Being able to track costs is vital for any business. OpenAir supports several cost tracking features and related functions that allow you to easily track every expenditure related to a project.
Within OpenAir, there are three main types of costs:
- Labor – the amount of time for and the rate at which employees are being compensated.
- Expenses – costs which add to the cost of a project such as traveling expenditures.
- Physical goods or services purchased – material, product, or service costs.
Costs are associated with an object (i.e. users, expense reports, or purchases) and can also be associated to reporting and accounting units referred to as cost centers.
Using Cost Centers
In OpenAir, cost centers can be used to follow objects including users, clients, projects, tasks, services, expense items, and time types. Once created you can determine the specific set of rules that these centers operate under. Typically rules are set up with an inheritance hierarchy depending on values related to objects. For example, as part of the receipt save process, OpenAir will cross-reference the receipt with objects associated to it such as project, user, etc. The inheritance rules configured for cost centers then determine the cost center value to store on the receipt directly.
Cost centers factor into all 3 major types of costs in the system.
User cost options focus on hourly cost rate values. As time is entered into OpenAir, the hours entered inherit the cost of the user’s hourly cost rate. OpenAir does provide the option to track up to 3 different hourly cost rates per individual. Each cost rate supports historical cost values with start and end date ranges.
With the logic of every hour being associated to an hourly cost rate for each user, there is the potential for labor costs to be overstated in OpenAir. For example, if a user is expected to work a 40 hour work week, as defined in their work schedule, and instead works 60 hours, the cost of the 60 hours will far exceed the cost of their salary cost at 40 hours. For cost tracking accuracy, OpenAir supports the ability to adjust costs to normalize the cost rate per hour against a utilization report. The Advanced report called Percent Historical Utilization supports a cost adjustment feature for all users included in the report by accessing a function in the tips area after the report has been run. Using this cost adjustment feature inserts historical cost adjusted hourly rate values in the user’s cost table. If you are tracking 2 or 3 different costs, be aware the cost adjustment feature only works on the primary cost level.
Besides tracking labor costs on each individual user cost table, you may find the need to set an override of cost at the project or even task level based on certain situations. Examples include subcontractors that charge different rates, cost transfer rates agreed between departments or geographies within the same company, and even cost values that differ by type of work for subcontractors. A feature may be enabled called Loaded Cost Overrides and supports both task and project level options. Task overrides project level and project level overrides the user level stored costs. To support flexible reporting, however, there are two key reporting values: Actual cost and Current costs. Actual costs are derived from the overrides while current costs are derived from the user cost table directly. With both values present, a plethora of custom calculations can be configured to support a wide range of cost reports.
Projects typically incur some form of expense which must be recorded and included when determining a project’s cost. The expense report features of OpenAir inherently require a client or project when entering expense receipts and therefore link expense costs to projects directly.
As with many expense systems, OpenAir supports the concept of an Expense Policy that will provide controls regarding values of certain expense categories, caps of certain expense categories, and even which expense categories may be used with a project.
Dealing with Purchases
OpenAir allows the user to input purchases against a project in two different ways. The first is through the use of a quick purchase order (Quick PO) which allows the entry of a product and the cost associated along with the project that will incur the cost. Quick POs do not require approval and are typically restricted to certain types of roles in OpenAir.
The other type of purchase is referred to as a purchase request seeks approval for an expenditure. Once approved, a purchaser role may create a Purchase Order, which may also have an approval process optionally. Once the purchase order is fully approved, it becomes a potential cost against the project. Purchase Orders themselves are not a cost to a project until the product purchase is recorded as a fulfillment of the purchase order. Once recorded as a fulfillment, in unit increments as necessary, the cost of those fulfilled units will reflect against the project. Quick POs do not require fulfillment and are recognized as costs immediately in OpenAir.