Keep Track of Project Management Costs in Real Time to Improve Your Bottom Line

Posted on May 13, 2016 in Blog ,Improve Financial Management ,Increase Project Profitability by

real-time costingThere’s a vast echoing gap between the mindset of accounting and project management in most businesses. It has a lot to do with time:

  • The PMO works with a today-and-tomorrow mindset – getting the project done, on time, to specs.
  • Accounting works with a history mindset – keeping track of things that have already happened in order to report, analyze profitability, be compliant, and invoice.

That gap hurts your PMO and your overall bottom line.

Mind the gap!

Most Project Management Offices (PMOs) are good at reaching milestones and task management. But since they lack access to real-time cost data, they have more difficulty with managing or being held accountable for budget.

It’s not easy, when the PMO doesn’t see cost reports until weeks or even months after costs have been incurred – if at all. Many companies produce time sheets that are disconnected from job information, sometimes even handwritten or in spreadsheet format. The information is then passed awkwardly from admin to accounting. Then double-checked and reconciled before going to payroll. Getting it back to the PMO is not high on the agenda.

Which of course, raises issues. Among them:

  • Ability to make informed daily costing decisions is decreased; their cost impact is not known until too late.
  • Projects are more likely to go over-budget.

What could your PMO do better with real-time data? The opposite of the above:

  • Make better budget-wise decisions when changes and unexpected events arise, because cost impact numbers are quickly available.
  • Know immediately when a project is experiencing cost overruns, and make immediate adjustments, as opposed to the costlier last-minute ones.

These are excellent reasons to implement a real-time platform. But there’s yet another benefit of real-time cost data. And it can change the whole fabric of your business.

The biggest gap may be the culture gap

If your PMO lacks real-time costing data, your service people and technicians can feel like cogs in a wheel. They perform their work, they do their jobs … but they have no way of seeing their own impact, how they contribute to financial success.

Once real-time costing is available, that mindset changes.

Let’s take an example – Ravi the service guy. Ravi’s working on a service ticket, and he’s out of the parts he needs. So Ravi heads to his wholesaler or Home Depot. But since Ravi knows that this trip and this purchase will show up real-time as a cost to the job, he wants this to be his only trip this week. By looking over the week’s worth of jobs assigned to him, he anticipates and figures out everything else he’ll need to buy for the upcoming work. And he makes one trip only.

Over and over, I’ve seen this ownership thinking spread through company culture like a wildfire. Individuals take a visible pride in their ability to be efficient and cost-minded, because they can see the results. Supervisors make more budget-savvy decisions about overtime / material planning / managing sub-contractors. Teams begin to compete with teams, branches with branches.

From the front line up, your employees become more self-managing. And the improvements never stop. Because everybody is motivated the way the owners are. And a new profit-centric customer-centric culture takes over.

An ownership culture pays off generously in financial results

Back to the original question – what would your PMO do with a real-time feedback loop of cost versus budget? Answer: Make better budget-minded decisions, every day, about job activities and events.

And better yet? Real-time cost feedback enables a company-wide culture of ownership thinking – and that’s a powerful thing. I’ve seen it affect a client’s bottom line to the tune of hundreds of thousands of dollars. More than once.


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