You are Losing Money – Part III – How much do I make per project?

In our last article we talked about how to calculate cost rates and billable rates. The next set of important questions to answer is:

  • How much do I make per project?
  • How do I ensure I do not run over budget?

The best way to keep an eye on your revenues and profits is by tracking in real-time what your employees are working on. When they work on billable projects and the billable rate is above the cost rate, then you make a profit. The cost can go up when your team members are booking on internal projects which normally have a cost component only. These could be either billable units such as programmers working on a product that one day can turn into a commercial success, or non-billable units such as HR and admin staff.

When you run a sizeable business, using Excel spreadsheets quickly becomes a NO GO. This is why we developed Cronforce – it gives you real-time overview of how your budget is being spent. But also provides insights into your profitability per project and resource type.

skitch4

A valuable function of real time tracking of your budgets is that you can immediately spot when you start spending more on a project than intended. This is especially up-to-date nowadays because business is dealing with increasingly thin margins and budgets require particularly strong scrutiny.

The Cronforce.com Team

3 Mistakes Small Business Owners Make When It Comes To Project Cost Management

Ah, project cost management. One of the most dreaded things for business owners alike, no matter their location or the size of their business. Nobody likes costs. Nobody likes gauging costs either.

Yet you have no choice than track them (or at least try your best to do so), if you want to have your business operating as intended. Otherwise, you risk a soon-to-be sinking ship scenario.

With that said, a lot of people underestimate tracking their costs and setting a steady schedule to calculate and implement an extensive, properly formulated project cost management strategy. A huge case in mind are the numerous startups that come with the era of digitalization we live in. Mostly tech-related, they consist of amazing web developers or designers… who sadly lack the perspective of calculating and tracking their costs.

It might be a bit harsh, but the startup and small business scenes are really full of people who are careless of their budgeting. Yet when they fail, they blame it on something else. We’ve seen such cases and as you might guess, this was a motivation to include a project cost management tool in Cronforce.

But where are the pitfalls when it comes to project management – and the costs contained therein?

You Think “Costs” Is a Monolithic Term

Far too many people seem to think that costs are just costs, making no distinction between different types of expenses. Of course, there’s a great variety here: some small businesses or medium-size companies extensively rely on a specific type of costs, yet are low on other expenditures of another type.

getting worried

What’s guaranteed is that you have overhead costs. These are the expenses that have to deal with advertising, rent, taxes, bills (electricity, phone), various utilities, fees (insurance, legal, accounting and other services). Like it or not, you’ll have some of these. This holds true especially for brick-and-mortar businesses tending to accumulate a lot of overhead due to building expenses (mainly rent). Cloud-based startups and Software as a Service (SaaS) ventures at least have it a bit lighter here, though web-based overheads can be cruel too.

Along with overheads, you’ll have various direct costs, fixed costs or variable costs. For example, direct costs are related to your actual product – when you sell it, what are the expenses it involves? Perhaps the shipping? No sale means no expenses in the case of direct costs. That doesn’t mean that you can get lighter on your overall project cost management practices, though.

The most important thing here is to start having an “all costs are not the same” mindset. Gauge your business and identify what type of costs you rely most on.

You Don’t Calculate Your Costs Properly

Feeling guilty as charged a bit? Don’t worry – lots of companies (especially small businesses) seem to mess up their expense management. After all, that’s why business consultants and project cost management tools and software exist.

However, a great chunk of companies don’t even identify that problem in order to seek a solution to repair the faulty financial pipeline at hand.

Before even starting a project, you should calculate all your costs immediately. What is, for example, your overhead cost per hour? What are the overhead costs related to various departments (if you have them, of course)? How much is your revenue and how are you currently allocating it? Who needs it the most? Have you actually set your product’s/service’s price to guarantee some juicy profits despite your overhead costs’ level?

office night frustration

Approach your business’ expenditures in a smart manner and from various viewpoints so as to gauge the financial situation to the optimum.

You Don’t Keep a Regular Track on Your Costs

Doing business is an extremely intensive thing to take part in. Variables are a constant here. Markets change, competitors come and go, customers’ preferences shift like crazy. What was once a fixed cost scenario can easily get shaky and need some tweaking. All of this especially holds true for eCommerce and tech-related small businesses/startups.

That’s why you need to always be in touch with what’s happening to your costs and all variables surrounding them. Not to mention that it’s about discipline – if you skip a week or two, it’s easier to fall into a downward spiral and ditch it for a long time. And then at the end of the year you’re left wondering what the hell happened and why your initial financial forecast didn’t turn out as planned.

Tweak your costs. Play around with your overheads. Be a dynamic swimmer, not a lethargic floater.

Project Cost Management Made Easy

Keeping a small business or even a medium-size company is a daunting task. It’s so demanding and requires of you to juggle so many things at once that sometimes the costs switch in your head might just shut down. We’re all human, after all.

That’s why we came up with a project cost management tool that you can utilize to become a flexible, functional and all-around efficient software sidekick of yours. What’s in the bag? Well, we:

  • Make it easier for you to set up budgets and rates
  • By providing you with a transparent, simple way to track your costs
  • In real time, on the go
  • With plenty convenient integrations with services such as QuickBooks or Paychex

What do you say about giving it a try for free and getting those costs settled once and for all? We reinvent project cost management tools. You draw the benefits.

4 Tips for Improved Project Budgeting

If you think about it, there are several types of “success” when it comes to finishing a project. There’s the success of on-point delivery in line with the desired timeframe. Then, there’s the adherence to what the client expected of your work’s quality. Lastly, there’s the “Hey, we didn’t spend that much more than what we expected to” project budgeting success.

Of course, there’s also the most treasured triumph of just cramming all three of these in the ultimate project management achievement. However, way too often this desired project management Grail remains out of reach for many teams.

And one of the most critical reasons for that mishap is not monitoring and calculating a project’s budget properly. We thought about writing out a few things that you can do to avoid such an unpleasant situation. Here they are.

Getting The Project Rolling: The Importance of Estimates

Let’s make it clear from the get-go: you need an estimate. No matter the scope of your project, its timeframe and other project specifics, you can’t do without a project budgeting estimate. It should be:

  • Realistic – Based on the workpower you have and the resources you can utilize for this project.
  • Extensive – Takes all your little project management/workforce details in mind, including phases, activities, possible dangers.
  • A bit liberal financially – Devising a realistic and extensive estimate is fine. However, you need to leave some room in terms of financial projections. You can’t possibly get a totally accurate estimate, so don’t fret too much over absolute financial punctuality. Just set the course and be prepared to tweak the details further while working on your project.

Making estimates is an art, but it can be tricky. On one hand, you have to come up with a good “project management skeleton” (hence the extensive); on the other, you have to give yourself some room as not to go crazy from the calculations (hence the financially liberal approach part).

An additional thing to consider is the frequency of the budget you’ll be coming up in your estimate. Traditionally, we’re talking about monthly budgets in most of the project management industry. However, some quicker projects will follow a weekly budgeting schedule. Customize the pace in line with your project specifics, but do document and analyze why you chose this exact expenditure.

Project budgeting writeout

Keeping The Project Intact: Forecasts, forecasts, forecasts

A project is not a stone that you just throw to the bottom of the well and wish for success. You need to control its trajectory and monitor every step closely. Project budgeting is an ever-changing deal: you start the project with these and these resources and expectations, and soon enough the situation gets a little bit different. “OK, what now?”, you ask puzzled, and that’s the beginning of the end.

This is why forecasts are an absolute must and you should do them regularly. As various project components deviate, you need to accommodate this change to your current plans. Are your running costs higher than the initial estimate? Are they lower? Are there any problems with the team working on the project – sick leave, miscommunication? Any unwanted complications or technical difficulties?

Of course there are. There’s no project without its moments of alarm and panic. Forecasts reduce the probability of your project budgeting getting out of hand completely. Frequently performing them means that even if you deviate a bit from your initial plans, you can still mend it and get back on track. Way better than realizing your mistakes when the deadline’s knocking at your door, right?

Oiling The Project Wheels: Team Communication Matters

A project’s success vastly relies on the team that works on it. Improving that team’s way of working and establishing an efficient environment is a great predisposition for your project’s success.

Keep your team in touch with how things are faring in terms of project budgeting. Be transparent with them. Talk about what has happened during your chosen timeframe and discuss the forecasts – and how should they be tweaked.

Both you and your team are the masterminds of this project so you can’t leave them out in the dark. According to experts, this will also reduce the risk of them charging too much “gray area” hours when your project budgeting is a little sour. Not to mention that constant feedback is invaluable when it comes to devising estimates, following forecasts and overall better project budgeting practices. Ingrain in your head the mentality that your team is the basis of everything operational – including your own vacation scheduling if you remember our previous article.

Estimating project budgeting costs

Bonus: Improving Your Project Budgeting By Collaboration Tools

There’s a reason why project management is an industry filled with useful collaboration tools: they help. A lot. When we lay the initial drafts of what Cronforce would be about, we mused over how can we be of ultimate value to both project managers, teams, and their clients.

What do you expect of project cost management software?

We spoke with business owners like you and asked them the very same question. So we came up with a project management solution that lets you:

  • Set your project budgeting and team rates intuitively
  • Get a visual representation of your planned or actual project budgets (graphs)
  • Establish rate rules per client, project, team member, job role
  • Have an extensive project costs overview and bill monitoring
  • Achieve 3rd party integrations with accounting services like Paychex, Quickbooks and others

Among many other things. There’s a reason why we talked in-depth with these business owners and why a great deal of them are now our clients.

What do you say about trying out Cronforce for free and taking that tricky project budgeting to a higher level with an increased efficiency?

The Cronforce.com Team