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 sales@abaksoftware.com

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!

Do you underuse your time management, billing software?

You have been working with your software since a few years but do you use it to its full potential? Does it still answer your expectations and fulfill your needs?

Most software are normally updated at least once a year and include new features and improvements. The world of software evolves quickly and continuously. Update after update news functionalities are activated and quite often the user has no time to get used with those improvements, and new features and hence cannot really get the benefit of those improvements.

IMG_0804 (5)

Under which circumstances would you under-utilize your software?

  • Employees leaving the company

In each and every organization, the staff is called up, sooner or later, to be replaced. Part of their knowledge is then passed on to the successors. This transfer of knowledge is often imperfect, incomplete or erroneous. This fact applies also to the resource(s) who manage(s) the time, billing and project management software. Hence, quality and accuracy of the passed on knowledge might decrease throughout the years, affecting the proper use of software. It is recommended to write a procedures handbook where the knowledge can be consigned.

  • Software not updated

Users often tend to forget to update their software. Most programs offer one or more updates per year. Each update includes improvements and new features. Therefore, the users quite often do not use the software to its full capacity, thus depriving them of valuable and useful features.

  • Additional training required

Quite often the users who maintain their software updated, will partially use the new features, and will not ask for additional training. The risk is then high that new features and software improvements will be misused or partially utilized.

  • Evolution of the company needs

Each and every business grows throughout time, and therefore company needs and requirements evolve too. Most of the time those needs, such as time management, billing, financial management of the project require a changing features tool. However, the user continues to use the software as he did years ago without using all the benefits that software can provide.

It is therefore recommended, in parallel with regular software upgrades and updates, to validate the following:

  • Does the staff know well how to use software?
  • Are my software updated to the most recent version?
  • Do we need to refresh our knowledge of software by means of additional training?
  • Does our time, billing and project management software still answer your growing needs?
  • Do we have an updated and customized procedures handbook?

A look at your current situation conducted with your software provider is recommended.

Implementing a new software sometimes seems like a dreadfull process

struggle

Each company is sooner or later confronted with the need of new management software, for instance a time, billing and project cost management solution. Such kind of software is a tool which belongs to a constantly changing world, and its life cycle is quite often very short.

Installation is only a preliminary stage of an implementation process that can sometimes be complex and require a lot of time. In the case of ERP systems, for example, the implementation process will generally require several months. One can imagine the stress and uncertainty that such an operation generates within a company.

Beyond technical considerations such as compliance of the IT infrastructure with technical prerequisites, integration with other software, and import of existing data, there are other important elements that play a role in the successful implementation of the new program.

These are human parameters. They should be taken into account in the specification of the implementation process:

  • the risk of reluctance to change
  • the motivation of key players involved in the implementation process
  • the availability of key personnel during the implementation process.

Reluctance to change

The situation is well known, and very symptomatic. For example, employees of a company are accustomed to log their time in an Excel format. The implementation of new timesheet software can be seen as a disruption of habits and a strengthened way of controlling employee’s time.
Another example: invoices are generated manually with word processing software. The advent of software that processes timesheets, expenses and generates billing may create irritation and reluctance because its implementation will modify work methodologies which often are deeply rooted among the employees. This climate of reluctance could generate the risk of delaying the commissioning of the new time; billing and project cost management software and affect its performance.

Motivation of key players during the implementation

Before making a choice of change or acquisition of a new timesheet management tool it is crucial to ensure that key stakeholders, that is to say, the managers of the company are really motivated by this implementation and consider this new project management software as a significant improvement in their current processes. If this is not the case, the duration of the implementation will be longer than normal, and the brand new tool is likely to be under-utilized. A common example refers to professionals with highly developed ‘creative’ skills (communication professionals, architects, and others) who could be poorly motivated by the perspective to use organizational and financial software features for monitoring their projects.

Availability of key people

When you implement a new management time and expenses recording software, key people (Controller, General Manager, HR …) need to be available in order to assiduously attend training sessions. Experience shows that too large time gaps between training sessions has the perverse effect of diluting the knowledge acquired progressively, to discourage individuals and to significantly slow the process of implantation. In addition, the software vendor expects to be guided by his client to set its product plan and organize training according to the customer’s expectations.

Conclusion

Choosing a time and billing software based on technical requirements and software performance is a good strategy of evolution of the company. In contrast, the human component, as briefly mentioned above should require a detailed analysis beforehand. If all the conditions required for the implementation (technical and human) are not gathered, one should then perhaps postpone the operation to ensure its success later. In a nutshell, availability and motivation of key people constitute the key to a successful implementation. When a company decides to move forward with our time and billing and project cost management software we take those human parameters into consideration, and work closely with the customer to ensure a successful implementation.

5 traps of fixed fee contracts

Fixed fee contracts can be great assets as well as disadvantages; it’s not that they’re bad in themselves, but they must be done right in order to avoid onerous consequences. When drafting a fixed fee contract with a client, here are 5 traps to avoid:

  1. The missing information. When doing a fixed fee arrangement, make sure to be as specific as you can about what is included and what isn’t in the contract. This can apply to the number of hours of work included or the number of revisions allowed on a plan. Also, any extras should be specified along with the rate at which these will be billed. This helps settle disagreements.
  2. Is it finished yet? Be very careful how you define a work as completed. Is it after the required hours have been worked? Is it if the customer accepts the work done? Is it based on specific requirements provided by the client? Being specific about when the work is done helps curtail the “one more thing” problem with clients who always want more.
  3. Forgotten costs. When putting together the proposal for a fixed fee contract, it’s important to think about all your costs. That includes time spent by administrative personnel, travel expenses, or even luncheon meetings. You should also think about technical support costs and factor those in.
  4. What about after? The fixed fee contract should also include the cost of post-project support. Just like the cost of customer service is built-in the products we buy, so should we include it in our fixed fee contracts – unless we exclude it.
  5. How full is the glass? No one wants to think about problems we might have in a project. We all want to feel competent and able to complete our projects on time. However, when estimating a fixed fee contract, pessimism rules. Planning for the project to take longer builds leeway for us down the line.

Precision and efficiency are most important in a time management et billing software like Abak 360.

Reluctance to change, a major obstacle for companies

change-ahead-sign

Types of change

Any change that occurs in the ecosystem of the business generates reactions. There are among others, two main types of changes:

  • Technological changes: for instance we introduce a new mode of production in the factory, or new management tools.
  • Changes related to duties and obligations of employees.

In some cases the change will not only have an influence on the technological aspects of the business but will also have an impact on human resources. This is the well-known case of the implementation of new software that modifies the management process, but also the habits and duties of employees. The introduction of a time, billing and project cost management software like Abak is a good example.

Possible reactions

The occurred change will have a serious impact on the day to day operation of the company and will also generate very different reactions from the workforce. Those reactions can be of two types:

  • Positives reactions: every change has its supporters. It is seen as a progressive innovation which, at medium and long term, will be productive (time saving, standardization of data entry, improvement of the billing process, optimized management of projects, etc…). Generally, executives and management staff are in favor of these changes.
  • Reluctant reactions: employees will have to complete their timesheets and their expense accounts regularly and in a consistent manner. Furthermore software will generate automated reminders when time sheets are not completed on a specific date. What will be the reactions of the employees?

– The introduction of this tool is a more or less hidden reinforced control tool of employees’ activities.

– This will result in a work “overcharge” because the time sheets will have to be filled regularly.

– The employee will have to detail his/her activities and not only declare these succinctly.

– The implementation of such a system can be seen as a lack of confidence from the management towards the employees.

What to do?

Before the implementation of the time management, expenses, billing and cost management project software, it is recommended to “take the pulse” of the team. We inform the staff of what is coming and we do it in an open dialog.

For example we organise one or more meetings that will focus on several topics:

  • What are the day to day recurring problems? For example: difficulty managing time banks, under billing, loss of valuable time; all factors that affect the efficiency of the business and its competitiveness.
  • The example of companies which have optimised their process by implementing new management tools.
  • The desires of the direction to facilitate the work of everyone in an organized, functional and effective way.

The final goal is to invite employees to think on how to improve the current situation and to present the solution considered as a useful tool for everyone whose use will simplify the daily administration, optimize the billing and project management and employees time bank. Time gain, ease and process optimization are all keywords that will contribute to the general acceptance of that new software.

Who does what, for whom and for when? Eloquent case study

The client has just sent his order and there is a lot of excitement at the company. Indeed, the project is very ambitious and is going to require most of our employees over a long period of time.

We are Epsilon Conseil (*), a SME specialized in professional services. We deliver projects which are mostly far different one from the other. Indeed, some of them last over a short period of time and involve a limited number of employees and others, on the contrary, are larger scale projects.
This kind of large project represents a primordial interest for a SME because it generates revenue that we cannot miss. However, it can be risky.
Let’s take some examples:

  • Delays on delivery resulting in possible penalties.
  • Work overload for employees and progressive demotivation.
  • Risk of exceeding the initial budget that was used to calculate a fixed price. Risk of loss through under-billing.
  • The project requiring much of the workforce, there is a bottleneck risk when obtaining other projects during the delivery of the project in question.
  • If many people are involved in the project, some tasks may be duplicated and, therefore, affect the profitability of the project.

We have, upon reception of the order form, determined the deliverables list and we have quantified them. To do so, we have listed the requested activities defined their quantities and determined the expenses that we shall engage to fulfill those tasks. At last, to take into consideration the risk factor we have applied a buffer percentage to the estimated project duration. Here we are, finally ready to launch our project. However, the human resource aspect must be taken into consideration to ensure the success of the mission. Indeed, we must plan the different steps of production and delivery to ensure that we have all the available resources to do so. Another element requires a special attention: our production capacity.

In our professional field, our production tool is time spent by our workforce on the different projects. Therefore, it is mandatory, for the benefit of the project, to ask us these questions:

  • In the meantime during which the project is active, what other projects are in the pipeline?
  • Which impact would have those ongoing projects in terms of staff mobilisation?
  • What would be our flexibility in case we would win new projects during the considered period?
  • How to deal with the delays and their impact on the following projects?

This list is not exhaustive.

The evidence is there: the solution is a planning tool which is integrated not only to the application that controls the working time but also to budget control reports, and other project monitoring reports (work in progress, expenses management, and billing).

Abak software Inc. proposes a resources assignment tool. There are several ways to assign employees to projects. It is possible, when building the project architecture in Abak, to assign several employees for a given period and for a specific number of hours per day during which the employees will work on the project or to assign employees to a specific activity for example.

This results in a monitoring table, Gantt type, which offers an overview of everyone’s time, and determines the level of availability of employees for a given period. The assignment module includes a detailed report as well. Depending on the selected criteria and the employee’s assignment, this application will be able to track the progress of projects and the remaining availability of resources.

gantt-english

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