Best practices: Project management (money)
With projects, there are two main metrics that need our full attention, both directly impacting one another. We’ve already looked into how to deal with our most valuable asset – time.
Now it’s time to take a look at the financial side of project management. With Scoro, you can easily track, manage, and optimize the time and, therefore, the money you spend on different activities. Let’s see how to make accurate prognoses, compare estimates to actual results in real time, and make sure you earn more than you spend. Note!
The best functionality for budgeting and financial reporting is included in the Scoro Ultimate plans. Project budgets are available with the Advanced project management solution. Margin (in quoting and reporting) is available with all sales plans.
If you mostly want to track real-time results and detailed budgeting is not that relevant for you, just skip the budgeting section in this article and jump right to tracking and measuring actual results.Before we get into best practices there are a couple of essential things to know:
1. USE PROJECT BUDGETING TO ESTIMATE REVENUE, COST (AND THEREFORE PROFITABILITY)
- There are two types of cost in Scoro that you can keep track of:
a. Labor cost for calculating the cost of services provided in-house (e.g. the cost of the time your team spends on different tasks). Labor cost is calculated automatically based on the hours spent on the task multiplied by the hourly labor cost rate of the team member doing the task. Labor cost is your internal cost for each user per hour and usually includes the person's hourly salary + some overheads.
b. Bills for calculating external cost (purchase invoices for outsourced services or products). Bills need to be entered into Scoro.
- The sales invoices issued are considered as project revenue. However, you are also able to track the potential earned revenue (based on the tasks completed and the selling price of the services).
- Project profit is calculated based on actual sales and purchase documents and labor cost. Project (gross) profit = invoices issued to the customer minus bills and labor cost (if used).
2. SEE ACTUAL RESULTS USING INVOICES AND COST (BILLS, EXPENSES)
- The easiest way to create a project budget is to use a quote confirmed by the customer as the budget. In the project modify view simply select the option to use amounts on the quote as your project budget. The total sum (amount) is then considered as budgeted income and total cost as budgeted cost. So make sure you have also filled in the cost section on the quote. If you have marked the services on the quote as in-house, the budget for labor cost is added. If the services are outsourced, the budget for bills is added.
Note! Only successful quotes are used as a basis of the budget, because several quotes may be issued to the client, but only some of them get confirmed. You can define which statuses are considered as successful under Settings.
- The cost section is automatically filled in on the quote if you:
a. add labor cost for each user to the system (if providing services in-house). You can then select a “default doer” for each service and when quoting them, the cost fields are automatically filled in with the correct data.
b. add a buying price on the product/service rate card for outsourced services.
- If you prefer not to add cost on every single row on the sales document and are rather looking to get a high-level estimation, it’s wise to use a simple budget instead of quoted amounts. The simple budget allows you to manually insert the approximate sum of the expected sales invoices, labor cost, and bills.
- When using a quote as a budget, there is also a highly detailed way of tracking project progress – the Quoted vs Actual table. The table shows a comparison of quoted estimates and actual results line by line. As this comparison is based on the quote, it’s important to link all relevant activities and documents with the original quote to make sure the numbers in the table are accurate. Turn the quoted services into tasks for your team. When it’s time to invoice the customer, create an invoice based on those tasks, or create an invoice from the original quote. When outsourcing some of the services, or ordering products from a supplier, create a purchase order from the original quote and then turn it into a bill. This way, the system can associate all the relevant information. If you don’t need to track projects in such a granular way, just use the project summary table as the budget.
3. COMPARE THE BUDGETED DATA TO ACTUAL RESULTS
- Issue invoices for the completed work (or prepayment invoices for future work). There are several ways for invoicing in Scoro. You can either use prepayments (pro forma invoices), time-billing (creating invoices based on completed tasks), partial invoicing (creating partial invoices from a quote for a proportion of work), scheduled invoices (for automating recurring sales invoices), create an invoice out of the quote or simply compile it manually from scratch. Just pick the option that suits your business the best. Creating invoices out of quotes is, of course, the easiest and most popular option.
- If you’ve set up labor cost for your team members, it’s automatically calculated based on the hours spent on the project-related tasks. Just make sure your team is logging their work-time accurately.
Of course, you don’t have to set up labor cost, if not relevant, just keep in mind that the project profit is then misleading, as it indicates the profit prior to the internal cost.
- Insert purchase invoices to Scoro as bills. As said before, you can automate the process by creating a purchase order out of the quote compiled for the customer, and later compile a bill out of that purchase order. This way all the relevant data is transferred from the quote to the bill (the product description, quantity, supplier, and buying price are prefilled for you). Just insert the bill number (the document number on the purchase invoice), due date, and double-check that the prices and quantities match.
TIP! If you receive a bill that should be associated with several projects (e.g. a bill for google ads used for several projects), link a project with each line of the document to easily divide the bill between the respective projects. (However, if you’re using the Quoted vs Actual table, the cost will not be associated with a specific quote line and is displayed in the table as “Not quoted”).
- In case of other project-related expenses (e.g. taxi receipts, restaurant bills, travel expenses, etc.) that should be linked to the project, insert them to Scoro as bills. To reduce the manual work of entering each expense to Scoro, simply add one combined bill for all the relevant expenses.
4. GET DETAILED REPORTING ON ACTUAL RESULTS
- Compare the project budget to actual results. Open the specific project detailed view and take a look at the project summary table or the Quoted vs Actual table to see whether you’re still within the budget or about to exceed it.
- To get an overview of multiple projects at once, use the Project list. Customize the list view by selecting the following fields to display: Project income (issued invoices), Labor cost, Cost (entered bills), and Profit (income - cost - labor cost). In the list view, the number on the first row shows the budgeted amounts, the number on the second row indicates actual results.
- In addition, you can customize the summary bar on top of the list to show only the information relevant for you (for example the budgeted and actual profit). Make sure to bookmark the view to avoid filtering the list each time and easily use the results on your dashboard.
- To track the financial results of the current period, go to the Detailed financial report. Filter out the documents you want to track (e.g. invoices or bills), then select the relevant period from the Issue date filter and group the report according to your needs. For example, group the list by clients and subgroup it as a list to see how many invoices you have issued to each customer and how much you’re making.
Or, if the sales team is responsible for issuing invoices, group the list by users to see each team member’s contribution to the revenue.
- Compare the financial results of two periods in the Detailed financial report. Just open the Issue date filter, tick the Compare option, and select the relevant comparison period. Read more on how to use filters.
- To keep an eye on project profit, select Profit (after labor cost) as an input in the Detailed financial report (this option is available if Margin is enabled on your Scoro site).
Alternatively, you can use the Project list to oversee project profit (this can be done, if the Project budget feature is active on your Scoro site).
- Set a target for income and see in real time exactly how close you are to reaching your goal. First, go to the Detailed financial report. Filter out all invoices in period (select the current month, for example) and save the filtered report as a bookmark. Now open the dashboard and set up a result metric with a goal. Read more on how to customize your dashboard.
- Set a limit to the project cost and track how much you’ve spent in real time. First, go to the Detailed financial report. Filter out all bills in period (select the current month, for example) and save the filtered report as a bookmark. Now open the dashboard and set up a result metric with a limit.
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