This guide shows how to design and implement processes for the cost management of construction projects. It is an interactive workbook that follows the main steps of conceptualising a cost management system. In this way, the required elements for a subsequent software implementation can be gathered straight away. The guide was created collaboratively by CONJECT AG and me. I provided idea and content, CONJECT AG took care of design and realisation.

1. Or give it to CONJECT.
They know how to do it.

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Cost management of construction projects does not require magic but – as always – the devil is in the detail. The complexity
mainly results from the multitude of contractual partners and relationships, invoices, approval statuses and cost codes. Even
in smaller projects you often have to deal with hundreds of invoices and hundreds of cost codes.
How can you control all activities during budgeting, awarding and invoicing and achieve the financial goals of the project in
an efficient way?
The simple answer: With IT-based cost management processes!
This guide shows you how to design and implement these processes. It will help you to
• gain an overview over the approach of how to implement a cost management system and
• make a first inventory of the required content.
We will introduce you to specific and field-tested methods and tools.
Comment:
Are you mainly working with Excel or other spreadsheet software? Are you unaware of the underlying problems and/or the
benefit of a professional cost management system? If the answer is yes, we recommend you consult our health guide for
construction and real estate processes, “Exceleritis Realis Estatis”.

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THE ULTIMATE GUIDE TO COST MANAGEMENT
COMPLEX THINGS MADE EASY
The following four symbols describe the areas that we will work on in order to achieve the best result possible for your cost
management system:
REPORTS
PROCESSES
STRUCTURES
INTERFACES
Follow our instructions and we promise to provide you with a definitive cost management system.
ADVICE
HINT

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DELIVERABLES AND SCHEDULE
We start with the reports. After all, the desired output determines which
information we need in the cost management system. Subsequently, we
work on processes, structures and interfaces.
At the end of each week, all deliverables of an area will be visible. There-
fore, the entire phase of conception will require four weeks if you have to
do it alongside your daily work routine.
If you can dedicate all of your time to this undertaking you can finish it all
in just a few days.
Starting Point
Processes
Process List
Process Charts
Reports
Report List
Report Designs
Structures
Costr Structure
Budget Structure
Roles and Rights
Interfaces
Interface List
Interface Definitions
Week 1 Week 2 Week 3 Week 4

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INSTRUCTION – PART 1
STARTING POINT
Initially, we have to thoroughly analyse the current situation and the associated problems. That
sounds simple but can be tricky as various interest groups are involved in finding a common so-
lution. Typical parties involved are board members, commercial managers/directors, controllers,
project managers, project assistants and accountants. Every party has different expectations
regarding a software solution due to their different responsibilities and tasks.
We recommend describing the starting point in a compact and written format. You can only
define and realise a clearly outlined solution if all involved parties are aware of the problems
that will be addressed.
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The result of your analysis could look like this.
SITUATION
• ABC plc is currently using Excel for the cost control of its property development projects..
• The main financial system is SAP.
PROBLEMS
• Separate cost management outside of the main system: No data security, no audit trail, no direct access.
• Projects have to be aggregated manually in Excel because there is no central system for control.
• This involves a high manual effort and risks of wrong data entries and calculations.
• External partners can hardly be integrated in the process due to the high manual effort.
SOLUTION
• Central cost control system that is integrated with SAP.
Example
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Take a pen and describe your current situation. Which problems are you facing at the moment? Which challenges are lying ahead of you?
Do you already have a solution in mind?
Maybe you find it useful to structure the problems based on the areas of reports, processes, structures and interfaces.
SITUATION
PROBLEMS
SOLUTION
REP ORTS Now it’s your turn!

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REPORT LIST
Reports are the fundamental outputs of a cost management system. They
help monitor activities and take decisions. There are numerous reports
that represent the varying information needs of the diverse participants
of a property development.
Initially, we have to inventory all the reports that you need to control your
projects.
The following example shows some of the most frequently used reports
which you may also use, although perhaps with a different name?
NAME DESCRIPTION RECIPIENT FREQUENCY
Cost Report Columns: Budget, Committed, Change Orders, Invoices, Payments, Forecast
Rows: Only costs • Level of detail: lowest level
Executive Board Weekly
Cost Report Bank Columns: as Cost Report • Rows: Only costs • Level of detail: lowest level Bank, Investors Monthly
Cost and Income Columns: as Cost Report • Rows: Cost and income
Level of detail: highest level
Executive Board Weekly
Cashflow Columns: Months from beginning to end • Rows: Cost and income
Level of detail: highest level
Controlling, Accounting Weekly
Contract Overview Overview over all contracts including contract date and amount „Working report“
Project Manager
Weekly
Changes List List of all change order including approval status, amount applied/certified „Working report“
Project Manager
Weekly
Invoice List List of all invoices including terms and payment information „Working report“
Accountant
Daily
Example
Frequently asked questions in this area:
• What are your internal information needs?
• Which information has to be communicated in which form to external recipients?
• Which status reports have to be presented how often?
• Which “working reports” do your colleagues require to do their daily work?
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NAME DESCRIPTION RECIPIENT FREQUENCY
Which reports do you need for controlling your property development(s)? List them in the table below and describe their contents!
• When evaluating the frequency, think especially about the reports that can currently only be created with high manual effort.
They offer the highest efficiency gains!
• Maybe you can identify a “master report” from which you can derive other reports by hierarchical structures and/or filters.
REP ORTS Dyed-in-the-wool Reports?

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REPORT DESIGNS
After completing the report list, you now have a good overview of the
reports you need and the information included in them. Now it’s time
to design these reports. Be sure to always use column headers! To avoid
misunderstandings, the field certified should contain the same amount
in the cost report as in the invoice list. If a deduction or discount is used,
please label it accordingly. It may be worth creating a glossary.
This facilitates a swift introduction into your reporting for all project parti-
cipants, both internal and external.
We want to show you three examples of essential reports. These are cost
report, invoice and change list. As in previous chapters, they should give
you some suggestions for your own deliverables.
Example
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REP ORTS

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REP ORTS
Frequently asked questions in this area:
• Are you categorising your projects (e. g. by region or usage) and thereby grouping them into portfolios?
• Do you have to take different currencies into account?
• How do you determine the forecast in your cost report? Do you have a defined algorithm for it or do you
manually enter an estimate?
• How do the different approval statuses of contracts, changes and invoices influence your reports?
• How do you deal with deductions and discounts in invoices?
We want to give you free reign when designing your reports. Hence, you don’t find a template here as we give you in other chapters.
Free reign? Be creative!

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INSTRUCTION – PART 2
Process List
With report lists and report designs at hand, the outputs are defined. You can now dedicate
yourself to the processes and determine how the collaboration between the various project
participants and departments should be structured. Here we will walk you through the diffe-
rent phases of cost management, record the single processes and name the active roles.
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The following example shows the collaboration between project management, controlling and accounting from budgeting via awarding through to
invoicing.
PHASE NAME DESCRIPTION ROLE
Budgeting Create budget After project approval Project Management
Approve budget No awarding without approval Controlling
Approve budget No change of total budget Project Management
Increase/Decrease budget After approval executive board Controlling
Awarding Create contract After tender, before negotiation Project Management
Approve contract No invoice without approval Controlling
Create change order Directly after receipt Project Management
Approve change order No invoice without approval Controlling
Invoicing Enter invoice Assign to contract and enter date, invoice no. and
amount applied for
Accounting
Check and sign off invoice After approval external project management company Project Management
Approve invoice Triggers payment Controlling
Enter payment Based on payment run Accounting
Example
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• Only describe the main elements. The details will be carved out while designing the process charts.
• For the overall controlling of key processes, we recommend you name a responsible person. This person can monitor deadlines and
discount agreements during the invoicing process.
• It can be helpful to define inputs and outputs for each process. You then get an overview of which information has to be available
before a process and which information exists after a process.
Register the essential phases and processes in the table below. Describe them in a few words and name the role responsible for driving the process.
PHASE NAME DESCRIPTION ROLE
P ROCESSES
Do your processes make your head spin?

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PROCESS CHARTS
Based on the process list, you can now design the flowcharts for the key
processes. In our opinion, the key processes are invoice approval as well
as contract and change assignment because the majority of information
is processed here. We recommend you illustrate the process charts as
swim. In doing so, every role receives its lane (e. g. as column) in which
their processes are listed. Arrows connect the process steps.
Thus, transitions between internal and external participants and between
systems become visible.
The following process chart shows how the invoice approval could look
for an invoicing phase. It also contains the integration of an external
project management company.
Example
Accounting Project Management Project Management Controlling
Enter
(in Excel)
Check /
Forward
Check
Sign off
Sign off Approve
Enter
Book
Pay
Role, internal Role, external
Accounting-SystemPaper
P ROCESSES

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Ready, steady, go! – Process ChartsP ROCESSES

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INSTRUCTION – PART 3
COST STRUCTURE
The cost structure is one of the key elements in cost management. It breaks down the costs
(and very often the revenues) of a property development into single cost elements/accounts.
Depending on project size and complexity there can be multiple cost structures in use at the
same time. They then help to answer the different questions of the various people involved in
the project. Cost structures can also be regarded as categories or views.
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STRUC T URES

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Example
The following example shows three different cost structu-
res. The costs are broken down by cost codes, funding and
usage.
Every cost structure consists of a list of single cost elements/
accounts. Here you can see the first level of the “cost
codes” cost structure.
You can see that the cost codes cover costs and revenues
and also consider the financing costs.
Role
Question
Role
Question
PROJECT MANAGER CONTROLLING
INVESTOR
Which trades do I have
to award?
From which sources doe
I fund the project?
How much do the retail
areas cost?
Cost Codes
Usage
Funding
STRUC T URES
NUMBER NAME
100 Land
200 Demolition
300 Structure
400 MEP
500 External
600 Furnishings
700 Consultants
FIN Financing
800 Marketing
900 Other costs
IN RES Income Residential
IN RET Income Retail
Cost Code
Cost
Income

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Think of the different roles and questions surrounding the project status: Which cost structures/categories/views do you need for your project?
Role
Question
STRUC T URES Are your cost structures dry-cleaned yet?

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Frequently asked questions in this area:
• Do you only track costs, or revenues as well?
• Do you have to consider financing costs?
• Are you running the project cash flow as an account? (i. e. do you have to track cash flow by revenues or financial funds?)
Go through each and every cost structure and list the top level. You certainly have all the details in digital format. However, it makes sense to note
down the top level here to get an overview.
NUMBER NAME
• The main benefit of using different cost structures is that reports within these structures can be received by the press of a button
and are thus immediately available.
• A standardised cost structure that is used in each and every project has the key advantage that projects can be compared with each
other and key performance indicators can be determined.
• Very often a unified and standardised structure of the developer is used as 1st
cost structure and an individual, project-specific
structure (e. g. proposed by the project management company) is used as 2nd
cost structure.
STRUC T URES Hurry up! Don’t let the ink run dry! ;-)

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BUDGET STRUCTURE
Before a project enters its intense phase the budget has already come a long way: From a first calculation – maybe on a
napkin – feasibility analysis is on a high and/or very detailed level. When we talk about a budget, we mean the amount and
structure it has after the investment decision. The budget structure is often derived from a cost structure.
Comment:
For a lot of people, cost and budget structure is the same thing. Not for us and the reason for this is the consideration of
multiple views (cost structures). Cost structures are mainly standardised lists of cost elements and accounts budgets, repre-
senting the project structure and reflecting trades and work packages.
If multiple cost structures are used within a project they are merged in the budget structure as each budget line item has to
be assigned to each cost structure. It is possible that budget line item has to be split between several accounts of a single
cost structure, e. g. via a percentage distribution.
STRUC T URES

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The following example shows the budget
structure for the cost report from the chapter
Report Designs.
Example
STRUC T URES

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You may already have a budget structure in Excel or another spreadsheet format so you can easily add additional cost structures.
The empty template shows you an approximate framework.
Frequently asked questions in this area:
• Are your budget line items work packages?
• Are the budget amounts net or gross values?
• Which VAT codes do you have to consider?
• Do you have to split costs of single budget line items?
STRUC T URES
ITEM NO. ITEM NAME AMOUNT NET COST STRUCTURE 1 COST STRUCTURE 2 COST STRUCTURE 3 COST STRUCTURE 4
1
2
3
4
5
6
7
8
9
Total
Make your budget structure cut-and-dried!

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Example
ROLES AND RIGHTS
The organisational structure typically indicates the roles and rights of the
people who are involved in the commercial processes. In this chapter it
is sufficient to briefly name the roles, describe the main tasks and list the
people involved.
This is an example showing two roles..
PROJECT MANAGEMENT
Enter and approve contracts
Enter, check and approve invoices
Peter Project
Laura Leader
CONTROLLING
Manage base data
Manage budgets
Claus Control
Role
Tasks
People
STRUC T URES

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Which cost management roles are relevant in your company? What are their key tasks?
Which people are performing these tasks?
Frequently asked questions in this area:
• Who has access to all projects? Who has access to particular projects?
• Who is authorised to change the budget?
• Who enters and approves contracts?
• Who approves invoices?
Role
Tasks
People
Role
Tasks
People
STRUC T URES Roles: Don’t leave anybody high and dry!
Role
Tasks
People

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INSTRUCTION – PART 4
INTERFACE LIST
Interfaces help to transfer large quantities of information correctly and efficiently from one sys-
tem to another. Hence, it is worth the effort to identify the areas in which a lot of data has to
be exchanged on a recurring basis. In cost management, interfaces are most frequently realised
for invoices and payments between the cost management system and the financial accounting
system. Very often, creditor and debtor information is imported from the leading system.
The following tables shows an overview of the potential for an automated data exchange,
based on our experience and example for listing and prioritising relevant interfaces.
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INT ERFACES

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Overview of the potential for an automated data exchange.
AREA INTERFACE DESCRIPTION IMPORTANCE
Invoices Invoice Import Import of relevant invoice data (e.g. unique invoice
number, unique contract number, invoice type, ap-
plied amount gross)
high
Payments Payment Import Import of payment information (e.g. unique invoice
number, date, amount)
high
Contracts BoQ import Bill of quantity import of the contract high
Contract Import Import of relevant contract information (e.g. unique
project number, creditor/debtor, contract type)
middle
Base data Company import Import of creditor/debtor information from the main
financial system
low
Example
INT ERFACES
Here is an example for listing and prioritising relevant interfaces.
AREA DESCRIPTION AUTOMATIC EXCHANGE POTENTIAL
Invoices Detailed tracking based on contract line items very high
Payments Documentation of payments of invoices very high
Base data Company information (creditors, debtors) high
Projects Project information as duration, categories project manager middle
Contracts Contract elements, line items and terms including budget coverage low
Budgets Budget breakdown structure based on single line items low
Cost Structure(s) Across projects, typical a one-time import from Excel very low

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• Talk to the various project participants and find out where and how routine work can be automated.
• If you want to compile a cost-benefit analysis we recommend that you estimate and evaluate the continuously incurring effort for
routine work.
Which interfaces can help you most to reduce manual effort and to become more efficient?
List those interfaces and briefly describe them!
AREA INTERFACE DESCRIPTION IMPORTANCE
INT ERFACES Interfaces? Up the irons!

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INTERFACE DEFINITIONS
After listing the interfaces you can now work out the details. It is essential to define which fields have to be exchanged. In order to assign imported
data correctly you have to specify a unique identifier.
When realising interfaces for invoices and payments you have to consider the different effects in terms of accounting. You have to agree how single
invoices and progress payments and deductions and discounts have to be treated. Your accounting colleagues can help you here.
The following example shows the definition of an invoice export.
Example
FIELD DESCRIPTION
UID Unique Identifier. Technical counter. Important for assigning the payment at a later stage.
Invoice amount Invoice amount net
Retention Retention as defined in contract
Deduction Deduction as defined in contract or for a single invoice
Certified amount Amount to be paid
VAT code VAT codes applicable for country
Cost structure 1 Cost codes
Cost structure 2 Funding
Invoice date Date of the invoice
Due date Date when payment is due
Approval history List person, date and performed action
INT ERFACES

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Now define the interfaces that you need for your integrated cost management system.
Are your interfaces crease-free?
• Look through your report designs. Maybe you can identify additional data that is relevant for the interfaces.
• Don’t worry too much about technology at the beginning. The content is more important at this stage.
FIELD DESCRIPTON
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SUMMARY
We made it! You have created the structure for your cost management system and have also brought significant clarity into your processes!
The following deliverables are now finished:
» STARTING POINT
» REPORT LIST
» REPORT DESIGNS
» PROCESS LIST
» PROCESS CHARTS
» COST STRUCTURE
» BUDGET STRUCTURE
» ROLES AND RIGHTS
» INTERFACE LIST
» INTERFACE DEFINITIONS
You are now fully prepared for a software implementation.
The best thing is: It really works! We have implemented a significant number of cost management systems based on this method.
REP ORTS
P ROCESSES
STRUC T URES
INT ERFACES

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Space for notes or stick figures ;-)

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Space for notes or stick figures ;-)

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DRESDEN | LONDON
VENICE | NOTTINGHAM
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www.conject.com
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