This is what an “empty” project looks like – this article is all about the Financials section and the Burnup chart that appears once we have a plan in place.

Basic project financials: currency, billing type and rates

A project has one currency

This is the currency that will be used when invoicing. If you have people working from locations that use other currencies, their rates and costs will be converted to the project currency automatically. Add and edit currencies here.

Please set the currency correctly as soon as you know it – the project rate card has to use the same currency, and all position-specific rates will also use it.

Each project has one billing type

Per hour (time & materials)

Per hour billing is a very straight-forward way of running projects. The client pays based on actual time spent. Think of the budget as a target you aim to reach in terms of work allocations.

• Here, it’s crucial that you make sure you have a team setup where you have enough availability – after sick leaves and other time off – that you’re able to capture the revenue that has been agreed upon.

• Assuming that your team is not blocked – but ready and able to do whatever the client needs the most, your client is getting the best value when the team is working as much as possible on the project.

Fixed Price (fixed fee)

Fixed Price means that you will invoice exactly the budgeted amount. Revenue will be distributed in reports based on the revenue recognition model chosen. Using project rate card will help you plan the amount of effort.

Because of the inflexible pricing, these projects require intensive monitoring: if you spend too many hours working on the engagement, you will still get paid the same.

• Plan the work in detail, manage client expectations with explicitly

  defined scope

• Be as effective as you can with time management

• Make sure that new requirements and change requests are budgeted for separately

  • Add new budgets for continuations or edit the existing budget to match the new grand total

Non-billable

Non-billable projects are not intended to be invoiced.

• An example of this would be your internal ongoing work, such as recruitment, sales, and HR. Operating recommends to allocate the internal teams (or some % of their time) to these non-billable projects, because when you have all of that accounted for, your Capacity reports show how much of your total capacity goes to client work and how much is overhead.

• You might also want to track non-billable work done for a client, if you need to allocate people for sales & account management efforts that are not billable but nevertheless are focused on a specific customer company.

NOTE: You can add non-billable work to any kind of project by assigning the non-billable role to a position where the rate is 0. In time tracking, you can define which tasks are billable.

Project budgets in the planning phase

As you can see from the billing type differences above, what the budget means depends on how you invoice.

• Per hour

  • Budget is “a target you aim to reach” – perhaps a ceiling for how much the client is willing to invest in your work

  • Project rates determine the amount to be invoiced

• Fixed price

  • Budget is what you will charge, no matter what happens during the project

  • Project rates are for planning purposes only

In the image above, we’re setting the first per-hour billing budget roughly to 100k. We haven’t allocated any work yet. This is reality – things are subject to change at this point in planning.

Instead of the global default rate (one rate for all work), for per-hour consulting work, we want to set more specific rates. Use rate cards to keep your charge-out rates similar across projects. Manage rate cards in Settings. You can always set position-specific exceptions to the card, even if a rate card is in use.

The Financials sections now looks like this:

Let’s start allocating the work on the Timeline:

Hovering over the budget shows us how much we’ve allocated. The project manager role for 18 days amounts to 22% of the 100k budget.

All adjustments to the allocations instantly show how the budget and margins (if visible) are affected. For example, stretching the 18-day allocation to 28 days and adding two full-time developers for the same duration of time takes us to 87%:

The next step would be to see if we can afford a designer to join the team for some period of time. Here, the consideration is obviously when the design work is required and how much of a designer does the project need – and how much do we have available. Looking at the People Timeline reveals that we have some options that would be 100% available, at least Mylee:

Even if we’re not assigning Mylee to the work yet, we can feel confident that this is a plan that would be doable and fit into the budget:

Even before assigning people to the positions, we have an indicative idea of what the profitability of this project would be. The accuracy of this gross margin calculation improves if you have set the person-based costs carefully. However, this is already useful. For example, you can see what the impact on profitability is if you add two your own developers – or use external subcontractors instead.

After four team members has been assigned, we see that many things may have impacted the budget:

• their seniority levels may have different rates

• costs are more accurate

• they may have 100% time off overlapping the project duration, causing those days to be ignored in the effort calculation

The change in budget spend is not huge – from 99 down to 96% – but the margin impact is massive, because we chose such a senior team:

Let’s see what happens if Gaven has a week-long vacation at the end of the project:

Operating assumes that the last week of Gaven’s allocation is simply not done. In order to get all of the revenue captured from this project, some changes are necessary. Whether it’s adding a couple of days to the end of the project, working more than 100%, or adding a third developer, that obviously depends on the project circumstances. Just make sure to keep an eye the budget spend and margins as you get more specific!

The burnup chart shows the shape of the project

The project details contains a Burnup section that visualises the burn rate – money over time. It’s spread until week 4 of the next year because our budget is valid until then. However, as we planned the project to be much shorter with a four-person team, let’s adjust the budget dates and see a more balanced burnup chart:

With 91% of the budget allocated, the dashed line never reaches the budget line. In the image above you can also see how the Financials section now has a summary about the revenue, costs, gross margin, and hours.

Known issue: fixed price + burnup in revenue not yet implemented

If your fixed price revenue chart is looking very flat, switch to Hours (from top right) instead.

Budgets during project delivery

This is the starting point for the project after confirmation:

Project burnup shows actuals, too

This is what the project looks like when time tracking actuals start showing up in the chart:

When comparing the green line to the solid blue, keep in mind that some time entries may still be missing, if the team members don’t track at the end of each day.

Hovering over the chart reveals more info:

Projects’ planned vs actuals report goes deeper than the burnup

In https://use.operating.app/reports/planned-vs-actual-projects you can drill down to each person and their time entries for the project.

In the image above, we can identify a handful of issues with time tracking actuals: Mylee hasn’t tracked anything on week 29, and both Bradley and Carleigh have done much fewer hours on week 30 than planned. These things can be easily spotted with the Highlight tool, setting it to under/over 40% highlighting looks like this:

You can show this data to your team and explain to them why realistic planning and timely tracking of hours makes for a successful project.

Budgets upon project completion

Happy ending: eventually exactly as planned

Here’s an example of how the actuals might track against the plans:

The team went too hard in the beginning, slowed down, but were able to reach the budget in the end.

A few hours over the budget

An alternative ending: the team went over the per-hour budget:

Now, it’s up you as a project manager to convince the client to extend that 38k budget to fit the extra $1930 – you don’t want that revenue to go to waste!

If this was a fixed price budget, that would have been an unfortunate overrun.

Budget extensions

Here’s what an extra 3k budget would look like – this one’s still tentative, and we’ve planned 10 hours of allocations to spend some of it:

If the client green-lights the extra 3k, we will make sure that the tentative allocations can be done by the same team and adjust the schedules accordingly.

(To be continued as we make progress on the reporting of budgets and invoiced amounts.)