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Audience

Project managers, invoice managers and executives

Description

The days of billing clients by time and materials are gone! Many project teams need to manage to a fixed bid or price. Project managers, project schedulers and financial team members learn how to set up and manage a project with a fixed price in this training.

Benefits

  • Learn how to leverage the software to manage fixed price projects
  • Understand how to set up milestone billing

Key Points


Transcript

Many organizations conduct projects for a fixed bid or price. This includes professional services teams, who primarily work on client-facing projects, but also other companies that have a portion of their business that is billable.

A fixed bid or price project is when you agree with the customer what the pre-determined amount that you are going to bill them will be. This may be a total fixed price for the entire project or it may be a fixed price for each milestone or deliverable.

This is very different from a time and materials project where you bill for labor and expenses as the work occurs.

With fixed price projects, it is crucial that you have a solid estimate on which you are basing your fixed price. If you do not, you could lose money or create unhappy customers because you need to go back to them mid-project and try to negotiate for more money.

Project Insight can help you create more accurate bottom up budgets on which to base your fixed price. Our software has functionality to help you manage that fixed price as the project progresses.

Billing at the right time and billing with the right deliverables and milestones is critical and you want to measure that fixed price against what your cost and what your actual billable would be if you were billing based on time and materials.

Quick Selection for Fixed Price Projects

To view a fixed price project, click on Projects.

Click on the Develop Website project.

Collapse your left navigation to give you more room.

This project was created from a template and has all the common tasks associated with a software development project.

These are all the Summary tasks.

Click on a summary task to expand it out.

These are the detailed tasks.

This is an advantage of using project management software. For projects with similar tasks, you can set up a template and create a project rapidly from the template. Then you can make adjustments to the project to reflect the current goals and deliverables by changing estimated hours of work or adding and removing tasks and then automatically you will have time and materials metrics.

When a new project is created, Project Insight displays a planning view that is one of the system default views. Or if your system administrator created a default view for your organization, it will apply that view.

On the planning view, the only field related to financial data is the Work Hours field.

The Work Hours capture the amount of effort it will take to perform tasks and are used to calculate estimated cost and billable amounts.

You need to change the view so that you can see financial data.

To do that, click the Display Options icon.

Click on the Column Selection Options section to expand it if it is not already expanded.

This is where you set the columns of data that you want to appear.

Milestone Billing Tasks


Viewing Milestones Tasks

When managing fixed price projects, you will want to know which of your tasks on the projects are set as milestone tasks.

Click on Name, in the Selected Columns because you want to insert your new columns just before that.

Click on a field in the Available Columns and type I to go directly to the fields that start with the letter I.

Scroll down until you see Indicator - Milestone.

Double click on that.

You can see that the milestone indicator gets inserted directly before the name field in the selected columns.

Any team member, stakeholder or even customer that has permissions to view the task list can change what columns of data they want to appear on the view. Of course, you can only change your view to see columns of data that you have access to. A project manager can see financial data but a team member or project scheduler cannot.

Click the Update Display icon.

Now you have a column display that shows you visually which of your tasks on the project have been set as milestone tasks.

Click on the column header to drag it and expand the columns so you can see all the text.

You can see any milestone task is flagged with the blue and orange diamond icon.

Now that you know what this indicator is, you may drag the column to make it smaller again, if you wish.

Project Insight will remember these settings the next time you display the project.

As part of your normal project planning, you may break down the work into sections such as Scope and Analysis/Software Requirements.

Then you have the individual tasks within each section which describes the work that is required.

You have other information for each detailed task, such as the amount of work you think it is going to take to complete that task and over what period of time that work will take place.

In each section, you also have a milestone task and it is normally the last task in that section although it does not have to be.

For example, there is a Scope Complete task.

And an Analysis Complete task.

Setting a Task as a Milestone

In your template, these milestone tasks were already set up. When you created this project from that template, those milestone tasks were automatically set up in your current project as well. This saves you time and ensures process is being followed.

However, if you had to add in a new section or change things around, you can set a milestone task by right clicking on the task, hover on Edit Task (inline) and click Edit Advanced Options.

You will want to ensure the Milestone option on this task is checked.

Click Save.

And that’s how you set milestone tasks.

Enter Tasks and Planned Costs

Another financial metric that is important for fixed price projects is the amount that you plan on billing the customer for each task.

To view that, click the Display Options icon.

Click on Start Date in the Selected Columns, because you want to insert your new column just before that.

Click on a field in the Available Columns and type W to go directly to the fields that start with the letter W.

Scroll down until you see the Work Billable Total field.

Double click on that.

This moves the field to the Selected Columns just after Work Hours.

Click the Update Display icon.

Drag the Work Billable Total field column header wider so you can see the full label.

The Work Billable Total is the total amount of labor and expenses that you plan on billing the client for that task.

The details about how the Work Billable Total value is calculated is covered in detail in the session called Managing Project Budgets for Professional Services .

Basically, Project Insight does the calculation for you.

To see where the data for the calculation comes from, click the resource name to display the Resource layer.

It takes the billable rate for the resource assigned to the task and multiplies it by the Work Hours to get the labor value.

Click X to close the Resource Layer.

Then it adds in the value of any billable expenses to give you the Work Billable Total.

If you hover your cursor on the Work Billable Total column header, the tool tip explains that it is the total of the work billable time plus the work billable expenses for the task.

Of course the Work Billable Total for all the detailed tasks roll up to the summary task to give you a Work Billable Total for the summary.

And it rolls up to the project level.

Scroll to the bottom of the project to see that total.

You can see what the total planned billable work for this project is, as determined by the detailed work break down structure (WBS).

That is one part of managing fixed price projects, you want to get as accurate an estimate as you can and the best way to do that is from a detailed project plan.

You and your customer may just agree to bill the customer those exact amounts.

For example, the Total Billable amount for all the work in the Scope summary task calculated out to this value, $6,820.

You discuss this amount with your customer and you both agree that this is what you are going to invoice or bill them.

Proposed Total

You want to record the proposed total amount because this field will never change unless there is an official change order is raised.

You will record that in separate fields called the Proposed amounts.

To show those proposed columns, click the Display Options icon.

Click on Start in the Selected Columns, because you want to insert your new columns just before that.

Click on a field in the Available Columns and type P to go directly to the fields that start with the letter P.

Scroll down until you see the Proposed fields.

Double click on Prop. Total.

There are some other proposed data columns here as well.

Information about these columns and how data gets entered in those columns as well as how the proposed total is calculated, is covered in detail in the training session called Managing Budgets for Professional Services.

Click the Update Display icon.

You can see for the milestone or the deliverables tasks, you have a proposed billable amount.

This is the amount you and your customer have agreed you are going to bill the customer for all the work in this summary task or essentially, it is the fixed price of the work for this part of the project plan.

The fixed price for this milestone task, rolls up to be the fixed price total for the summary task.

You will see that the amount can be different than the Work Billable Total.

You may use the exact billable value as determined by the detailed project plan or it can be different.

The Proposed Billable amounts may be greater because you have rounded up to the nearest 10s, 100s or 1,000s or this could also be where you built in some contingency. For example, you planned for a certain amount for this work, but you build in another 10% contingency, so you would take your Work Billable Total amount, add 10%, round it and put that value in the Proposed Total amount.

The goal is to have this proposed billable amount at least equal to or maybe even greater than the Work Billable Total.

One best practice to keep in mind, is that this milestone task where you record that proposed value should have 0 work hours assigned and a $0 amount in the work Billable Total.

You want to keep the data separate so every task that has any amounts in the Work Billable Total, should have no amounts in the Proposed Total.

Conversely, the milestone or billing task should have an amount in the Proposed Total but $0 in the Work Billable Total.

However, data from both those columns are rolled up to the summary level, so summary tasks will have both sets of data filled in.

Hover on the Tools icon and click Collapse all Summary Tasks.

You can see the proposed billable amount for each summary task as well as a total for the project.

This is the total fixed price for the project.

Enter and Track Hard Costs


Proposed Hours, Rate, Time and Expense

In this view, you are seeing just the Proposed Total. This is a calculated field. You cannot edit it.

To see how the data in that field gets populated, click the Display Options icon.

Click on Prop. Total in the Selected Columns, because you want to insert your new columns just before that.

Click on a field in the Available Columns and type P to go directly to the fields that start with the letter P.

Scroll down until you see the Proposed fields.

Double click on Prop. Hours, Prop.Rate, Prop.Time, and Prop. Expense.

Click the Update Display icon.

Those columns now display.

Click on the headers to drag them wider to see the full label.

Double click on the white space of the task to go into edit mode.

Click in the Proposed Hours.

You could enter the total work hours that you propose to bill.

This can be different than the planned work hours that you entered or it could be the same.

You then have a proposed rate. Again this could be the same as your billable rate for the resource or something different.

Leave the Proposed Time as that value will be calculated automatically by taking your proposed hours and multiplying it by the proposed rate after you click save.

In the Prop. Expense, enter the proposed value or your non-labor or expenses that you plan to bill the client.

The Proposed Total is not editable because it is also automatically calculated.

Click Enter to save the information.

Again, it takes the proposed hours and multiplies it by the rate to get the proposed time, then adds the proposed expense to get the proposed total.

You do not have to enter proposed hours and rates. That is not really required and you can just put in a total value for labor instead.

Double click on the Proposed Hours to go into edit mode.

Erase the Proposed Hours and Proposed Rate.

Type in $6,500 in the Proposed Time because you are going to round up.

Leave the Proposed Expense as $1,000.

Click Save.

You do not even need to separate Time and Expenses on the proposed amounts. You can just have one billable amount.

Click on the Edit icon on the milestone task. Erase the Proposed Time value.

Put the total billable amount in the Proposed Expenses.

Click Save.

It is up to you and the level of data you want to record. You can just record the total value in the expense column, or you can break it down by labor and expense and then even break down the labor with hours and rates.

If you are just recording a total, we suggest using the Proposed expenses to do that, but really you could just enter the total in the Proposed Labor too.

Click on the Edit icon on the milestone task.

Erase the Proposed Expense amount and put that in Proposed Labor instead.

Click Save.

It is your choice. You can do what makes the most sense for your organization.

By recording the data in the proposed columns, you know what fixed price to bill and when.

Target Budget Billable

When you created this project, you may have recorded a target budget billable for the entire project. Again, this is covered in more detail in the training session called Managing Project Budgets for Professional services but you’ll see at a high level how it related to fixed projects.

Hover on the Edit icon and select Edit Project.

Click on Target Budget Information.

Only a project manager or project scheduler can edit this data.

This is where you can record the total fixed price that your customer agreed to pay.

In most situations, it should be the same value as your Proposed Total. You are recording it here again, so that you have a permanent record of the total amount in case for some reason the project plan changes and also so that you can run variation and profitability reports.

That is the recommended best practice for fixed price projects.

However, in some instances, it could be a different amount that the Proposed Total. That would depend on your business process. Maybe your sales team gave the customer a ball park estimate to win the business and that occurred before the project team was involved. Then the project team got involved to do a detailed estimate. That detailed estimate came from the data from the Proposed Totals on the project plan and was used in the contract that was written for the customer. You could still record that original estimate and report on that.

Click Save.

You can view this kind of financial data, hover on Views and select Status.

Click on the Budget tab.

There’s the Target Budget or the total fixed price your customer agreed to pay.

Then you also have the Work Total Billable, which is the total billable amount of both labor and expenses as it was calculated from your detailed work break down structure.

And there is also the proposed amounts, which is the milestone billable amounts as outlined in the project plan.

Click the Views menu option to return to your task list.

Entering Actual Time and Actual Expenses

You have now created your plan with your fixed price data.

As your project progresses, your team will start recording actual time against the project.

Tracking time is covered in detail in Track Your Time and Enter Expenses training sessions , so you are only going to see just one way that it can be entered here.

Click on Determine Project Scope.

Click the Time tab.

Enter Actual Hours.

The Actual Hours are the total number of hours you worked on the task.

Because you are logged in as a project manager, you are seeing some extra data when you do time entry, however, just click Save.

You can also enter some actual expenses.

Click on the Expense tab.

Again, you will see some extra data columns because you are a project manager.

Enter $500 in the Actual Cost.

Click Save.

You can see the expense entries that were made on this tab.

And you can also see your time entries by clicking on the time tab.

You can also see the totals of this data on your task list view.

Click on Views to return to the Task List. The software remembers that last view that you set.

Click the Display Options icon.

In the Selected Columns, click on Start Date to put the new fields before that.

In the Available Columns, scroll down to the Billable section.

Double click on Billable Total.

Click Update Display.

Click and drag the column headers to see the full label.

You can see the total value of the billable hours and expenses entered.

This shows you where you are in terms of your actual spend on the project.

More details on all this are available in the Managing Project Budgets for Professional Services training session.

Portfolio Reports for Fixed Price Projects

Once you have set up a view of the fixed price data that you need, you can save it so that you can easily switch to that view of the data whenever you need it.

You can use that saved view on this project and on other projects as well. This saves you time and ensures you are following your business process.

Click on Display Options.

Click the Edit icon on the Quick Selection.

Enter the name of the View, such as Fixed Price view.

Click the Save icon.

Now you can easily click in the drop down and switch your task view to this one. This view is available for any project that you work on.

Click the Update Display icon.

You will also want to run portfolio reports with the same kind of data and save those reports so you can run them instantly when you require.

Click on Reports.

Click on Project Reports.

Click Create Project Report.

Click on the Column Selection Options section to expand that out.

In the Available columns, double click on each field to remove all but the name.

Let’s just add in our total values.

In the Available Columns, double click on:

Proposed Total – which is the amount you agreed to bill the client based on each milestone

Work Billable Total - which is the total amount you should bill the client based on the project plan or this could also be called the time and materials amount

Billable Total – the actual total labor and hard costs as they are entered Target Billable Total – which is the high level target amount for billing the client

Click Update Display.

Click Save Report to save it.

Enter Fixed Price Projects.

You can share this report with others if you require.

Click Save.

That report is now available with one click access from anywhere in the system.

Hover on Reports, Project Reports and select Fixed Price Projects.

This is a real time view of the project fixed price data.

That helps you track your fixed price deliverables, your planned values or your planned billable, if you were doing a time and materials project.

Some other types of reports that you may want are a Planned Profit Report.

Hover on Reports, Project Reports and select Planned Profit.

Or a Fixed Price Performance Report.

Hover on Reports, Project Reports and select Fixed Price Performance Report.

These were both reports that were created from the data and saved for easy access. You can setup the reports that you require too.

The final piece of this is when you end up going to invoice and that is covered in the Generating Invoices and ERP Integration training session. This is where you learn how to track how much you’re actually charging the customer versus how much you planned and how much you actually spent. You can make all those comparisons.

That’s managing fixed price projects.


Online 10/13/2015
Updated on: