ERP for Project-based Industries – A Complete Guide

ERP for Project-based Industries – A Complete Guide

Table of Contents
Table of Contents

In 2019, the global project management market held a value of USD 4.2 billion. The compound annual growth rate (CAGR) for the same shows signs of 13.4% until the period extending to 2027.

This staggering growth rate can be attributed to the increasing use of cloud-based services, which have expedited and simplified remote monitoring of projects. Beyond this, the other factor contributing to this sector's growth is the wide application of automated tools across diverse industries.

Factors Encouraging Project ERP Implementation
Factors Encouraging Project ERP Implementation

From construction to healthcare and from the government to telecom, all industries have embraced digitalization and remote monitoring for their projects to enhance productivity and align business operations.

Some factors that have extensively triggered the implementation of the project-based ERP include consolidating planning, scheduling and efficient decision making, and obtaining a bird’s eye view of all the project operations. Also, the companies are eying a quicker ROI and cost-efficient use of the resources deployed.

A project-based ERP drives the ability to innovate and develop projects and improves the organization's ability to respond to change. In addition, evaluation and monitoring procedures are used to keep an eye out for project delays and abnormalities. It also enables companies to take the necessary action to streamline them and boost their profitability.

Additionally, with the aid of the solutions provided by a dedicated ERP system, businesses may place more emphasis on attaining goals by concentrating on strategies rather than project operations.

To make it more understandable, we shall take a close look at the core topic of ERP and Project-based industries. Here is what we shall learn by the end of this article:

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What is ERP?

A system that aligns all units of a business and enables them to exchange information through a common platform or database is the Enterprise Resource Planning system.

The strong vision of companies to organize themselves is one of the main issues that any organization faces. Decisions cannot be made without considering the organization's strategic and tactical goals as a whole. Also, all the departments the company comprises in favor of the immediate goals must be brought under an umbrella to learn about the crucial data each unit shares.

ERP connects all of the various locations where you distribute and arrange your various sets of resources, giving you an insight into all the various components that feed into your manufacturing, human resources, finance management, and payroll departments and connecting them.

This provides you with crucial visibility into your daily business operations in relation to supply chain planning, project management, accounting, and finance. Because of this informational awareness, you can monitor your product's status, manufacturing, and transportation phases.

In other words, the objective of optimizing supply chain synchronization can be accomplished with the deployment of an ERP system. This is due to the single centralized repository which processes the data generated at every point of your supply chain. Another advantage is that all authorized people can now access the data whenever and wherever required.

What are Project-based Industries?

Project-based organizations or industries or PBOs refer to the type of organizational structures that develop ad hoc mechanisms to carry out their tasks and complete the undertaken projects. Project-based organizations are more likely to be appropriate for businesses that demand and anticipate rapid innovation.

In the project-based sector, departments are established in a functional structure to arrange work according to expertise like marketing and finance. However, the majority of business processes in a project-based organization are structured as projects.

Small business management can think about implementing a project-based structure because it increases productivity. Project-based management implementation also increases responsiveness, enabling them to quickly adapt to market fluctuations and constraints.

Some examples in this category include the industries like entertainment, building, aerospace, etc., which divide their labor into different projects to organize it.

Structure of a Project-based Company
Structure of a Project-based Company

As observed in the above illustration, a public-based company has different managers appointed by the CEO or the Director to look after the individual projects. These managers have a team of analysts, developers, or architects who are instrumental in shaping diverse business operations; however, they are restricted to their own projects.

How does a Project-based Company Function?

When we speak of projects in a project-based company, we must understand that a project focuses on a single objective or task. It could be for a client or for internal development. Companies put up projects to function in accordance with specific needs in order to take advantage of these business prospects.

The team works in accordance with the client's suggestions for feedback. The project manager is in charge of the project's overall quality.

They must ascertain that the teams handling the crucial information of the project are knowledgeable and technically sound. The manager must also shoulder responsibilities of selecting an expert team, overseeing the tasks assigned to each team member, and that all the members have duly fulfilled their duties and the project gets completed in time.

What are the Benefits of having a Project-based Company?

There are several benefits of having a structure like that of a project-based company. The following points mention some of them:

Organizational Learning: Project-based organizations promote an unrestricted flow of knowledge transfer. They establish knowledge repositories where they share and apply their knowledge and experiences to succeeding projects. This is instrumental in raising the overall bar and caliber of project execution.

Potential: As project tasks and organizational strategies interact closely, the organization's products and services show gradual improvement. This raises the business’s value and potential which then creates more room for major improvements.

Adaptive nature: The adaptive character of the project enables its participants to be exposed to a variety of knowledge and abilities. They receive consistent learning, which helps them to deal with critical concerns at every stage of the project.

Efficient application of resources: PBOs' flexible organizational structures make it easier to direct physical and human resources toward projects that will best serve the organization.

Equal opportunity: In the structure of such an organization, where every individual is shouldering many significant responsibilities, the occurrences of any internal politics and favoritism are significantly reduced. All the team members receive equal opportunities and fair treatment.

Flexibility: The projects can be safely termed flexible and agile as the manager has direct control over project operations. This, in turn, ensures and enhances the response time and performance output.

Performance reviews: As the structure supports the presence of a manager for each team, the manager tends to pay close attention to all the team members. This paves the way for a higher dedication from the team members as the encouraging reviews from the manager catalyzes the process of productivity.

What are the cons of a Project-based company?

While we have learned about the advantages of PBOs, it is also crucial to understand the disadvantages of working in such a scenario.

Expensive: The companies need to dedicate a single team to each project which could prove to be cost-inefficient in the long run. Only the larger projects can provide a decent ROI, but the smaller ones may tend to be expensive.

Isolation from other team members: A project team is designed to produce outcomes independently, ideally without assistance from any other teams. Being cut off from other teams could be a disadvantage.

Communication gap: As the teams work independently without communicating with each other, there are bound to be communication gaps. Knowledge transfer may be difficult if teams do not communicate with each other as much.

Career continuity: Employees' career continuity and professional development suffer when they are frequently shifted from one project to another. Also, at times the end of a project may mean the end of the job for the employee.

Difficult transition for team members: Once a team member is removed from their role, it may be difficult for them to go back to their previous role as the project is continuously developing.

Restricting the overall number of projects: When a company dedicates one set of talent to complete only one project, they are essentially limiting or restricting themselves from taking up more projects (which may require a similar set of skills).

What is a Project-based ERP?

One of the simplest explanations of project-based ERP is that it transforms conventional ERP into a process-driven technology by creating software platforms that demonstrate the interdependence of various manufacturing and production processes.

Let’s understand through a simple example. In the traditional ERP, a dashboard or other resource provides a timeline with dependencies that depicts all of the steps that go into producing and presenting enterprise outcomes rather than individual unit production reports.

On the other hand, a project-based enterprise resource planning is a system that is specially made to fulfill the needs of a project-based firm, assisting them in finding, winning, optimizing, and delivering successful projects repeatedly. It is an innovative approach that applies all the concepts of a traditional ERP along with expanding the conceptual and functional capabilities of the ERP system.

It presents generative techniques assisting the managers and owners in accomplishing operations beyond basic production/manufacturing. When there are multiple departments and many different projects to be completed, an ERP may not be sufficient. To cultivate a hassle-free work environment and get things done accurately and in a timely manner, the companies may require things beyond what ERP can provide.

Consolidating and Analyzing data

Project ERP gathers and analyzes data by managing numerous operations in a single system, providing stakeholders and business owners with the vital business information they require to run and manage their particular business unit or department.

Each project has different aspects to be tracked, a different approach with which it must be completed, and different requirements. Project-based ERP offers a comprehensive picture of processes, KPIs, and other crucial metrics on a project-by-project basis. It accomplished this by utilizing the features and techniques of project management.

We shall further understand the project-based ERP through the characteristics it exhibits in the next section.

What are the Characteristics of a Project-based ERP?

Let’s run through the features of a project-based ERP here:

The top feature of a project-based ERP, which also sets it apart from the traditional ERP, is that it does not simply deal with the manufacturing of physical products; on the contrary, it lays focuses on the people who help fulfill and successfully complete the project.

There are now a huge number of different ERP systems available, and many of them have options designed specifically for project-based organizations. Here are a few elements that firms looking for a project-based ERP solution should pay great attention to the following:

Business Intelligence: An organization that has data but little knowledge transforms itself into a knowledge-rich organization through Business Intelligence. Using Project ERP, you can assess results by project, department, account, customer, organization, vendor, and so on. The ERP dashboards are based on KPIs and metrics such as revenue, profit, backlog, labor utilization, proposal win rate, cash flow, and projects at risk.

Project Management: It is one of the most significant features as project management can concentrate and combine numerous procedures. Using reports, you can keep track of project timelines, resources available, overlapped projects, and milestones.

Invoice Management: Project-based organizations may have greater complexity and unpredictability in their accounts payable and receivable. This creates the need for well-organized invoice management software that includes more advanced invoicing options.

Project-based Accounting: This crucial aspect provides insights on revenue, profits, and project costs which are resourceful elements in budget planning and other financial decision-making processes.

HRM (Labor Management): Many project-based ERP suites provide enhanced labor management solutions for typical tasks, including employing subcontractors, assigning skilled workers' time, predicting labor demands, and managing HR procedures. It also comprises hiring, onboarding, payroll, and labor forecasting.

Automated Compliance: By streamlining accounting and business rules, compliance can be simplified. By implementing it, violations can be caught before reconciliation or audit even begin. Designed for industries with high compliance requirements, project-based ERP aims to lower the risk of non-compliance. Moreover, it facilitates easy access and validation of compliance by auditors.

Client Relationship Management: An ERP system for project-based businesses must have a CRM (Customer Relationship Management) module that is appropriate for the intensive client collaboration and relationship-building that is typical of project-based businesses.

The CRM module aids in opportunity management, tracking, and forecasting. Administrators can design campaigns and monitor how prospects and customers move through the sales cycle. Planning future projects benefits greatly from identifying weak points in the sales cycle and the voice of customers who frequently return.

Bid Management: Construction and other project-based industries rely heavily on the calculation and management of project bids and estimates. Therefore, a project-based ERP solution must include reliable data tools for generating precise bids and estimates as well as for tracking and reducing cost overruns.

Risk management: Project-based business models demand comprehensive risk analysis and reduction on each possible project beginning with the proposal stage. A well-designed project-based ERP system may combine several data streams, such as historical project data, demand forecasting, and numerous other scenario data streams, to quantify risk.

Mobile functionality: This is important in many project-based sectors since it allows employees to access a variety of data and tools via phones and tabs. Therefore, project-based ERP solutions frequently include capable mobile apps that offer employees access to centralized data wherever required.

Change Order Management: Organizations require strong tools for tracking and managing client requests in order to reduce the disruption caused by change orders. Therefore, a preferable project-based ERP system must be characterized by the capacity to automatically coordinate numerous parts of a change order.

Supply Chain Management: The module offers a single platform through which the business can collaborate with their partners to achieve a comprehensive knowledge of the product lifecycle, from inventory to shipping and tracking.

Engaging Project Stakeholders in Collaboration: Stakeholder communication is essential to project management. Communication with stakeholders has always involved printing reports and handling numerous databases that must be handed over for security reasons. Your data is seamlessly shared in real-time on a cloud with an ERP. To manage important information, managers and stakeholders can establish daily reports, automated emails, and personalized alerts.

Why do You need ERP for Project-based Industries?

Project-based ERP is a business software that uses project management tools. Unlike a conventional ERP, it offers a comprehensive perspective of business processes. This solution is appropriate for project-based manufacturers, service-based businesses, architecture, aerospace, construction firms, and more.

Project ERP enables the production of precise and timely insights crucial for any business, including financial reports, invoices, payroll, and project progress reports by connecting every transaction to an account, an organization, and a project.

Here are some primary components that can be strengthened in a project-based industry with the help of ERP:

Strengthens Project Accounting

The companies can make use of the project accounting tools that are tagged with the ERP. This way, the companies can ensure that their projects are on track with respect to the budget. The ERP also eliminates the need to quantify the financial standing as the ERP enables them to draft near-accurate reports and also helps in forecasting.

The system also presents data through which the managers can determine the worthiness of the money invested in the project.

Boosts Inventory Management

With the inventory management module of the ERP, shipping, purchasing, and demand forecasting are made easy. Automating key tasks inside an ERP system that is designed for inventory management ensures that stock purchasing, sorting, and transferring are coordinated. The system incorporates the inventory requirements of personnel, customers, and suppliers to assist in maintaining appropriate levels of stock.

Additionally, inventory can be managed at every point in the supply chain with the aid of tracking methods like barcodes, RFID tags, and serial numbers. Additionally, this aids in resource management. Real-time tracking techniques make it convenient to update, analyze, and make forecasts.

Improves Resource Management

Planning, scheduling, and allocating people, money, and technology to a project or program are all examples of resource management. In essence, it involves allocating resources to maximize organizational value.

ERP can help in resource management through the competence to make recommendations on how businesses should allocate their resources to maximize economic value. It helps in planning for sudden or abrupt scenarios.

The various capabilities and tools of the ERP can be used to review, accept, change, and schedule resources. Project managers and resource managers can communicate and work together owing to a common resource request workflow.

Offer Project-based KPIs

KPIs are excellent for analyzing and reviewing a project's success. Project managers and stakeholders can obtain quantitative information as well as distinct indicators of progress and opportunities for development. But it's crucial to customize particular KPI measurements for your project.

Some crucial KPIs that the project managers must keep a close eye on is mentioned in the following:

Planned and Actual Expenses

This KPI presents the values of planned expenses against the actual expenses that have occurred.

Planned Hours Vs. Actual Hours

This KPI compares the amount of time actually spent on the project to the number of hours initially projected for it. It implies that the project is moving ahead of schedule if the number of hours scheduled was higher than the number of hours actually worked.

On-time Completion Percentage

The On-Time Completion Percentage examines the proportion of jobs that were completed on time. A low percentage indicates structural problems with the team's assignments and tasks.

Employee Churn Rate

This is the rate at which workers quit the job or the business. A low attrition rate indicates contented employees and effective project management.

A high turnover rate is a sign of unfavorable working conditions, including bad management and a hostile workplace. In that circumstance, a project redesign is typically required because a high churn rate slows down the completion of any assignment and is generally bad for a company's operation.

ROI – Return On Investment

ROI is typically a long-term indicator and does not initially reflect favorably on the majority of projects. It considers a project as a whole and determines its value in relation to its price. It compares the benefits of a project to the resources that were spent to complete it.

Human Resource Management

The majority of HR duties are supported by a contemporary ERP system, from basic employee and payroll management. It can also leverage analytics tools to monitor employee performance, onboarding, employee benefits, bonus, support staff development, and support recruitment processes.

Leave management and time tracking are other important elements of HRM that can assist project managers in workload designation. Additionally, it helps them to establish a timeline for the project based on the workforce available.

What is the Difference between Project-based ERP and Traditional ERP?

Traditional ERP systems are better suited to businesses with simpler business procedures. However, they are unable to manage businesses with several departments, intricate processes, and shifting data. Therefore, businesses need to invest in custom ERP software development to streamline these complex operations.

Project-based ERP software offers more practical solutions for project-based businesses than traditional ERP software, which places a greater emphasis on the accounts and manufacturing departments.

Traditional ERP was primarily developed to enable particular product management procedures. It was effective for analyzing production but less so for studying how production tasks were linked together into a chronological life cycle. However, this was insufficient to meet the completion dates and release milestones.

Project-based ERP solutions offer a more practical way to manage many operations in a single system. Users of customized ERP solutions can also keep tabs on KPIs like labor costs, customer data, inventory control, turnover, payroll, and many others.

We know that before project-based ERP became popular, many businesses created reports on complete projects outside of an ERP platform for order fulfillment plans and other intricate planning.

It did not take long for the businesses to realize the utility and competence of the ERP software, especially when it came to tracking and consolidating their data. However, they also started to see some of its drawbacks. Effectively, ERP excels at giving you a broad picture of your business operations and where everything is located. Yet, they felt it is less adept at providing a precise piece of information or idea of where a project stands in relation to where it was anticipated to be. This led to the rise of Project-based ERP.

In essence, project-based ERP is extremely adaptable and can be considered an updated version of ERP. This is to say that all the functions of an ERP are encapsulated within the idea of a project ERP. The main distinction is how much more programmable the project ERP is. Consequently, businesses who utilize it can customize it to meet their unique requirements.

To sum up, we can state the following by creating a clear distinction between the two:

Project-based ERP 

Traditional ERP

A project-based ERP is primarily built to oversee the project lifecycle in its entirety while integrating all the business operations. 

Its main highlight is that it encloses all the processes of a project-based company into a single solution.

This is suitable for businesses that require more intricate and detailed analysis of processes.

The traditional ERP is a system that entails all the repetitive processes related to product manufacturing and enables scaling of the business by aligning all the repeatable activities.

This is more suitable for businesses with simple processes.

Which Industries Benefit the Most from Project-based ERP?

Empowering their businesses and scaling to higher grounds are the premises on which the companies use project ERP. There are diverse sectors that utilize the project ERP, from architecture and engineering to government contractors. The factors that connect all the businesses using project ERP are to maintain transparency in procedures, monitor the progress of the projects of their clients, and derive revenue.

Various Industries Benefit from Project-based ERP
Various Industries Benefit from Project-based ERP

Let’s take a quick look at the various kinds of businesses that implement a project ERP.

Construction Companies

A construction company or contractor's success depends on accurate, real-time accounting and job costing, not to forget – project management. Small projects may get completed in weeks or months but bigger ones like roads, rail, buildings, utilities, or other infrastructure may take several years to complete construction projects.

ERP for Construction industry
Construction and Building Sector benefits from the use of ERP

Every construction team wants to establish its objectives, organize its activities, make estimates, and keep track of its expenses. With project-based ERP, they can use it in your preferred way irrespective of the size of the business. Teams can obtain accurate information, automate repetitive tasks, and operate more productively with a consistent and trustworthy project data source.

Information Technology or Software Industry

IT projects can differ greatly in terms of complexity, scope, and design. It is commonly known that initiation, planning, execution, monitoring, and closure are the five common project stages that every IT project must go through. These fundamental procedures are needed to transform a concept into a finished good.

ERP for Software Industry
IT has benefitted the most from project-based ERP systems

IT project management software enables teams to manage risk, scope creeps, knowledge base, and rapidly changing client needs with various tools and applications. There are customized reports, Kanban boards, personalized dashboards, and Gantt charts that can catalyze project development.

Thus, it would not be wrong to summarize that while several industries benefit from project ERP, IT has benefited the most.

Architecture and Engineering Firms

Architecture and engineering projects deal with a lot of complex stages throughout the project lifecycle. Business development, resource planning, talent management, document management, and financial management are all parts of the project lifecycle for an architecture or engineering firm.

ERP for Architecture
Architecture and Engineering Industry can benefit by implementing ERP

An engineering project ERP system can assist you in moving to the next level of success regardless of how large or small and smart your A&E firm is. It can leverage the centralized communication system to accurately define the scope of the project while presenting near-perfect milestones of completion.

Marketing Agencies

Project ERP is valued by marketing and creative agencies because it simplifies project management, staff management, and financial management. Whether it is consolidating digital assets, centralizing communication, monitoring marketing campaigns, or monitoring the performance of social media marketing, the ERP can fill in all the gaps.

ERP for Marketing Agencies
ERP can help drive conclusive marketing strategies

From automating certain laborious tasks to creating personalized dashboards, marketing teams can now monitor all aspects with project ERP systems. It also helps the team to focus on what they are good at and deliver value to their clients.

Event Management Firms

Managing events, big or small, requires meticulous and updated information to make the event a success. Various operations such as registration, managing the sale of tickets, billing, floor planning, managing sponsor details, and organizing participant data are all made simple with the event management software.

Event Management can be made easy with ERP
Event Management can be made easy with ERP

Additionally, it is simple to combine with other applications for accounting and finance, marketing automation, customer relationship management, and payment gateways.

Consulting Firms

As a consulting firm, you have to compete for the best talent, compensate and utilize consultants properly, deliver successful results, and improve client satisfaction. Your team can successfully meet these challenges by using an ERP that focuses on the entire engagement lifecycle.

Law Firms

Teams in a law firm may securely and accurately get ready for crucial negotiations, court cases, or company audits with the help of all legal documents, contracts, and information saved in a centralized database. Project-based ERP software can assist legal teams in streamlining their processes, automating duties, centralizing the organization of legal contracts, and prioritizing their workload.

The system automates diverse important procedures and eliminates the need to carry out laborious and error-prone tasks. The use of spreadsheets can be rolled back and digital transformation can leverage crucial aspects such as cost and completion timelines; thereby, leading to satisfied and happy clients.

Accounting Firms

In order to provide clients with fresh insights, accounting firms must get a grip on accurate data. Using an ERP system can help accounting firms build value into everything they do by providing them with the visibility and insight to make accurate plans.

What are the Challenges in Project-based Industries?

Like all other sectors, project-based companies face their own share of challenges. Although the challenges differ from project to project based on the industry, it is still vital to understand these challenges. Let’s understand them in this section.

Coordination between several projects

There are several projects undertaken and are being worked on simultaneously in a project-based company. Not all projects belong to the same industry. Also, the projects may differ in terms of their completion stages. So, the main challenge is to keep a repository of all the ongoing projects along with their progress.

Allocation of resources

There are several teams and resources allocated for the completion of these projects. The companies need to intelligently align the requirements and the priority of the resources for each project. This calls for meticulous coordination between the multiple projects going on in the company.

This point further extends to other challenges which are discussed in the following points.

Parallel projects need similar resources

When there are multiple projects that require a similar set of products or customers, they are likely to require similar supplies such as procurement resources, manpower, production, etc. How can one decide where to allocate available resources to get the most value for money spent? In such a scenario when there is a dearth of resources, project managers will assert that they have an urgent need for those resources.

While the cost of various resources may play a role in deciding which resource goes to which project, project managers are still accountable for their own projects and not the company's overall goal achievement. They cannot be expected to accept a delay or lower-than-anticipated input into their project.

Monitoring costs for overhead, labor and indirect expenses

The ability to keep track of expenses presents one of the largest hurdles for project-based organizations. It might be challenging to keep track of expenses that are tied to individuals, clients, projects, or other things, thereby making it difficult to track overhead costs.

Maintaining and deploying an efficient information system

Project management information systems are focused on gathering, storing, and presenting information about the status of the production process. There are a varied number of details that get added to it on a daily basis. The number of units, the number of units with defects, numbers in stock, the material used, the number of production work hours, and so on.

This data, although correct, may not be required by the managers. This creates a huge room of redundant and unimportant information pieces.

This calls for designing an information system that compiles and stores only the data that is relevant to the project. Moreover, the system needs to update the managers with information on which project must be prioritized above others.

Delayed Projects

When there are multiple projects going on in a company on a huge scale, requiring numerous parameters, they are likely to suffer from delayed completions. Projects that are overdue can cause major problems and extend the time before a business can begin to profit. They not only block the manpower and other resources but also lead to a loss in revenue.

This may reduce a company's long-term return on investment. A project-based firm finds it challenging to control the timely delivery of its projects.

Misalignment of project goals and business objectives

The goal of a project is to further one or more corporate objectives. It is often observed in project-based companies that there is a persisting gap that can greatly skew business objectives. Deliverables and projects ultimately fall short of expectations when there is insufficient adequate redirection. Therefore, it is crucial for firms to match projects with their goals.

Company Reconfiguration

We understand that a project-based company works on a model that constantly evolves and changes once the ongoing projects get completed. This also implies that the processes followed in each project may be different.

This means that even if the projects are similar, the processes will be dynamic in nature and new ideas and methods will be deployed for each of them. This can be termed continuous reconfiguration. This may have some repercussions which we shall learn about in this section:

  • Creating a balance between the projects that generate income today and the ones that will provide for the future is difficult when the companies are regularly reconfiguring themselves.
  • Planning for future reconfiguration can be difficult as predicting the type of customers, their requirements, and the desired outcomes may be different. Thus, building capacity for the future by linking the firm's aspirations with both short-term and long-term project design is a major challenge for management.
  • Learning curve is not very steep in a continually changing environment. Since there are constantly new projects being added to the portfolio and many employees are working on multiple projects at once, the process of learning gets impeded. There are so many dynamic changes and updates in a company that is heavily focused on projects. Moreover, there is a communication gap between the teams working on different projects; as each team is focused only on their projects.

Decision-making is complicated

The majority of project-based companies struggle to gather the proper data at the right time to fully understand their current situation. From rapid changes in scheduling to lack of communication, there are multiple factors that influence and affect the decision-making procedure.

Accountability issues

The project's accountability and responsibility are impacted by a failure to communicate and track project milestones in real time. The entire responsibility lies with the PM or the project managers while handling a project. However, if there is a failure in setting clear expectations at the beginning of the project, the managers may find it difficult to take responsibility for the failure.

There are various signs that signal a lack of accountability. It includes overstepped deadlines, poor quality of work, unsatisfied customers, poor reputation, and high turnover, among many others.

All these factors are a result of a lack of information regarding each team member. The PM needs to have detailed information pertaining to the development of the project and each team member working on it.

Using a task manager or creating clear operating procedures can be helpful. However, efforts must be made to have a system that can streamline all information for the project managers to take goal-centric decisions and also aid accountability.

Unrecognized Business Value

An organization's success hinges on its projects. In the end, all projects produce deliverables that are used to generate revenue for the company. It is difficult to capture commercial value when such deliverables fail to meet deadlines or are late.

How can ERP help Project-based Industries?

We have seen the problems that project companies commonly face. With the deployment of project-based ERP, these issues can be resolved to a great extent. In fact, it would not be incorrect to state that ERP could just be the one-stop solution for all the problems the companies are dealing with currently.

In this section, let’s learn about the problems that the project ERP can drive away.

Eliminating Spreadsheet Errors

While it is possible to manage a project without the right software, the likelihood of mistakes and process inefficiencies will grow. A project-based ERP makes accessibility and interaction simple.

In earlier times, spreadsheets were the means to track and monitor projects, but it took a lot of time and work. Spreadsheets need to be manually updated and therefore, have a higher chance of man-made errors. The spreadsheet must be saved and updated repeatedly to a central location for the team members or users to view the modification.

There are multiple other issues that arise due to manual methods of making entries, which are mentioned as follows:

  • There are issues with information synchronization that prevent real-time collaboration.
  • There are multiple versions of the same file, making it unclear which is the most accurate and current.
  • It is challenging to swiftly document the updates.
  • Due to spreadsheets being downloaded and uploaded several times, there may be security concerns.

ERP software will be of immense help in bringing down these errors and will also assist in carrying out the following:

  • Reports and dashboards can be created to aid with project performance visualization.
  • Any linked tasks, dependencies, and other variables are immediately updated in real-time when changes are made to current projects and tasks.
  • Stakeholders have access to information and progress in real-time.
  • You can set up notifications to let you know when tasks are due or have changed.
  • A consolidated location can be used to store lessons learned and documentation from earlier projects.
  • ERP offers the convenience of integrating programs like Dropbox, OneDrive, and Google Drive for enhanced data sharing and accessing in real-time.
  • The automation of workflows provided by the ERP enables the team members to learn about the nuances of the project.
  • You can get a better understanding of the overall health of the project by seeing everything in one location.

Project Budgeting and Planning

Recent reports have shown that there are approximately 30% of projects which experience an unexpected overshooting of their budgets midway through the projects.

You can utilize project-based ERP software to create customized reports that satisfy the needs and queries of your stakeholders. The system also helps you with decision-making when they want insights about the budget. Use an ERP system that enables you to examine previous project budgets and costs in order to develop precise projections.

Strong project-based software also comes with built-in functions that alert or notify users when a task goes beyond its allotted budget. The versatility of the project  ERP to keep teams apprised about project data, resource utilization, milestone progress, and budget is one of its top advantages.

Project-based Accounting

The budgets and costs associated with individual projects are the main emphases of project-based accounting. Project accounting can be used for everything, from going to a trade show to launching your newest invention to prevent budgets from getting out of hand.

Project accounting lets you monitor the costs and revenue associated with a specific project and draw a comparison with the forecasted budget. The system adeptly shows if there is a discrepancy. In that case, you can change the project's budget, scope, or schedule of delivery to ensure things run smoothly. This way, project-based accounting documents the way funds move between various parts of a certain project.

Accounting is what defines the success of a project as it is based on a variety of factors such as operational costs, business expenses, budgets, billings, estimates, and so on. The cloud-based facility of the project-based ERP empowers all the managers, business owners, and other authorized users to access, monitor, analyze and use the information entered into the system.

Here are the points that highlight the ways in which the project-based ERP can be helpful in the accounting arena:


Leverage Project Budgets for Timely Completion

Closely Monitor Project Expenses

Build Flexibility into Your Budgets

Utilize Forecasting for Cost Management

Revenue Recognition

Control Project Documentation

Leverage Project Budgets for Timely Completion

When you set out to work on a new project, it is imperative for you to establish a project budget in order to control project expenditures. Secondly, set the objectives straight. Align them with the cost and time you have at hand to complete the project.

There may be times when you might find that your project is constrained by a lack of cash, a small amount of time to complete it, or a small workforce. This creates the need for realistic forecasting for efficient project accounting.

You must recognize any restrictions or obstacles you may face and take them into account when making your estimates. Let’s understand this through an example. Assuming you realize that there is a shortage of manpower to complete the project in time, you shall need more people onboard. These could be contractors but you will still need to borrow some time to hire them.

In such a case, you can request a later deadline from the client or raise the budget.

You may create a reliable budget estimate if you have accurate pricing for all the project's requirements, including staffing, materials, and travel expenses. But if you can not get every element just right, look for related previous projects and use their budget estimates. You can also take cues from the averages and base your decisions on those averages.

For example, you can refer to the previous timelines of completion of constructing a road and quote your time to the client accordingly.

Closely Monitor Project Expenses

We know that regular accounting reports are produced once every three months. There is a set schedule for the process of generation of these reports. Yet, when we speak of a project-cost system, it surpasses the regular process by keeping far more frequent track of expenditures and income. This could be once per week or once per day.

You may examine how the project budget compares to your initial prediction over time by regularly monitoring your finances. Transaction data can also be used to identify issues before they become more problematic. With a project-based ERP, financial reports may be customized and accounting data is automatically retrieved in real-time, keeping you informed about the entire structure of the spent amounts.

Build Flexibility into Your Budgets

The initial budget should have enough flexibility to accommodate a situation where you experience an abrupt change that needs to be implemented. Allocating a reserve fund to cover unforeseen costs or that you extend the project deadline by a few weeks will help you to adapt when the inevitable and unforeseen issues crop up.

Furthermore, your budget projection must include realistic numbers. When you set out on a project, examine the numbers carefully. It is crucial to keep everything practical as things may go haywire down the line.

There are other variables that actively associate with a project which include cost, scope, features of the project, time, and so on. In case an issue arises at a later stage, you will have to be agile enough to mold one of these variables.

Utilize Forecasting for Cost Management

Making forecasts about potential project outcomes is the practice of forecasting in project management. These projections are created by analyzing past project data and anticipated future results.

The key parameters you need to follow here are the project cost estimate and the duration of the project. Trend analysis is something that can be critical at this stage which is helpful for estimating the past and present spending patterns. This will eventually present you with the expected project cost.

Another aspect is the project’s duration helps you understand the uncertainties and risks involved in the developmental stages of the project. This is a significant consideration as the project's cycle will be slowed down by insufficient finance or resource availability.

With a project-based ERP system, you can access all the relevant data and study the trends, read into forecasts, and make decisions that lead to a positive outcome.

Revenue Recognition

While there are several projects going on at a given time in a company, not all of them invite cash flow. There are some projects that are set to generate profits in the near future but are not revenue generators.

Only a few projects that include constructing a road or home or innovative software solution is able to generate income that covers the expense. As the work is completed, others receive partial payments. Therefore, companies must consider establishing guidelines for when the revenue will be recognized even before the project begins.

Control project documentation

Project-based accounting alone involves a lot of routine paperwork. Reports on projects provide more information than just how money was used or how much was made. Approving billable hours and expenses, creating and submitting bills, collecting invoices, and documenting income are all components of good project paperwork management.

The project accountant provides management with monthly financial reports to monitor progress. They must include information on the amount of money still in the budget and also update whether or not it is sufficient, the breakdown of project costs that are invoiced to clients, justifications for the numbers on the invoices, and written-off costs that are unbillable.

Financial reports are also produced in great quantity by project accounting. The project accountant needs to be able to inform managers or stakeholders about the status of the project. The accounting team moves ahead with closing the accounts, moving data from the sub-ledger to the main ledger, and turning in any necessary tax documentation to state and federal authorities after the project is finished.


Project management's purpose is to ensure that tasks and projects are completed on time. It facilitates and paves the way for conducting internal initiatives, product launches, and marketing campaigns.

Overstepping deadlines for completing projects is a serious concern. You run the risk of losing the client’s trust if you do not achieve your deadlines. By enabling interaction and behavioral tracking, CRM solutions are meant to help businesses manage client interactions and data. In project management, a CRM is crucial, especially when it comes to understanding and pleasing clients.

A CRM can help you achieve the following when using it with project management:

  • Make sure that the sales, customer service, and PM teams are all communicating effectively.
  • Give sales and account managers the ability to follow the progress and development of the project.
  • Lets the clients view and approve deliverables. This goes a long way in increasing quality control and aiding long-lasting business partnerships.
  • Enhance the efficacy of all the teams, including the marketing team. The valuable information pertaining to the lead, sales funnel, etc. is shared in real-time which can be instrumental in the overall betterment of overall performance and outcomes of the project.
  • You can watch client behavior while working on a project and promote the use of the system to drive better results.
  • Organize all of your contacts and their information in one location for easy access.
  • It also accelerates the implementation of the project as soon as the sales are made and the deal is finalized.


When you have adequate financial tools that are responsive, you can scale the business while simultaneously reducing costs. A project-based ERP can create ways for merging your accounting tools with the financial system. By doing this, you can audit trails, automate regular transactions, and so on. This goes a long way in controlling operational costs.

Secondly, an ERP also assists you with asset management owing to its cloud-based technology which can be accessed in real-time. This leads to better inventory management, better control over compliances, and also aids transparent purchasing.

Finally, your finances can be in better shape when your people management is done effectively. This takes into account your staff and the workforce, their salaries, overtime, and labor management.

Most importantly, all your financial statements can be reported in time with a quick and easy automated generation of important documents including general ledger, accounts payable, accounts receivable, cash management, fixed asset management, tax connect, and so on.

How is a Project-based ERP deployed?

When businesses opt for a project-based ERP, they must also choose where the deployment of the ERP takes place. They have two options, namely the on-premise and cloud-based ERP.

The choice of whether to deploy your ERP on-premises or in the cloud is crucial when choosing one for your project-based organization. For larger firms that need to modify system operations and use the current infrastructure to host and maintain their own data, on-premises ERP may be the best option. On the other hand, for firms looking for cheaper initial expenses, basic features, system reliability, and accessibility, cloud ERP software may be the ideal option.

Let’s learn in detail about the deployment of ERP and the differences between the two options.


On-Premise ERP

Cloud-based ERP


In this case, all the resources are managed and controlled on or by the premises.

When the pool of resources can be accessed online, it is termed cloud computing


The overall cost is borne by the premise that owns the premise. Therefore, the returns may start receding in the long term and the company incurs a higher upfront cost.

This has a ‘pay as you use’ facility, which is an on-demand service, and therefore, the upfront cost is lower.


The services provided by the on-premise ERP are only locally accessible.

This provides a universal service that can be accessed anytime and anywhere.


On-premise ERPs are not dependent on the internet for accessing the features.

Cloud ERPs are internet-dependent. Without the connectivity, you are not able to access any of the features of the ERP.


The on-premise ERPs offer great customization options.

Cloud ERPs offer relatively lesser options for customizations.


Depending on the number of customizations, the time taken to implement can be long.

These generally do not take long to be implemented.

Why opting for Cloud ERP can be beneficial?

  • With cloud ERP, companies can rest assured about the storage of data as there is ample storage capacity.

  • It can be set up quickly and easily.

  • It is cost-effective as you do not pay for any security, storage, or maintenance.

  • These offer better collaboration owing to remote accessibility and accessibility through smart phones.

While cloud-based ERP is housed on a vendor's servers and accessed through a web browser, on-premises ERP is installed on the PCs and servers of your business. The cost of on-premises ERP is often a one-time license fee. However, this is often based on the size of the organization or the number of concurrent users.

Security is a major problem because an ERP stores confidential information. The key is picking a trustworthy cloud ERP provider with rigorous data security requirements. The quicker setup periods of cloud ERP software are one advantage.

Cloud ERP is available for a monthly or yearly subscription fee. For support, training, and updates, there are additional costs in both situations. On-premises ERP typically requires a capital expense or sizable upfront investment. The cost of cloud-based ERP is often an ongoing operating expense that the company must cover.

How to Choose the Best Project ERP for Your Company?

Although many businesses believe that any software will perform and give results and that their structures would simply adapt to it; however, recent reports and failed ERP performances depict that this is not the ideal approach.

Choosing an ERP program for your company might be difficult with so many options available today. Companies must also note that ERP is a game-changing business effort that gives your organization crucial advantages, and therefore, they must analyze and conduct research to arrive at the best solution for their business.

Selecting the right ERP is critical as an ERP is not only a tool but a reliable partner that has the potential to bring about a transformation of business operations and outcomes. If you are looking for a new ERP system or are re-evaluating ERP providers for an upgrade, you may choose the best ERP by taking the following factors into account:

A holistic and project-centric system: Rather than being a common business solution or a generalized solution that must be adapted to meet your particular needs, your ERP solution should be created from scratch from the perspective of your industry.

Product accountability of vendors: Companies must check the vendor’s accountability, for if a vendor is not completely transparent, your business may be exposed to more risk. If the vendor takes responsibility for the system provided, companies can trust the ERP vendor and go ahead with implementing the solution.

Vendor Reputation in the industry: Check if your ERP vendor is known for the promised solution and meeting those commitments. Additionally, you can also consider the vendor's impact on the industry in addition to the product. This will help you gauge their reputation in your industry.

Scalability: Look for a system that can readily support the expansion plan of your business.

Customer care after deployment: After deployment, your primary channel of communication should be a vendor with better and adaptable customer service plans. Check if they are known for their customer-friendly plans.

Transparency in the total cost of ownership: All details should be included in pricing models. If there are any recurring expenses, they must be made apparent before the final deployment of the system.

What are the Key Components to Check Before Choosing an ERP?

Each project is different and may require you to tweak some of the features in each project-based ERP. However, there are some common features in ERP that you may look for. Let’s look at them closely in this section.


Real-time collaboration

Team members and stakeholders should be able to communicate in real-time. The system facilitates simultaneous user access and modification.

Document exchange and storage

Does the project ERP enable you to store and exchange documents, creating a knowledge base for your projects?

Template creation

To avoid starting from the beginning with every project and activity, you should be able to create and customize templates. Check if the features on the dashboard allow you to accomplish this.

Real-time reporting

Based on the factors that are significant to you, you must be able to filter and format the data. Real-time reporting is possible owing to customizable dashboards and reports. Can you access this feature in your ERP?

Cost Management

Your software should make it easier for you to keep track of, report, and watch for any cost overruns.


The system must be simple to use. The ease of use paves the way for quick actions and speeds up the process of development.

Warning flags

The system you choose should send out alarms or cautions in situations where things go wrong. Check if your system updates and informs you about the red flags encountered on the way.

Resource allocation

The system should allow you to assign tasks to specific people. If the system guides you into appropriate resource allocation. 


You will need software that enables you to simulate a schedule baseline and compare your real schedule to it. It is one of the vital characteristics of a good project-based ERP.

Time management

In order to measure progress and manage labor expenses and resources, the system will need to keep track of the actual time spent working. 

How much does Project-based ERP cost?

With the extensive application of project-based ERP systems across industries, it is vital to learn how much is the cost of the ERP. The businesses would like to learn about the factors that influence the cost and whether it is different for different projects.

First and foremost, the cost of project ERP would certainly be different for each project as every project is different and may have a completely different set of requirements. Secondly, the cost of the ERP will vary based on the features selected while enrolling for the ERP services.

Let’s take a deeper look through the following points that can be influential:

Size of the business

The cost of the system depends on the number of users and the size of the business. The more the number of users, the greater will be the cost. This is because, with more users, the business will require a lot more storage capacity, which will eventually raise the cost.


Every ERP solution comes with a different package of features and tools. Each tool may have a different cost assigned to it. Let’s assume, you are a small business and therefore, do not want to opt for a solution with heavily-laced components. Then a basic package will cost you less.

However, in the case of larger enterprises that need an advanced system that offers a comprehensive solution, then the prices are set to rise.

Furthermore, there may be some customizations that may be required. The vendor may charge more for extra accommodations and personalization in such a scenario.

System Vendor

You will find vendors that offer different prices for ERP systems. The businesses will have to conduct some research to find out the one that offers them the best price. The prices vary across industries and therefore, there will be some effort required to find the best-suited vendor.

Apart from these, there are other factors that may lead to a rise in the cost of the project. Let us look at them in the following:

Hidden costs: There are a lot of free options available in the market, but there may be hidden costs associated with them. It is extremely vital to know about these and educate the managers about them. Most free versions do not offer any training, support, or guidebooks on how to use the system. This implies businesses will need to spend an extra amount to educate their staff. Also, the maintenance and upkeep of the system will also add up to the cost.

These hidden costs are not known upfront but businesses need to be aware of these charges.

Miscellaneous costs: We understand from the article that a project-based ERP can work wonders to empower the projects and steer them toward successful completion. Not only do they pave the way for clear and easy communication, but the ERP systems also enable project managers to make strategic decisions for business growth and expansion.

Without all these features, the business will be handicapped to make its way into the future. This will aggravate the existing problems, lead to miscommunication, and ultimately, lead to failure or repeating the steps all over again.

All the wasted effort and the cost of redoing the stages can be included in the costs that the company will incur; which they had not signed up for.


Project-based ERP systems can provide your company with a number of advantages and cost savings. Make sure to pick a solution that is worth your investment if you want to enjoy all the benefits of a straightforward, sophisticated, and effective tool.

Centralization, Coordination, Communication, Process Standardization, Pipeline Forecasting, and Budget Management are some of the advantages you can reap with the implementation of the project-based ERP.

Key Takeaways

  • A system that aligns all units of a business and enables them to exchange information through a common platform or database is the Enterprise Resource Planning system.
  • Project-based organizations or industries or PBOs refer to the type of organizational structures that develop ad hoc mechanisms to carry out their tasks and complete the undertaken projects.
  • Flexibility, organizational learning, providing equal opportunity, and adaptive and dynamic nature are some of the benefits a project-based company enjoys.
  • One of the simplest explanations of project-based ERP is that it transforms conventional ERP into a process-driven technology by creating software platforms that demonstrate the interdependence of various manufacturing and production processes.
  • Business intelligence, project management, invoice management, labor management, automated compliance, project-based accounting, bid management, and risk management, are some of the features of a project-based ERP.
  • A project-based ERP is primarily built to oversee the project lifecycle while integrating all the business operations. Its main highlight is that it encloses all the processes of a project-based company into a single solution.
  • A project-based ERP is helpful across various industries including IT, architecture, event management, law, accounting, construction, and so on.
  • Coordinating several projects simultaneously, allocation of resources, delayed projects, and misalignment of project goals are some of the challenges the project-based companies face.
  • These companies also struggle with reconfiguration, unrecognized business vale, monitoring overhead costs, and accountability issues.
  • ERP can provide respite from spreadsheet errors, and help in project budgeting and planning effectively.
  • The cost of the ERP is based on several factors including the size of the business, the number of users, and the number of customizations required from the vendor.
  • Project-based ERP systems can provide your company with a number of advantages and cost savings.
  • Centralization, Coordination, Communication, Process Standardization, Pipeline Forecasting, and Budget Management are some of the advantages you can reap with the implementation of the project-based ERP.

How can Deskera Help You?

Deskera provides you with an ERP system that is not only quick and simple to set up, but also compliant.

Business owners must take swift action in project-based industries and maintain a birds-eye perspective of all ongoing business activities in real-time. The software enables you to easily scan all activity and get real-time information for different business modules with the cloud-based business management.

You may automate a wide range of accounting processes using Deskera Books, including invoicing, expenses, costs, billing, payments, payments in different currencies, and much more.

Utilizing CTAs, landing pages, email marketing, and software that guides you through the appropriate stages of your sales pipeline, Deskera CRM gives you access to tools that can help you grow your customer base.

Last but not least, use Deskera People to manage all of your payroll and HR procedures. It's amazingly easy to handle your employees, their deductions, bonuses, attendance tracking, and overtime.

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  • Be connected with a central database
  • Organize scope, timelines, workforce efficiently
  • Oversee fluid process flow
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