How to handle project finance like a pro

Drawing from more than twenty years of experience collaborating with professional service organisations, our project management maturity model, comprising 4 distinct levels, is dedicated to enhancing project finance through targeted processes and key performance indicators (KPIs).

Today, it's time to become a legend in project finance.

The Legend Level: Agile power-planning

The goal for the legend level: Constant optimisation

The legend level of project finance management is about efficiently managing resources and lowering delivery risk. You do this by constantly knowing the progress of your projects and being ready to optimise and adjust the use of resources.

When successful at this level, you can answer the following questions:

• Do we have the right resources to deliver the remaining project - or across our portfolio?
• Do we have the proper competencies available?
• Should we staff the rest of the project differently, thereby increasing our profitability?

And many more. Let's go!

Also read: Comparing leading project management tools 

1. Capacity planning

Capacity planning is the first process you need to get up and running at the legend level. It involves forecasting resource needs and ensuring enough resources to complete projects within the specified timeline.

Tasks include:

• Analysing resource utilisation rates.
• Identifying resource bottlenecks.
• Adjusting resource allocation as needed.

Also read: Mastering Resource Planning and Allocation: The Key to Driving Succes

The capacity plan should be reviewed and updated regularly to reflect changes in project requirements or resource availability.

A well-structured capacity planning process benefits you by equipping you to avoid overburdened team members or needing more work.

2. Resource planning

The second process to master as a legend is resource planning. While capacity planning looks at the capacity and/or resources in more generic terms, resource planning is about planning specific resources in detail.

Capacity planning has a time perspective of 3-6 months, while resource planning operates with a shorter time frame. Both involve allocating or re-allocating resources for specific projects or tasks.

The resource planning process entails the following:

• Defining resource requirements for the specific project or tasks.
• Taking stock of the company's available resources.
• Assessing which resources are available.
• Allocating and re-allocating resources, including analysing dependencies related to tasks, other projects and teams.

Also read: 5 KPIs that will improve with efficient resource management

3. Labour cost optimisation

The third process is labour cost optimisation. The question you would like to be able to answer is: 'Is the person doing this specific task at this specific time the best fit in terms of cost, efficiency, and work speed?'

The option to replace senior consultants with juniors at the right time in a project can ultimately secure the project's profitability.

However, you need a structured process for monitoring the labour cost optimisation to intervene at the right time.

Download the e-book: Level Up Your Project Financial Management 

And with that, we are fully prepared for...

KPIs to rule project finance like a legend

• Employee workload 
• Non-planned work optimisation
• Monthly revenue forecasting 

Employee workload

This KPI focuses on the tasks assigned to and carried out by individual employees in a project team during a set timeframe.

It encompasses employees' responsibilities, duties, and obligations within their project roles.

By closely monitoring this, you can proactively identify and resolve potential conflicts that may arise in the coming months, effectively preventing bottlenecks.

3 ways you can use TimeLog PSA to manage employee workloads

• Gain insights via the resource allocation and utilisation reports: With TimeLog PSA, you have reports that clearly show each team member's workload. These reports detail who works on which projects, their assigned hours, and how much time they spend on tasks. By analysing this information, you can ensure everyone's workload is balanced and adjust if anyone feels overworked or underutilised.
• Leverage capacity and resource planning tools: TimeLog PSA's resource planner is invaluable for forecasting resource availability and workload capacity. By inputting project timelines and estimating effort, you can visualise potential resource conflicts and identify opportunities to optimise workload distribution. This proactive approach allows you to address workload imbalances before they become problematic, ensuring that everyone's time is utilised effectively.
• Effectively track time and tasks: With TimeLog PSA's time tracking features, employees can easily log their time against specific tasks and projects. As a manager, you can review these time entries in real-time to monitor progress and identify areas where additional support may be needed. This ensures everyone's workload is manageable and helps prevent burnout by proactively addressing issues.

Also read: The effective project plan: The project manager's ultimate guide

2. Non-planned work optimisation

Measuring this KPI will reveal how much 'non-planned work' (ad-hoc work) you have in a project.

Using TimeLog's resource planner, you can pinpoint, evaluate, and reallocate resources to enhance optimisation and decrease unplanned work.

Also read: Guide: Resource management [4 things you need to get right]

If you have a lot of non-planned work, it typically means that many of the project tasks are outside of scope, thereby indicating "scope creep".

Scope creep can significantly lower the project's profitability and cause delays and budget overruns.

Also read: What is a project scope?

Monthly revenue forecasting

This KPI estimates the expected income or revenue generated each month.

You can base the forecast on, e.g.

• Historical sales.
• Project data.
• Market trends.
• Customer behaviour.
• Economic conditions.
• Upcoming events or initiatives that may impact revenue.

It includes data and market analysis, using sales projections, segmenting your customers, adjusting for seasonality and similar.

When you forecast per month, you can plan and allocate resources better, set realistic targets, and make informed decisions to drive growth and profitability.

Step-by-step approach to do revenue forecasting using TimeLog PSA

• Collect historical data: Gather revenue data from TimeLog PSA for the past few months or years. This should include project revenues, billable hours, and client invoices.
• Review project pipelines: Delve into project timelines, estimated effort, and client contracts within TimeLog PSA. This analysis provides insights into the anticipated revenue from current and upcoming projects, utilising reports such as the sales pipeline, project profitability, or project overview reports.
• Evaluate resource utilisation: In TimeLog PSA, use the resource planner to see utilisation rates and usage percentages. This will show you how much work you can bill for in the next few months. Find any issues where you might not have enough resources or assign too much work, which could affect how much money you make.
• Remember your different billing rates: Consider the billing rates for various resources, employees and services. Ensure the forecast accurately includes these rates to project revenue based on billable hours.
• Consider seasonal trends and market conditions: Remember to account for any seasonal trends or fluctuations in demand that may affect revenue generation. Additionally, consider the current market conditions and economic factors that could impact client spending and project opportunities.
• Create revenue projections: Use the gathered data and insights to create monthly predictions for the upcoming period. Incorporate estimates for new business opportunities, recurring revenue streams, and any anticipated changes in project scope or timelines. To achieve this, export the data from TimeLog into your financial forecasting or BI tool:
• Monitor and Adjust: Regularly monitor actual revenue against forecasted figures using TimeLog PSA's reporting capabilities, such as the revenue analysis report. Adjust the forecasts as needed based on changes in project status, resource availability, or market conditions.

Also read: Become a world champion in project accounting

Want to enhance your project finance?

TimeLog's state-of-the-art Professional Services Automation solution can unlock your projects' full potential by streamlining project finance. This lets you gain insight into consultant performance, project profitability, and client success.

Curious about how TimeLog can elevate your project's success and profitability? Schedule a quick 20-minute consultation with us today.