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Budgeting automation in construction companies

Author

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  • KUZNETSOVA E.V.

    (National Research University Higher School of Economics)

Abstract

The article focuses on corporate information systems intended for management accounting and budgeting (MAB) in project-oriented construction companies. The author argues that the successful implementation of such systems requires a comprehensive approach involving the development or the adaptation of MAB philosophy taking into account the software functionality and related business processes. The author demonstrates that ERP software is the most effective technological platform for corporate MAB systems of project-oriented companies. This is explained by the fact that the ERP systems have both sufficient functionality for project management automation and appropriate tools for management accounting and budgeting. Relying on this analysis, a comprehensive approach and appropriate solutions for developing corporate MAB systems in project-oriented construction companies are proposed. The methodological solutions proposed in the field of MAB design take into account the specific nature of a contractor who carries out construction projects for external customers. In particular, the following methodological solutions are presented: establishing temporary project-based profit centers in the construction company’s financial structure; using administrative quasi-projects and the “direct costing” method for fixed overheads costing in certain departments; establishing temporary profit centers related to production departments (internal subcontractors). This paper also shows how such a financial structure may be used in the SAP ERP system relying on the end-to-end “project” attribute. A budgeting structure with two versions of the corporate master budget is proposed. The first version of the structure is based on the contracting plans and the second on the last approved project budget versions. The paper shows that monitoring implementation is necessary for both master budget versions. The main assertions and results of the paper are applied in the implementation of a corporate MAB information system based on SAP ERP in a construction company. The results ofthe system’s implementation and operation have shown significant improvement in the key financial indicators of the company, including _ profits, rate of return and net cash flow.

Suggested Citation

  • Kuznetsova E.V., 2016. "Budgeting automation in construction companies," Бизнес-информатика, CyberLeninka;Федеральное государственное автономное образовательное учреждение высшего образования «Национальный исследовательский университет «Высшая школа экономики», issue 3 (37), pages 45-53.
    • Handle: RePEc:scn:025686:16917320
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    Cited by:

    1. Hagenaars, Luc Louis & Jeurissen, Patrick Paulus Theodoor & Klazinga, Niek Sieds, 2017. "The taxation of unhealthy energy-dense foods (EDFs) and sugar-sweetened beverages (SSBs): An overview of patterns observed in the policy content and policy context of 13 case studies," Health Policy, Elsevier, vol. 121(8), pages 887-894.
    2. Wadud, Zia & Mattioli, Giulio, 2021. "Fully automated vehicles: A cost-based analysis of the share of ownership and mobility services, and its socio-economic determinants," Transportation Research Part A: Policy and Practice, Elsevier, vol. 151(C), pages 228-244.
    3. Daniel Greenfield & Jeremy A. Sandford, 2021. "Upward pricing pressure in mergers of capacity‐constrained firms," Economic Inquiry, Western Economic Association International, vol. 59(4), pages 1723-1747, October.
    4. Kumar, V. & Ramachandran, Divya, 2021. "Developing firms' growth approaches as a multidimensional decision to enhance key stakeholders' wellbeing," International Journal of Research in Marketing, Elsevier, vol. 38(2), pages 402-424.

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