Project Cash flow Reporting and Forecasting at Lend LeasePrepared by: Ken Salmon
16 August 2010
2
Agenda
Introduction Who am I? Who is Lend Lease? What does our Oracle environment look like?
The business problem (Why project cash flow reporting/forecasting?) Our project cash flow solution
Process overview Spreadsheet demo
Alternative approaches to cash flow reporting/forecasting Questions
3
Experience with Oracle applications
Worked with Oracle applications for 13 years
Started my Oracle applications journey as an accountant
Implemented and supported Oracle applications at sites throughout APAC
Lend Lease employee: 2 years
Current role: delivering business solutions to customers in Lend Lease’s communities business primarily through Oracle applications
4
Lend LeaseA global fully integrated property group
Established in 1958 Headquartered in Sydney, Australia Listed on Australian Securities Exchange (ASX:LLC) Global, fully integrated property group
Development Management Investment Management Project Management & Construction Asset & Property Management
Operations in more than 30 countries Four key regions:
Asia Australia EMEA (Europe, Middle East and Africa) Americas
A$5.6 billionOperating revenue
A$8.4 billionFunds under management
A$9.3 billionRetail assets under management
Circa A$4.6 billionMarket capitalisation
10,000+Employees globally
Numbers as at 31 December 2009
5
Some of our key projects
Shanghai Pavilion, Singapore Trump Tower, US
The new Royal Children’s Hospital, VIC
Barangaroo South, NSW MidCity, NSW
Darling Quarter, NSW Ropes Crossing, NSW
Brisbane Supreme Court and District Courts, QLD
6
Oracle at Lend Lease
1997 - initial implementation 2005 – upgraded to 11i
Currently on version 11.5.10 CU2
Core financials and projects, iExpenses and property manager implemented
Moderate to high level of customisation
ERP systems vary across location and businesses
Hyperion Performance Management Reporting used for operational reporting from the eBusiness suite
Hyperion financial management used for financial reporting and consolidation across multiple ERP’s
In Australia we have two set’s of books, one for Bovis Lend Lease and another for Lend Lease’s communities business and corporate functions
7
The customer
Australian communities business Apartment living (Vivas Lend Lease)
Victoria Harbour (Melbourne) Jacksons Landing (Sydney) St Patricks (Sydney)
Master planned residential subdivisions - (Delfin Lend Lease) Laurimar (Melbourne) Springfield lakes (Brisbane) Rouse Hill (Sydney) Mawson Lakes (Adelaide) Springbank Rise (ACT) Fairway Waters (Darwin) Alkimos (Perth)
8
The business problem
Users wanted to analyse cash flow at a project and task level
Solution is designed for Lend Lease’s residential development business
Lend Lease is a ‘project’ organisation
Construction historically a ‘cash’ industry (revenue and costs ‘lumpy’ depending on stage of project)
GFC – imposed greater discipline around cash
Solution to enable management visibility on projects cash flow performance and future forecast cash needs
Focus on costs as opposed to revenue
Completed quarterly
9
Cash flow solution overview
10
Cash flow process
11
1) Run extract process
Complex
Process extracts data from Oracle AP, AR, GL, PO and Projects modules
Point in time snapshot
Stores data in a number of views and temporary and permanent tables
Data outdated as soon as another transaction is processed
12
2) Save cost report
Project level snapshot based on extract process (previous step)
Still accrual based
Baseline on which the cash flow reporting/forecasting process is based
Multiple versions can exist simultaneously based on different extract versions
13
3) Download cost report version to spreadsheet
Based on saved cost report
Changes data from ‘accrual’ to ‘cash’ basis
Monthly periods on a two year rolling time frame
Months broken into ‘actual’ and ‘forecast’ periods
Populated by cost report, forecast populated by prior forecast
Spreadsheet does not download tasks where FFC = LTD certified
Track expenditures through the following stages: Uncommitted Committed Certified Cash FFC
14
3) Download cost report version to spreadsheet (cont)
15
3) Download cost report version to spreadsheet (cont)
16
4) Update forecast data (spreadsheet demo)
17
5) Upload forecast spreadsheet
Saves forecast data back to database
Baselines forecast as QPR or BP
Forms basis of hyperion cash flow reports
Populates forecast columns of next spreadsheet download
18
Issues with the solution
Difficult to Support Complex Wide range of skills required for support
Limited understanding by users ie ‘Black Box’
Inflexible time frames
Only at project level – does not consolidate across projects
Despite this, the solution has been widely accepted, stable and welcomed by the business, because it has enabled more precise management of project cash flows.
19
Other possible approaches
Alternative custom solution
Attach cash flow category to each GL natural account value via DFF
Natural Account Number Natural Account Desc Cash flow Desc (DFF)
410450 Wages and Salaries Payments to Employees
100010 Sales Receipts from Customers
410475 Telephone Exp Payments to Suppliers
200000 Misc Tools Payments to Suppliers
20
Other possible approaches (cont)
Custom solution to track back from every payment/receipt to the related AR/ AP invoice distribution’s natural account
Result should tie back to bank account movement
21
Other possible approaches (cont)
Standard Oracle Cash Management
Initial Cash position from bank reconciliation process
Based on user defined templates Columns = periods Rows = sources of cash
inflows and outflows
Forecast cash flows from all modules (includes projects)
Forecasting open interface available for external systems
22
Conclusion
About Lend Lease
Business context
Business problem
Lend Lease’s communities business custom cash flow forecasting solution
Other possible cash flow solutions
23
Conclusion
Questions?
“Cash is the oxygen of business, because unless cash is available to pay bills when needed, the business might be unable to operate or close its doors – even if profits are being made”
www.business.vic.gov.au
Cash flow forecasting and management is important because it:
Allows company’s to ensure liquidity
Minimise borrowing costs
Maximise income from short term investments
Manage financial risks
Project Cash flow Reporting and Forecasting at Lend LeasePrepared by: Ken Salmon
16 August 2010