource Ledger Entry. System present complete breakdown cost structure, but present separately usage cost and standby cost also. We can see all deviations from G/L to calculated and applied entries.

Depends of options you choose, the most of these reports can give analysis with less or more details. Solution has many and many analysis, but I will recommend BI tools we have.

The best of these reports is that they can give you “smart” analysis and you can make right business decision, e.g. are you need to buy new resource or keep old one with maintenance. You can compare credit/leasing installment costs (with fuel/oil consumption for new machine) with maintenance costs (with increased fuel/oil consumption for old machine). Of course, you can use actual costs, not planned.

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Cost Accounting for Resources (calculation) 3/4

Applying Calculated Cost automatic calculation process recalculate evaluated Resource Costs to actual Resource Cost. Actual resource costs are the really costs bookkeeper posted as payables costs on G/L accounts (energy, fuel, oil, tires, maintenance, depreciations, payrolls…).

Complete Applying Calculated Cost automatic calculation process is based on next steps:

1)     Setting the actual mapping

2)     Starting the calculation

3)     Configure date rang

4)     Getting Resource Cost Calculation results

5)     Applied Costs to entries and choosing model of applying

We will discussed about all of them:

Setting the actual mapping

We can make more resource mapping variants in the same time. When we want to apply specific mapping to entries, we must to set mapping name on Resources Setup, on Default adj. res. Name field. This name, we must configure on all mapping line on Adjust Resources Cost table.

Starting the calculation

We need to start Calculate Resource Cost command. When we start this function, we need to choose calculation variant:

  • based on actual quantity in entries
  • based on planned quantity

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Configure date rang

System make calculation for specific date rang. To get correctly data, we always have to set start date as first day in year. End date is the last date for calculating period. As this setup, system will always make cumulative calculation.

Resource Cost Calculation results

When function finish procedure, system used value in Cost Posted to GL, and depend of choice calculated next:

  • Actual Quantity: value in Cost Posted to GL divide with actual resource quantity for period in field Resource Quantity on the same table
  • Planned Quantity: value in Cost Posted to GL divide with planned resource quantity configured on Resource Card

This results was multiplicity with percent in Share of Cost on G/L Account % field and put it value in Calculated Cost field.

We have choice in calculation because these costs is used in offering process. Sometimes, resources did not works at specific period. If we calculated with actual quantity we can get abnormal resource costs for desired period (e.g. civil-engineering machines on winter period). Later in same year, we can recalculate complete costs for complete period with actual quantities.

Applied Costs to entries

When calculate process finished, difference from Calculated Cost and Unit Cost placed in Adj. Direct Unit Cost. This is value for update existing value in Resource Ledger Entry and Job Ledger Entry.

We can look up values and analyze them. We can continue to use planned values in Unit Cost field or apply calculated values. If we want to apply calculated values, we need to start Apply Calculated Cost command.

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What and where to apply?

When we start this command, we must to choose method of applying or we can cancel job:

  • Apply cost calculation: NAV will only update calculated values to Direct Unit Cost and Unit Cost; new entries will be using new costs.
  • Apply cost calculation and post to entries: NAV will update values to Direct Unit Cost and Unit Cost and update all values in Resource Ledger Entry and Job Ledger Entry on desired period.

When process is done, NAV will marking field Applied Calculated Costs.

What else?

Usually, we don’t use the same Unit of Measures for all resource usage. Sometimes, we use kilometers for vehicle usage, but sometimes we use work hours or transported volume, or combination of them, or…

We have standard solution for posting this solution, we can use Work Types with configured additional Unit of Measures. But, how to calculate cost of them? There no exist completely exact way to do this, but we can get “enough exact” way. First, we need to use Unit Price for internal reason (or external, it doesn’t matter). We must to use this for standard resource price and for all work types.

We have to set that we want to use that calculation system on Resource Setup and Default Cost Type (Fixed, % Extra, LCY Extra). When we start this functionality, NAV will automatic calculate cost per work types using Unit Price for work type and Price/Profit Calculation and Profit % values on Resource Card fields.