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Project Planning: Estimate, Budget, and Forecast

by Kim Koster Budgeting & Forecasting

May 10, 2019

What is Project Planning? – Estimating New Work (Proposal) The project planning process starts with a proposal estimate. Taking the time and effort to make a great proposal plan is a sure way to give the executing team the best shot for project success. The proposal estimate will have scope, schedule, and a cost. Understanding the scope is the first step. Utilizing a statement of work (SOW) or any document from your customer with the work required will establish the scope to be bid. Missing work can lead to schedule delays and cost overruns. Scope comprehension is hard when timelines to submit proposals are short. Associated with scope are the resources needed to execute and when those resources are available. The when and who make up the schedule and the cost portion of the estimate. Since your projects may be similar it is also advised to have a tool that can clone, utilizing a template, the project information, tasks, timelines, and the budget or estimate. Steps for completing the project proposal estimate: Understand the scope. Scope comprehension is the key to accurate estimating Utilize the project template to clone or populate the project information, the past estimates, and the timelines for the tasks Establish a work breakdown structure (WBS) Estimate the resources needed to complete the work Understand the timing of needed resources Include all materials, services, and travel required Time phase the estimates Ensure that the right skill set is available when you need them Use To Be Determined (TBDs) if the name of the resource is not yet available Gain buy-in from the proposal team and the functional departments before submission to the customer. Once the proposal is sent to the customer and negotiated, (YIPPEE, you won the project!!) it is handed over to a project manager to execute. Since a great project proposal estimate was developed by following the steps above, the project manager now has clear defined scope of work to execute, and an achievable resource plan with currently available resources. Work Breakdown Structures (WBS) A WBS is a hierarchical decomposition of the work to be accomplished on a project. It is typically outcome or product based and should make the management of scope, schedule, and cost much easier. A WBS should be created in the proposal phase of the project. During the proposal phase the WBS may stop at the task level. It is during execution that the detail is added to the WBS. As you can see from the visual, the work is broken down into manageable chunks. The advantages of utilizing a WBS are below: Work is broken apart, so task management can be spread out amongst the project team Provides a visual representation of the project Provides the structure for scheduling, costing, and reporting on the project Gives a repeatable backbone for future projects Helps with scope management—comprehension in initiation phase and minimizes scope creep in execution Scope, Schedule, and Budget Scope comprehension is one of the toughest activities that both a proposal team and a project team must tackle. It sounds simple, but with complex projects it can be difficult, because clarity of what will be delivered and what outcomes are expected are often not adequately described. Associated with scope are the resources needed to execute and when those resources are available. Scope is tracked in a document called a statement of work (SOW). The SOW gives the teams the bones of the project and typically it has a reference number with each requirement. The reference number makes it easy to track. In fact, the SOW reference number can be attached to a task, subtask, or work package so that with a simple report, you can cross reference to ensure all scope is covered. Scope creep is a continual problem and you must work hard to avoid adding scope without the associated budget and authorization. A robust change management process will help keep that from happening. Make sure your change management policies and procedures are up-to-date and that the teams have had role-based training to understand their part in the process. Since your projects may be similar, it is also advised to have a tool that can clone, utilizing a template, the project information, tasks, timelines, and the budget or project proposal estimate. During the proposal phase make sure you have a thorough scope review with all stakeholders in the SAME physical or virtual room. If you miss scope during the proposal phase the impact will be passed down to the execution team. Missing scope on a contract takes money right out of your pocket so make sure you understand what your customer wants. A proposal and a project schedule are a must. The task need-by dates establish the schedule that provides the basis of the cost. In a professional services company, the budget and resultant cost are driven by PEOPLE so our next section is on planning your resources. Resource Planning “Right People, Right Time, Right Task.” This is especially true in professional services firms where people are the primary driver of revenue, and the primary contributor to cost. People really are the most important asset a company has, yet so many companies struggle to truly manage this resource. Many times, resource planning is done too late in the process to make a difference and the result is behind schedule and over cost projects. Even if proposal and project managers want to plan their resources, the reality is that most resource planning is done ad-hoc with Excel files at the project level. There is no consideration of skills or what other projects need, and there is no clue what new work will require from a resource perspective. Below are 7 simple tips to help increase the efficiency of managing resources across the enterprise: Have a centralized repository for all resource plans that is accessible for all stakeholders Create a skills catalog so that the right resources will be available when (and where) you need them Forecast resources throughout the project lifecycle, don’t just start at contract award Use a single pool of resources across your company, not just on one project or portfolio Plan at the project level and roll-up to the enterprise—do not forecast by department only Provide stakeholders real-time resource demand and Key Performance Indicators (KPIs) reports as well as role-based dashboards Don’t plan your most important resources on disparate Excel spreadsheets Project Planning: The Importance of a Tool That Provides Real-Time Data Use a tool that enables all project stakeholders to visually see the availability, utilization, and time phasing of the resources. This level of visibility and control will help maximize overall performance and profitability of the project because clarity of what will be delivered and what outcomes are expected are often not adequately described for all stakeholders, but critical factors against which the success of the project will be measured. Resource Management Basic Information Metrics for resource planning/management MUST be real-time. Old data will not help you make great decisions, and can result in very costly ones. At a minimum, you should be able to answer the following questions: What utilization do you need to be profitable? What utilization should you aim for to avoid burnout? What is your actual billable and non-billable utilization? Is your project probability up-to-date so that your people forecasting most accurately reflects the most likely billable revenue and utilization? Estimate-at-Complete (ETC) As the project progresses things will change from the original plan. A key resource may win the lottery or be needed on a higher priority project, and when this happens the forecast must be updated. The EAC is the total actuals expended on the project + the dollarized time phased resources needed to complete the work. That time phased resource plan for work to be completed is called the Estimate-to-Complete (ETC). EAC and ETC can’t live without each other. EAC = Actuals + ETC The EAC is a forecast of the project’s cost when the work is complete. Throughout the project plans may change, the resources may change too, and it is the responsibility of the project manager to revise the work and replan tasks to best accomplish the end goal. Master the Project Planning Process with Unanet ERP software like Unanet can help streamline your entire project planning process, from estimate to budget to forecast. Our project management system is a single solution filled with invaluable tools that provide real-time insights and data to get your business where it needs to go. Learn more in our eBook, Selecting an ERP for Professional Services, and our white paper, 9 Simple Steps to Convince Your Leaderships to Adopt Project Portfolio Management (PPM).

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Project Visibility and Control for Project Managers

by Kim Koster Project Management

Apr 23, 2019

Do you need project visibility and analytics to drive decision-making? Would real-time querying make your job easier? Do you need a tool to communicate with all project stakeholders (executives and project teams) in both a simple and sophisticated manner? If the answer is YES, this blog is for you! Project managers (PMs) and their teams scramble too often for project visibility information in Excel and perform busy work instead of actively managing their projects and fostering relationships with customers. With the right processes and tools, PMs can have the information at their fingertips needed to focus on performance and profitability, reduce risk, and manage their projects. Successful PMs have the tools to look deep within the project data past, present and future. Their goals are met because they can obtain the right information with accurate data, eliminating costly manual manipulation of data. These best-in-class PMs have comprehensive and timely visibility and control over their projects, resources, revenue, profitability, schedule, pipeline, and financials. They can make decisions quickly and effectively, resulting in a positive effect to the bottom line of the organization. What is Project Portfolio Management (PPM)? The purpose of project/program integration management is to… Coordinate project activities and integrate all efforts into a project plan Integrate, analyze, and report the project results in carrying out the project plan Control changes to the baseline plan Collect, integrate, and organize project information in a project information system. (Reference: Project Management Maturity Model by J. Kent Crawford pg. 27) Project Portfolio Management is a great overall philosophy that enables organizations to efficiently manage projects. A major outcome of PPM is having visibility and control over the projects, which will benefit the organization by: Fostering a greater understanding of the key drivers of revenue and profit in your organization Proactive tracking and management of performance relative to an annual operating plan Elimination of profit losses on direct projects due to unanticipated project overruns Increased profitability on T&M and Fixed Price projects Reduction in the amount of funding “left on the table” (revenue backlog) Increased adoption rates for the system you choose as it relates to planning and forecasting Reduction in Days Sales Outstanding (DSO) or other invoicing metrics Less time spent managing the financial aspects of direct projects Key Performance Indicators (KPI) As we discussed in a previous blog, KPIs provide status and information for all levels within the organization. KPIs are typically displayed on dashboards and they should be a real-time visual representation of the role-based information needed to manage the business. You should be able to quickly see with colors and graphs where you are against your plans. KPIs provide actionable insights to help you run your business on one single screen. Commonly Used KPIs Below are a few examples of commonly used metrics that project managers should have access to in order to run their projects successfully. Hopefully your organization is running a software package that provides this information. Annual Billable Utilization: Billable Hours / Total Hours or Billable Days / Total Days Booking: A commitment by a customer to buy your goods or services Backlog: Total Bookings – Delivered Goods or Services Billing: An invoice requesting payments for goods delivered or services rendered Revenue: The amount of earnings that can be recognized T&M Revenue per Employee: Actual Bill Rate x Hours Charged + ODC For a more in-depth look on establishing strong KPIs, read our blog, “Tips for Developing Key Performance Indicators for Your Organization.” Earned Value Management (EVM) Another helpful aspect of project visibility is earned value management. Earned Value Management (EVM) is a project management best practice that flows directly with your established PM policies. The basics of EVM are plan, execute, assess performance, and monitor the project. Project managers can assess completion of the work at the task level and by doing this will get a host of metrics on current and future performance. Gain Project Visibility and Control with Unanet’s Project Management Software How can one just system provide project managers with the project visibility and control they need to ensure business success? Unanet’s project management software allows you to align projects to corporate strategy, lower project management costs, gain key real-time project insights, and much more, all in one single source of truth! We’ve helped over 2,000 customers transform their project management processes. To learn more about Unanet and how it can provide your project managers the visibility and control they need to ensure project success, download our eBook, 9 Simple Steps to Convince Your Leadership to Adopt Project Portfolio Management (PPM).

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8 Tips to Budgeting for Project Based Organizations

by Kim Koster Budgeting & Forecasting, Professional Services

Apr 21, 2019

Budgeting for Project Based Organizations One of the most challenging activities performed by a company is budgeting. Every year there is a large investment made to create annual budgets. So, what is the role of a budget? It should represent what the business believes is achievable and what it intends to accomplish. The organization establishes a budget that becomes the baseline for performance management. A large investment is made by many within the organization, so there are a lot of moving parts. Follow the 8 tips below to create a budget that is a useful tool for your business: Kick-off the budgeting cycle, providing a timeline, parameters, and overall goals. Include all stakeholders. Establish clear guidelines for the budget process. Below are just a few examples: What is the horizon of the forecast? What are the due dates? How to handle proposals in the forecast? What is the growth rate expected? Make sure your organization has a tool that provides all stakeholders with the visibility and control they need over the budget. The budget should be time-phased and align to the timing of the work. Scenario modeling is critical to understanding the best case, most likely, and worst case scenarios. A tool that allows for what-iffing or modeling is a necessity. Account for rate differences whether they be OH, G&A, COM, or Labor Rates. Make sure your tool is flexible enough to account for project specific rates, ceilings, and budget as well as forecasting rates. Throughout the year hold monthly reviews where the budget is reviewed, and course corrections are made via a forecast. Understand that the budget is a living and breathing document…not a static metric that is put on the shelf. Update it for changes in your business environment. Budget Revenue Budgeting revenue is crucial as it drives many other metrics (profit, growth rates, etc). The revenue plans are the barometer of your company health. The revenue plan will contain awarded contracts and opportunities that are still in the pipeline so make sure both are included. Tips for revenue budgeting are below: Look closely at your pipeline for new opportunities. Understand how your profit is trending. Labor vs Subcontractor – examine closely. Examine backlog, breaking it out between opportunities and awarded work. Benchmark your expenditures with prior years. Look Closely at Your Resources People are by far the biggest investment and in turn it is the largest revenue generator for services-based companies. Resources should be managed during the entire project lifecycle including proposal, project initiation, execution, and closeout. Measuring the utilization of resources is critical and below are a couple of questions you should be able to answer. What utilization do you need to be profitable? What utilization should you aim for to avoid burnout? Understanding billable and non-billable utilization? Project probability in people forecasting to more accurately understand both billable revenue and utilization? Indirect Rates are Pivotal The management of indirect rates can be the difference between winning a bid, losing a bid, making profit, and the ability to grow. It is critical to have the ability to look both at the actual rates being charged as well as bid rates to determine profit by resource. Often proposed rates will be different than actual rates, budget rates different than forecast rates, forecast rates are different year over year, and having the ability to apply multiple rate scenarios to your direct cost is very valuable in helping you create your forecast. Rates play a big role in revenue baseline assumptions. For instance, if your overhead rates are less than you predicted on Cost Plus projects, the actual revenue recognized will be less. On Fixed Price projects, higher than anticipated rates will eat into planned profit. Having revenue forecasts for the 1-5 year horizon will help the finance team more accurately predict corporate or forward pricing rates. Managing rate forecasts is important for all contract types and communication of rate changes to project and proposal teams will help eliminate a rate impact surprise. Below are a couple of pointers for indirect budgeting: Don’t forget to budget your indirect costs. Look at labor utilization to better understand the indirect component. Do you have a system that will handle cost pools and allocations? Understand your sales forecast and demand for resources. Hope these tips helped spark new ideas for your budgeting process and gave you some new things to think about! Learn more about how Unanet can improve your budgeting and forecasting practices.

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Tips for Developing Key Performance Indicators for Your Organization

by Kim Koster Business Development & Growth

Apr 16, 2019

If you can’t measure it, you can’t improve it! And if your organization is not measuring its performance, how can you hope to improve? Key Performance Indicators (KPIs) serve as important measures of your organization’s progress. They provide actionable insights to help you run your business on one single screen. These can be invaluable benchmarks that your team can use to determine if you are on track to reach your project and financial goals, giving you a clear path to growth. The Advantages of Key Performance Indicators They allow you to focus on corporate and strategic goals Real-time information gives you the ability to be proactive vs. reactive You can study lessons learned so improvements can be made in the future They provide insight into what types of projects to chase Tips for Developing KPIs It is clear that KPIs can greatly benefit organizations, but how can you ensure your KPIs are the best for your company? Some organizations use common KPIs within their industry. While this can be valuable for gauging industry-wide success, your organization will not grow efficiently unless you develop KPIs specific to your company’s resources, needs, and goals. Naturally, no two organizations’ key performance indicators will look exactly the same, but here are a few general tips for making sure your KPIs are a good fit: Avoid KPI multiplying—KPIs should reflect overall corporate goals The data quality must be good to have accurate indicators The person responsible for the KPI must have direct control over results Relevance to all levels of the organization KPIs should be in simple terms Benchmark both externally and internally Collect lessons learned and learn from the past Utilize a system that has easy access to KPIs that are real-time and accurate Examples: Utilization, %Complete, Earned Value, Gross Margin%, Net Margin%, Burn Rate, etc. In addition, you must make sure that your KPIs are not vague, abstract goals you hope to achieve someday. You need clear, actionable performance indicators that your team will use as benchmarks on the path to success. Each KPI you create should have the following details outlined: Concrete, specific details about what you hope to achieve. Goals that are realistic for your organization. Many organizations think too big and cannot reach these goals within their current means. A way to measure your progress. Do not think in abstract terms. Establish a system where each KPI is measured with thorough, real-time data. A realistic deadline by which you will complete your goal. Define benchmarks by which parts of the project or goal will be completed to keep you on track every step of the way. Define and Measure Your Key Performance Indicators with Unanet ERP software like Unanet is designed to help your organization manage its projects, people, and financials to promote project success and company growth. Unanet provides real-time insights and data that project managers, directors, and CEOs alike can use to measure their organization’s progress and make changes when needed. With an ERP system streamlining your processes, you can watch your business thrive and break new ground. To learn more about how Unanet’s project based ERP system can benefit your business, download our ebook, Selecting an ERP for Professional Services.

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What to Look for in Pipeline Management Software

by Kim Koster Budgeting & Forecasting

Apr 09, 2019

Your project based company’s pipeline is invaluable for your growth, so managing it properly should be high priority. With everything else in your enterprise that needs organization, however, how do you make sure your pipeline gets the attention it deserves? Some organizations may struggle with dedicating enough people, resources, and time to closely monitoring their pipeline, which means they miss out on gaining valuable insights that they can use to vastly improve their sales. If this describes your organization, you could benefit greatly from pipeline management software. In this blog, we will explain the benefits of using pipeline software as well has how to find the right tool for your business.   Why Use Pipeline Management Software? How exactly can pipeline management software help? Being able to measure your pipeline health will give you a depth of insight that only few companies enjoy. This insight will help to understand the past, current standing, and a view into the long-range forecast. Having real-time reports and dashboards gives all stakeholders actionable information to make decisions for their role and level in the business.   What Features Should a Pipeline Management Tool Have? Keep in mind that not all pipeline management software will give you the features and data that you need. Shopping around requires a keen eye and strong understanding of what characteristics will most benefit your organization. Although no two companies have the exact same needs, a pipeline management tool that serves as a good one-size-fits-all solution will be able to do the following: The tool is 100% integrated with the project based ERP system you select Customer Relationship Management (CRM): track your customer interactions Contact categorization for easy reference (decision maker, geographic location, golf buddy, etc.) Workflow optimization, assigning tasks and providing notification Opportunity tracking by phase Easy-to-use reporting, dashboards, and metrics to direct business decisions Real-time data Project notes and code fields for unparalleled analytics Resource demand planning with both current and TBD resources Ability to shift forecasts to the right or left Ability to make POA adjustments as opportunities move through the funnel One-click transformations from proposal project to an executable project Cloud based system so there is 24/7/365 access to your information   Important Pipeline Management Metrics to Look for In addition to the above key characteristics, an efficient pipeline management tool will have valuable metrics that allow you to take your pipeline management even further. With these metrics, you can pay attention to crucial details that may make all the difference between a Closed Won or Closed Lost. Pipeline Snapshots (comparing the pipeline to the same time last year, quarter, month) Bid to Win Ratio = # of bids/# of wins Bid to Loss Ratio = # of bids/# of losses Length of the sales process = number of days from identification to contract award Phase statistics—what types of opportunities are in each phase, customer, etc. Labor Utilization Skill Set Utilization Revenue targets by region, portfolio, customer etc. Rate analysis by year Forecast comparisons utilizing POA or other % forecasting methodology   Gain Real-Time Visibility of Your Pipeline with Unanet’s Pipeline Management Software The health of your pipeline correlates to the health of your business, so why take any chances when it comes to your pipeline management tool? Unanet is an all-in-one ERP software for project based organizations. Our Pipeline Management and Customer Relationship Management software is designed to provide your business the real-time data and analytics it needs to keep on top of your prospects and branch into new market territory. To learn more about the benefits of ERP software for not only your pipeline but your entire business, download our ebook. Or if, you want to test-drive Unanet for yourself, contact our sales team.

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What Makes a Project Based ERP System Special?

by Kim Koster ERP Software Best Practices, GovCon

Mar 20, 2019

Every project based business requires projects to keep it running smoothly and growing, so why not choose an ERP system that is built to manage them? A project based ERP system can help a business streamline and automate its project management process to avoid delayed projects, a lack of skilled employees, and unbilled hours. In short, project based ERPs are designed to promote project success and company growth. But what about generic ERP systems? While they have a few benefits, there are a few key differences between generic and project based ERPs. Generic vs Project Based ERP Systems Generic ERPs are still prevalent in the marketplace today, but they are costly and very difficult to maintain if your business is projects. These ERPs typically do not have the project as the center of the universe. Generic ERPs focus on the account and the department/organization, and the project is accounted for with a separate tool. In a generic world, the project is an afterthought. Why Project Based ERP Systems? In a recent blog, we discussed what to look for when choosing project-based ERP software. But why are project based ERP systems the clear choice for project based organizations? We explore 8 main reasons below: Transactions are attached to a project, department/organization, and a general ledger account. This ensures that transactions do not get lost in the midst of a project and prevents team members from tracking them down while running expense reports.  A time collection system attaches charges directly to the tasks that the individual works on. This makes tracking billable hours much easier and more intuitive. Costing architecture is tailorable for each project and task. No two projects are alike, so why should there be a single costing architecture? Costs are often outlined in a Work Breakdown Structure (WBS), which project managers and standard employees alike use to monitor the progression of the project. Visibility is provided into the financials of each project (i.e. profit, cost, billing). This visibility and transparency is crucial for all team members be aware of what the project is costing and make adjustments if needed. A resourcing tool provides project managers with information on what skills are available at what time. This prevents surprises and winding up with a lack of skilled employees to handle a project. Complete financial reporting with the project in mind. Financial reporting of a project plays a large role in the project being an efficient success or dragging on for months. Project based key performance indicators to help drive the organizational and project goals. System controls that send notifications when project restraints are met, configured to the needs of your business To Best Manage Your Organization’s Projects, Trust Unanet’s Project Based ERP System Project based companies require project based ERP systems. It’s as simple as that. Unanet’s project management software allows you to align projects to corporate strategy, lower project management costs, gain key real-time project insights, and much more. Learn how you can unlock greater productivity, operational efficiency, and profitability with project clarity and control, download our ebook, The Business of Projects for dummies.