Projects and the four stages

Accounting Ahead | Original study resource | accountingahead.com.au

Projects and the four stages

MODULE 4 | PART A.1 | STUDENT COMPANION

Project management: planning, controlling and coordinating resources and activities so a project meets its

objectives on time and within budget, while anticipating its risks. A project is unique and temporary; an

operation repeats.

What makes it a project?

Unique

The main difference from day-to-day operations - and the

source of high uncertainty

Solves a problem within a defined scope

Profit, cost or process goals agreed with the funder; must add

value for them

Defined start and finish

Heavy investment comes before the benefits, so the finish

date is watched closely

Related activities and resources

Decide which activities run in sequence and which can run at

the same time

Sydney Opera House: planned as about four years and $7 million; took about fourteen years and $102 million

The four stages and the management accountant

Stage What happens Management accountant

1. Selection Objectives, acceptable performance and deliverables set;

team formed; feasibility and justification. Objectives:

specification, budget, completion time. Criteria: strategic fit

and risk

Identify and quantify risks;

SWOT; financial viability

2. Planning Five areas: scheduling; optimising cost and time; budgeting

(resources and a framework for variance analysis);

performance measurement (KPIs, milestones); incentives.

Sponsor then approves or stops

Budget, financial planning, KPI

design

3. Implementation

and control

Work starts; progress against milestones, dates and

budget. Price variances from inflation and currency; cost

variance and schedule variance

Ongoing variance analysis; KPI

tracking

4. Completion and

review

Deliverables finished; team released; lessons documented Final project cost; close the

accounts

STRATEGIC MANAGEMENT ACCOUNTING | M4 PART A.1 | STUDENT COMPANION

1

Accounting Ahead | Original study resource | accountingahead.com.au

Six ways to structure projects

Project structures

Six main ways to organise

Project organisation

Projects are the core business

(construction, software)

Internal project

Supports another core business -

where most accountants work

Joint venture

Shared capital, technology, revenue

and expenses

Collaboration

Looser, flexible, not always

commercial

Public private partnership

Government and private sector,

often for public benefit

Virtual project

Dispersed team linked by

communications technology

What changes across borders

Five differences

Wider spread

More complex purpose

Larger scope

Higher risk

Higher coordination, transport and

communication costs

How to cope

Right team

Satisfied, collaborating stakeholders

Careful resourcing

Constant monitoring

Capture lessons as you go

Cultural fluency

Strategic: how business works across

cultures

Workgroup: how mixed teams operate

Personal: etiquette, language, skills

A technically excellent project can still fail without cultural fluency

Case notes

Sydney Opera House: construction began in 1959 on a plan of about four years and an estimate of A$7 million;

it opened in October 1973 at a cost of A$102 million - more than fourteen times the first estimate.

Project track record: Bent Flyvbjerg's database of more than 16,000 projects found only about 8.5% on budget

and on time, and about 0.5% on budget, on time and delivering the promised benefits.

Joint venture: Sony and Honda formed the 50-50 joint venture Sony Honda Mobility in 2022 to develop electric

cars. Collaboration and virtual project: the Event Horizon Telescope linked radio telescopes worldwide in April

2017 and released the first image of a black hole in April 2019.

Sources: Guinness World Records and PMI on the Sydney Opera House; Flyvbjerg & Gardner, How Big Things Get Done (2023); AP

and company reports on Sony Honda Mobility; Event Horizon Telescope collaboration announcements, 10 April 2019.

STRATEGIC MANAGEMENT ACCOUNTING | M4 PART A.1 | STUDENT COMPANION

2

Accounting Ahead | Original study resource | accountingahead.com.au

Practice questions

MODULE 4 | PART A.1 | TRY THESE BEFORE THE WORKED ANSWERS

Question 1 - Project or operation?

Activity Project or operation? Why?

(a) A bank's call centre answering customer enquiries

(b) Moving a company's servers to a cloud provider by June

(c) Producing the monthly payroll

(d) Designing and launching a new loyalty app

(e) Restocking supermarket shelves overnight

(f) Building a temporary stage for a one-off festival

Question 2 - The accountant at each stage

A university plans to replace its student enrolment system within eighteen months. Describe one contribution the

management accountant could make at each of the four project stages.

STRATEGIC MANAGEMENT ACCOUNTING | M4 PART A.1 | STUDENT COMPANION

3

Accounting Ahead | Original study resource | accountingahead.com.au

Question 3 - Which structure?

Situation Structure

(a) Two mining companies pool capital to develop a deposit overseas and

share profits

(b) A council and a private consortium build and run a new aquatic centre

(c) A bank's IT team upgrades its payments system

(d) Engineers in four countries design a product together online

(e) Universities informally share data to study bushfire smoke

STRATEGIC MANAGEMENT ACCOUNTING | M4 PART A.1 | STUDENT COMPANION

4

Accounting Ahead | Original study resource | accountingahead.com.au

Worked answers

MODULE 4 | PART A.1 | WORKED ANSWERS - ATTEMPT THE QUESTIONS FIRST

Question 1 - Project or operation?

Activity Answer

(a) Operation: continuous and repetitive

(b) Project: unique, deadline, ends when migrated

(c) Operation: repeats every month

(d) Project: new deliverable, defined scope and launch date

(e) Operation: routine

(f) Project: one-off, temporary, defined start and finish

Question 2 - The accountant at each stage

Selection: quantify risks such as data migration failure, run a SWOT analysis and assess financial viability

(costs versus savings and benefits). Planning: prepare the project budget by activity and milestone and help

design KPIs such as enrolment processing time. Implementation and control: report cost and schedule

variances and track the KPIs, including licence costs paid in foreign currency. Completion and review: confirm

the final cost, close the project accounts and record lessons for future IT projects.

Question 3 - Which structure?

Situation Answer

(a) Joint venture

(b) Public private partnership

(c) Internal project

(d) Virtual project

(e) Collaboration (no commercial motive, flexible)

STRATEGIC MANAGEMENT ACCOUNTING | M4 PART A.1 | WORKED ANSWERS

5