Including operation costs in projects: For or against?

There are two schools of thought when it comes to project costing:

  • Charge only direct costs to the projects. In a second step use the project’s contribution margin to cover operation costs, also called overhear costs. This method makes the global profit margin more visible.
  • Charge all costs, including the operation costs, to the projects, and get net profit directly from each project.

How does it work?

Computing net profit globally

When charging only direct costs to the projects, the profit is called a contribution margin. It’s normal, since operation costs are not paid for yet.

At the end of the project, I compute my contribution margin:

  1. I invoiced $50,000.
  2. Direct costs for the project, including employee work, supplier invoices and contractor costs, are $23,000.
  3. My contribution margin is $27,000.

By adding this contribution margin to that of my other projects, I create a reserve to pay for operation costs. At the end of the quarter, for example, I can total my operation costs and subtract them from my contribution margin, to get my net profit for the period.

  1. I have $103,000 in contribution margin from my projects this quarter.
  2. I have incurred $60,000 in operation costs.
  3. My net profit for the quarter is $43,000.

Charging operation costs to projects

Project direct costs are easy to charge: supplier invoices, expense reports, time sheets and contractor costs are already associated with a project when logging them in Abak. When we want to add operations costs, it gets tricky. How can we decide how much of the operation costs to charge to each project? We’re talking about rent, administrative staff, computers, etc.

The simpler method is to add an extra amount to the hourly cost of resources.

Here’s an example:

  1. My operation costs are $100,000 per year. This includes all costs not charged directly to my projects.
  2. I have 10 employees who work on projects, on average 2,000 hours per year.
  3. My total worked hours for the year is 20,000 hours.
  4. I can divide my operation costs by my worked hours: $100,000 / 20,000 hours = $5.

This $5 is the amount I will add to my hourly costs for all employees that charge to projects. If my employee has an hourly cost of $32, including salary and benefits, then I’ll us a cost rate of $37 per hours to include operation costs. I can do this directly in the employee’s cost rate in Abak, or I can configure a $5 cost mark-up in the employee functions.

With the adjusted hourly costs, I can include my operation costs in my projects. This operation cost mark-up can be computed on a yearly basis by accounting and finance teams.

At the end of the project, I can see my net profit easily:

  1. I invoiced $50,000 for my project.
  2. My costs, including the operation costs mark-up on hours worked, total $37,000.
  3. My net profit is then $13,000.

Good sides, bad sides


Document Management for your Projects

There was a time, not so long ago, when metal cabinets heavily loaded with files were the only solution to preserve and file documents. This time now belongs to the past and paper is gradually replaced by the more convenient electronic format, less bulky, and easily sent to multiple recipients.

Storage and classification of documents in electronic format are performed on directories located on the computer disk, in emails, on server, or in cloud mode.

Indeed, though this solution is rather convenient when one wishes to manage a virtual library, limitations will soon appear. We will get back to this topic a little later.

Demand generating supply, new tools and concepts quickly appeared on the market.

Indeed, terms such as Electronic Document Management and Content Management (better known under the term Enterprise Content Management -ECM) are now common; there are numerous document management systems.

Collectively known as content management solutions, they meet very diverse needs. Let us mention a few of them:

  • Document management;
  • Web content management (WCM Web Content Management);
  • Multimedia document management (DAM (Digital Asset Management);
  • Archives management;
  • Email management;
  • Content analysis of digital documents (Content Analytics or Content Analysis).

The aim is to manage the content of numerous unstructured documents in order to automatically analyze and identify trends in those documents.

What are the benefits of document management?

Utilizing a document management system offers numerous benefits. However, it is mandatory that the solution is integrated in a software suite which brings together the various modules required for appropriate and effective project management. In fact, quite often, organizations will have a whole range of management tools:

  • Time Management
  • Budget Management
  • Management of the deliverables
  • Management of changes occurring in projects
  • Management of work in progress and billing
  • Management of time banks
  • Document management
  • Etc.

The problem that arises does not involve the tools themselves. The problematic rather lies in the fact that those different systems do not communicate with each other. Therefore, the benefit of these solutions is dissolved in the time needed to forward information from one application to another with all the risks of mistakes and forgetfulness that this delicate operation involves.
Ideally, the document management tool must be available on a versatile software platform, easily operated by the project manager, that is to say; no need to use multiple software, and direct access to all components of the project:

  • Budget;
  • Project WBS;
  • Allocation of resources;
  • Monitoring the availability of resources;
  • Transactions (timesheets, expenses);
  • Management of vendor invoices;
  • Billing;
  • Financial Reports;
  • Notes on project;
  • And other documents related to the project itself.

The direct benefits are time saving and centralization of information.

Abak360 was recently fitted with a versatile document management module. It is thus possible for the user to centralize all documentation relating to a project directly in the project folder (receipts, pictures, layouts, and any other type of documents). An employee who enters his/her time and expenses also has the ability to electronically attach receipts to the expense account.

For further information do not hesitate to contact us!

Time and expense tracking software for R&D projects

Tax credits on R&D projects constitute a significant financial source that contributes to the growth of your company. However, preparing credit application files often represents a time consuming and rather painful process both at administrative and organizational levels.

Are these issues familiar?

Permeability between different projects: how to log the actual time against the appropriate project? Most of the time, various R&D projects are carried out simultaneously and may be related to similar tasks. Therefore, unless you have a flexible tool to manage those projects, time recording may become unreliable and tedious.

Create project templates in Abak 360, duplicate them each and every time you launch a new R&D project, and assign employees to the project. Reliable data entries will be logged against the right project, by the appropriate resources. Quick and efficient!

Everyone can log time on a project according to one’s own method (task description for instance). Quite often employees will not log their time and related expenses on a day to day basis. In the absence of a systematic input method used by all, data entries may vary depending on individuals, their attendance, and their attention to details. Thus, the information might not be realistic, nor reliable.

In Abak 360 create all the tasks and expenses types that you need. List those tasks and expenses types in your project, organize them in phases and sub phases. All employees assigned to the project will access the same list of tasks and expenses.

Correlating time/expense entries and documentation: tax credit applications require detailed documentation in regard to the projects and the time devoted to them. In most of cases, documents and receipts are not correlated with the time/expense tracking solution.

Abak 360 includes a powerful document management tool which allows storage of documents in electronic format for a given project. Centralizing all information on a R&D project including documentation will save you precious time.

Omissions and errors regarding hours and expenses logged on a R&D project are quite common.

With Abak360 It is possible to limit the risk of errors and omissions by building phase based project architecture. Moreover automatic alerts will be triggered when a project has reached a problematic or critical situation (in regards to the budget for instance or on planned quantities). Abak360 will warn you when a project is drifting away from its boundaries.

Managing expenses for R&D project is quite often difficult. Are all the expenses planned, have they all been approved. Are the expenses assigned to the right project?

Planning and budgeting your expenses is easy in Abak 360. Within your project tree you even can plan you expenses per phase and per sub-phase. Invoices and receipts (in electronic format) will be kept in the project file.

Preparing an application for a R&D tax credit requires a lot of time. Very often information is scattered throughout different files.

Abak 360 standardizes and secures your project management process. Further, all the information related to the project is centralized onto one platform (time and expense entries, budget, report, documents, resources assignations, and notes on project). With Abak360, you spare a lot of time. No rush anymore to complete and send your application for tax return on time!

The right tools for the right team!

As you know, we live in a very competitive world.

To gain contracts and projects, a nice reputation and past successes aren’t
enough anymore; you have to gather the key elements of the achievement equation:

Quality of the product or service + Reputation & referrals + Optimized prices and delays + Pragmatic organisation = Project acquisition

Therefore, the focus must be put on the preciseness of the price and the accuracy of the project’s structure as well as a satisfying accomplishment delay for the prospect.

At a preliminary stage (the quote), it is important to use work methodologies that allow you to calculate the price of a project. This price has to be competitive but should also generate important profits for the company.

With this in mind, a time management, invoicing and project cost management software is a must-have; its efficiency can be found in a logical follow-up of actions:

  1. Project architecture
  2. Quote preparation
  3. Budgets
  4. Time management
  5. Follow-up of project’s cost
  6. Invoicing

At the preliminary stage, the project management can define the main phases of his project and extrapolate any expected sub phases and activities.

That way, it is possible to anticipate different skill levels and attribute them diversified tasks, therefore make responsibility choices according to each team member’s abilities.

Honorary optimisation for everyone is then possible. For example, visiting a building site costs less that writing a technical report; elaborating a building plan costs more that informative meetings or administrative paperwork related to the project. A wise decision regarding those choices will optimize your offer’s competitiveness.

The software allows you to partition the project in as many phases, sub phases and activities you need in order to understand better the client’s needs, the project’s challenges, its risks and the time it takes to fulfill it. Above all, the software allows you to plan in details the required activities, the costs and the prices while considering competitiveness.

Working with this method allows a competitive positioning but also lets you save time when obtaining a project because most of the management and budgeting is already done.

No more double entry of data: you can just keep on working with Abak and follow-up on your project’s real-time cost until it is over!

8 steps to choose your project management tool

StockfreshDecisionsRegarding the choice of a project management software, you cannot improvise: it is crucial to adopt a structured method that will guide you to the most appropriate choice. We recommend a methodology identifying the main steps that help you avoid selecting a product that isn’t fit for you.

Your needs evolve in time and it is essential that you acknowledge this fact during your selection.

Here are the eight steps that will help you choose a project management software. You have to:

  1. Define your needs;
  2. Establish a software evaluation workbook;
  3. Identify software suppliers;
  4. Ask each preselected supplier to fill the evaluation workbook;
  5. Demand a demonstration to 3 of your potential suppliers;
  6. Request a free 30-day trial;
  7. Ask for client referrals;
  8. Negotiate prices and contract terms.

1 – Define your needs

This most important step is often minimized or hastily executed. That is why we recommend that you meet with the employees that might be involved in project management, gather the documents you usually need and explain your preferred behaviors regarding the actions you take. Over all, this step will allow you to validate if your methodology is constant in the company. We also recommend that you compare your ways of functioning with the PMI standard.

2 – Establish a software evaluation workbook

Once your needs are clarified, you need to precisely evaluate the tool’s functionalities in order to make sure that it will easily be integrated in your current environment.
Let’s be honest, the “perfect” tool does not exist. However, the market is full of good quality solutions that might be able to fulfill your needs.

It is important to create a criteria and precise method grid to facilitate the selection of your potential suppliers’ tools. Classify your needs in 3 categories: E = essential, I = important, W = wanted. Don’t forget to include your key collaborators and the future users of the tool.

3 – Identify software suppliers

You can quickly find the most popular solutions by doing a quick web search. We recommend that you identify 3 to 4 suppliers in your evaluation workbook because the assessment can be lengthy. Ideally, when possible, the suppliers should be located relatively close to you (same time zone, language, corporate culture).

4 – Ask each preselected supplier to fill the evaluation workbook

It is important to ask your preselected suppliers to fill the evaluation workbook and to give it back to you in less than a month.

5 – Demand a demonstration to 3 of your potential suppliers

With the help of your evaluation workbook, you have to choose 3 suppliers that correspond the most to your needs and ask for a demonstration. If possible, you should give them a project script so they can prepare for a personalized demonstration.

6 – Request a free 30-day trial

In order to get used to the tool, we recommend that you request a free 30-day trial.

7 – Ask for client referrals

Request at least 3 client referrals working in your field and contact them to know their opinion regarding the product and service.

8 – Negotiate prices and contract terms

When your supplier is selected, negotiate the price and contracts terms and ask for the implementation plan. Try to evaluate the implementation duration and your resources’ availability.

Thank you and good luck in choosing your software! In the meantime, we invite you to visit our website to discover our multiple project management, time and billing, skill management and standard management products!

Find the margin thieves in your projects

canadian-money-stock-market-7471429 (2)Projects can easily start off with a good profit margin, and end up at a loss – even if the billable rate is twice the cost rate for a consultant, and even if there was plenty of room for error when the contract was quoted and signed.

As the project moves along, margins thieves get into the project and eat away at that comfortable padding we added to the contract. These margin thieves can go undetected until the end of the project, when it’s too late. Margin thieves often take the form of non-billable items that are not logged correctly to the project. For example, it can be time logged in an internal project or not logged at all, or an expense mistakenly absorbed in the overhead costs of the business. When the project closes, the administration team corrects those mistakes, and our profit margin melts away.

How can we fix this and prevent the margin thieves from going undetected? Here are 5 suggestions:

  1. Make sure all expenses are logged to the project. This includes non-billable expenses, like parking fees or employee’s expense reports.
  2. Make sure all time worked on the project is logged to the project. This includes non-billable time, such as technical support time or administrative time.
  3. Make sure to log all supplier and contractor costs to the project, even if it’s non-billable.
  4. Run your budget control report religiously. If all expenses and work hours are logged, the report will tell you, in real time, how much the project has cost so far.
  5. Set up a workflow alert to email the project manager when budgets are in danger.

For more information, contact

Project management and project cost management: two worlds

Quite often when we speak about project management, we usually refer to the set of monitoring tools that are utilized to ensure that we shall deliver the project according to the three universal criteria:

  • Product/service delivered on time;
  • It is proper according to the specifications;
  • It is proper according to budget.

It is rather simple to list the required specifications and to comply, and it is relatively easy (everything being kept in perspective, of course) to plan the final delivery date for a project. However, it is more difficult to incorporate changes and contingencies that may arise during its execution. In general, project management tools used to manage these changes along the way allow limiting risks, at least on the organization point of view. It remains no less true that these changes have an impact on the financial component of the project.

Therefore, the concept of delivering ‘according to the defined budget’ becomes quite often uncertain.

The importance of billing method is obvious:

If we invoice the real number of hours and related expenses, then the situation is perfectly clear and there are no problems in sight. Whatever the changes involved in the life of the project might be, the billing will be done based on the real number of hours incurred in the performance of services and expenses. However, unforeseen costs may occur after project delivery.

If we bill on a fixed fee basis, the following question will soon or later arise: what do we do if our flat rate billing does not reflect the reality on the ground? In other words, if we charge a lump sum which in equivalence is less than the selling value of the worked hours? Shall we post the difference in losses, or initiate a negotiation with the client? It will depend on the customer’s goodwill and on our negotiating skills.

Anyway, at this point we find ourselves still in the phase of delivery of services, but what about services rendered to customers beyond the delivery date of the project? Although these occur in retrospect, they were not initially budgeted, and as such they will affect the level of profitability of the project.

Let’s take an example: we develop a software solution for the industry.

My project consists of three phases: needs analysis, development, and commissioning. For the entire project I planned respectively 25, 100, and 50 hours for a total of 175 hours. My average hourly cost is $35 and my average hourly rate is $70. The agreement with the client is based on a lump sum of $14,000 (175 hours and a 25 hour buffer at the rate of $ 70).

I underestimated, in my analysis, development needs. In addition, the Beta version contained bugs that I had to fix. In total, I spent 40 hours more than anticipated in my original budget (excluding the buffer). In compliance with the agreement I have with the client, I charged a flat fee of 200 hours and therefore have recorded a loss of 15 hours, representing $ 525 (cost). The software has been delivered. Two months later, the client informs me that there are recurring malfunctions and I have to work twenty hours to correct the situation. In total, although the project has been delivered, I recorded a second loss equivalent to $ 700 (cost). To summarize:

industrial software

Beyond project delivery, financial loss may occur. It is therefore appropriate to include in the budget a risk factor which would ideally represent the price of one year of service contract. In the example, besides the 25 hour buffer, it would have important to add an amount to cover the risk of post-delivery, for example 10 to 15% of the total contract value. Abak software specializes in time recording, billing and cost management of the project while including a component for budget calculation.

Abak or ERP?

The ERP: An Essential Management Solution

ERP solutions (Enterprise Resource Planning) are now an indispensable tool in the management of a company. Ensuring the pragmatic management of internal processes, the ERP system contributes greatly to increase the profitability and productivity of the enterprise. The ERP offers many features and positions itself as a centralizing element: a communication link between different software (CRM, payroll, accounting, etc.) and thus eliminates data redundancy, multiple data entry and errors or inconsistencies between different management systems in place within the company.

The Other Side of the Coin

The process of choosing a solution, its gradual implementation of the solution, testing, and customization have an impact within the company, both in terms of personnel and processes. The time required for the solution to be fully operational alone represents a significant challenge for the company, especially for small business.

Alongside these considerations, there is the financial component – not a negligible element. ERP systems are generally expensive. The introduction of an ERP system, in addition to its price, generates significant associated costs:

  • Time required to choose the solution
  • Time and effort required for implementation
  • Customization costs
  • Test phase costs
  • Training costs
  • IT infrastructure costs

While many companies are fully satisfied with their ERP system, others, however, find themselves ‘stuck’ in a lengthy and costly implementation process. In some cases, company leaders must face the facts: the implementation of the solution is a failure, as well as a waste of time and money.

The implementation of an ERP system is not only the installation of an IT solution. Whatever the chosen solution, a constant challenge is time. Business leaders must indeed be patient and plan the implementation of its ERP over several months before it is fully operational, sometimes after multiple adjustments.

ERP vs Abak

The missing timesheet nightmare: 5 strategies to fix the problem

When we meet prospective clients, we often hear about their difficulties in getting everyone to fill out their timesheets in time. Missing timesheets create problems for administration: information is missing at billing time, project performance reports are incomplete, and payroll requires assumptions to be made, which are difficult to correct later on.

The fact is, very few people enjoy logging their time. It’s often perceived as a clerical activity that is not productive to the employee, and provides a sense of “being controlled from above.” Not every part of one’s job can be fun, and we have to live with that.

However, as managers, we can use strategies to motivate our employees to hand in their timesheets. Here are five of them:

  1. The hard line: No timesheet, no pay.
    Pros: It’s highly effective. If someone misses a paycheck once because they forgot to submit their timesheet, it will certainly be their last.
    Cons: Repressive strategies tend to breed discontent in teams.
  2. The positive reinforcement: Get a perk every week the timesheet is filled on time.
    Pros: Getting the perk is a positive motivator and people will enjoy it.
    Cons: No perk comes for free: you have to allow the additional cost in your budget.
  3. The nagger: Automatically (or manually) tell your employees when they have not filled out their timesheet.
    Pros: This method works well with the forgetful employees.
    Cons: Most employees will become accustomed to the reminder over time, and the method may lose effectiveness in the long term.
  4. The gamification: The first employee submitting a timesheet gets a prize.
    Pros: Gamification of the workplace is all the rage these days. It’s especially effective with younger employees.
    Cons: As the article suggests, making a game out of timesheets does not make up for bad management. Plus, the game needs to be kept interesting, so it requires frequent updates and changes.
  5. The social reinforcement: Teams who submit timesheets on time get recognition, team who don’t lose a perk.
    Pros: This strategy promotes working as a team and may improve team cohesion.
    Cons: A non-compliant team member might be ostracized and experience adverse effects from his or her colleagues, creating more conflict in the workplace.

Whatever the strategy, you have to choose one that fits your team and the way they work.Good+boss

Workflow management, a must

IMG_1267In order to improve your business efficiency and to standardize your processes you have purchased a time and billing system which enables you to invoice and to manage your projects through various financial reports. So now you have a solution that centralizes the different stages of your project management.

However, the system is dependent on your goodwill. It is your responsibility to manage your employees’ timesheets, to follow the evolution of your costs, project by project, to manage status changes in your projects, to manage completion dates of projects … and the list goes on.

Abak is a proactive software that manages these important elements for you and keeps you informed through alerts. Abak’s workflow module enables you to configure alerts in various situations.

How does it work?

The principle is simple; various rules relating to specific situations are set in Abak. Those rules are customizable (frequency, description, trigger parameters). The administrator creates templates for custom alerts. Alerts can be applied to one or more projects, and a number of customers or employees. The alarm activation results in sending an email to interested parties.

Some types of alerts:

  • When you reach a certain percentage of the budget,
  • When the project status is changed,
  • When you approach the planned completion date of a project,
  • When a timesheet is incomplete, etc.

Example of a customized alert:

“Hello! A phase of a project is over budget:

Project WLAFL-01F-CONSULAR – Training and Documentation

Phase 1.1 – Meeting client. Actual amount of hour in phase: 40h – Budget Phase: 30 pm.

Attention is required.

Good day! Abak, your friendly business management system.”

Do not hesitate to contact us for more information on Abak’s workflow module!


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