Project Budget Management, Earned Value Management and Reporting in NetSuite OpenAir

Earned value can mean a lot of different things, depending on your business and even your role or perspective within the organization. However, when it comes to projects and reporting within OpenAir, earned value takes on a very specific meaning.

For a professional services organization, earned value is a key way to understand the health of a project and its potential trajectory. It’s like a red flag, alerting OpenAir users to the possibility of a project going off of the rails. OpenAir makes it easy to view the metrics that can give you that heads up.

However, taking advantage of the out-of-the-box earned value management (EVM) features in OpenAir requires that certain elements be set up and used for your projects. That’s good news, since these elements – namely things like project budgets and tasks – can be beneficial for your overall project management.

Like many things in NetSuite, if your workflow doesn’t align well with what’s required for out-of-the-box EVM features, some customization can give you the results you need without disrupting the way you do business. The key to getting the most from either scenario is understanding what setup is required, what the key terms represent, and the value of the metrics involved.

Budget Management Options in OpenAir for EVM

Two key elements need to be in place for a project to take advantage of the built-in EVM metrics and reporting. First, projects must be broken out into tasks. Those tasks don’t need to be granular, although OpenAir gives you some sophisticated project management tools to use, like predecessors and Gantt chart views. Regardless of whether the task breakdown is high level or specific, it must be in place and managed for earned value reporting.

The other element that must be in place is a means of tracking the project’s budget. Together, this gives the ability to track the project’s budgeted hours and the projected costs. These budget options can range from simple to complex.

At the simplest level, you can set up a budget at the highest level, the project level.

The next level down from that would be to set up each task to have a budget. That would allow for a budget at the project level, and for each task to have a budget that rolls up into the project level. This offers a tighter view of what parts of the project may have overruns or be causing concerns.

Still more complex would be to set up a budget per person, per task. In this case, each person would have a budget hours amount associated with them, and then a group working on a task would combine for the task level budget. This would then roll up to the project’s budget. Again, this gives you better and deeper insight into challenges that a project may be having, all the way down to the individual level.

We talk more in-depth about these different budget management methods in our webinar, “Project Budget Management, Earned Value, Management, and Reports”.

Project Budgets vs Transactional Budgets

At this point, you may be wondering why a project budget is needed when you may already have a budget set up within OpenAir. That’s because these two types of budgets have different purposes and definitions within OpenAir. It’s important to understand both of them in the context of reporting and earned value management.

Project budgets are a granular budgeting feature that gives you the ability to budget across time periods. This can be a very flexible and useful feature in OpenAir that can be used in conjunction with custom calculations and other metrics – like actuals and bookings – to give a specialized view of the business.

Transactional budgets – formerly known in the platform just as budgets, is the more out-of-the-box budget option. This is meant to track revenue dollars associated with a project. A transactional budget can have multiple budgets, such as a labor budget, an expense budget, and a purchase budget. These budgets can be reported on separately and be used with custom calculations.

Because OpenAir is such a powerful and flexible platform, many customers use both types of budgets to help give them an even clearer view of the health of the organization down to the project and task level.

Key Metrics of EVM Reporting

When working with the out-of-the-box project budget features, many of the earned value metrics become inherently available within OpenAir. To get the most out of these metrics and what they indicate, or to mimic these values with custom calculations, it’s key to understand how they are computed and what they mean.

SPI –  The Schedule Performance Index, or SPI, calculates earned value over planned value. Essentially, it’s a measure of whether the project is set to deliver on schedule based on the initial project plan.

CPI – The Cost Performance Index, or CPI, is your earned value over actual costs. In other words, the CPI indicates if the project is over or under the cost estimated to deliver the project.

Together, these two measures tell you a great deal about the health of the project. For instance, if a project is behind, you might add additional resources to complete it on time. That would result in a good SPI, but would negatively impact the CPI.

Ideally, the quotient of each of these numbers would be close to 1. An SPI less than 1 means you are behind schedule, for example, where a CPI over 1 indicates that you’re over budget.

Equally powerful is the critical ratio – a measure that is derived from the SPI and the CPI. When multiplied, these two numbers paint a picture of how the project’s earned value, overall, looks. Again, the closer to 1 the critical ratio is, the better the project is performing.

Suppose you’re not using one of the out-of-the-box methods of project budgeting that would allow the platform to compute SPI, CPI, and the critical ratio for you. In that case, you can create custom calculations for these to still gain the insights these metrics provide without changing your workflows. We talk in greater detail about how to do this in our webinar, “Project Budget Management, Earned Value, Management, and Reports.”

Conclusion

As with many of the reporting features and metrics within OpenAir, there are multiple ways to understand the health of your projects using earned value. It largely depends on your goals, your workflows, and your desire to incorporate different levels of complexity into your project management.

If you’re wondering how your organization can take advantage of the project management and budget tools or the earned value management features within OpenAir, or if you’d like help creating custom calculations or adequately setting up the platform for this reporting, reach out to us at Top Step. We’ve used our extensive experience with NetSuite’s OpenAir platform to help companies get the most use and deepest insights from their professional services automation tools to improve their business and bottom line.