There was once a time when managing a project at work was fairly straightforward.
Preparing project budgets is perhaps one of the most challenging parts of project management, especially for bigger and more complex projects. With budgets getting tighter, managers need smarter ways to estimate costs accurately to procure funds for resource allocation and give clients and stakeholders the confidence that projects will be delivered on time and on budget.
This is where SmartBudget in Polaris PSA (our professional services automation software) comes in. Managers can use SmartBudget to simulate cost, price, margin, and profitability for projects to ensure that the project is set up for profitability and hits revenue goals.
Here are four ways you can leverage SmartBudget to improve project pricing and revenue for your business.
Create Profitable Bids
A recent SAP study, Intelligent Enterprise for the Professional Service Industry, notes that 80 percent of project profitability is determined at the bid stage, and more than half of all projects do not deliver to plan. This is mostly because project managers fail to factor in true utilization, 100 percent of costs, and margins to ensure profitability.
SmartBudget helps project managers build competitive bids while accounting for all the business costs and the true utilization of resources based on historical information and current and future availability. This level of granular insights — from both historical and real-time data — ensures that your proposals are not underquoted.
Operate with Optimal Billing Rates
To maximize profit, project managers must know what billing rates will result in optimal margins while considering all relevant costs. The challenge here is gathering all relevant costs, including billing rates, traveling spends, training costs, research expenses, capital expenditures, and any other material expenses.
SmartBudget automatically consolidates all business-related costs, including project, non-project, direct, and indirect costs, to calculate the most profitable billing rates. This minimizes administrative overhead and human-induced errors. The auto-calculated billing rates consider the organization’s entire business and labor costs and the desired margin and utilization rates. Managers can view the billing rates in real time to quickly identify any rates that can decrease project profitability.
And since resource requirements change from one project to another, SmartBudget gives managers the flexibility to adjust the rates dynamically to match profit goals and achieve maximum revenue. To reduce rework, managers can create default rate cards for every role in the organization.
A project’s revenue and profitability depend on the utilization rate, the billing rate, and margins. Project managers need the flexibility to analyze “what if” scenarios to fully understand the impact of changes to cost, price, and utilization.
SmartBudget gives project managers the ability to simulate profit and revenue scenarios based on the utilization goals, margin goals, average billing rate goals, and revenue goals they want to target for the project. Managers can simply plug in their goals and the built-in engine automatically calculates the value of other metrics required to reach that goal. If the value of any of the metrics is not matching your expectations, you can drill down to understand what challenges or bottlenecks are holding them back.
Track Revenue in Real Time
With complete real-time visibility into all financial metrics like costs, billing, cash flows, and more, SmartBudget works with full visibility into up-to-date project financial health. Tracking estimates versus actuals helps to pinpoint where the revenue is leaking and fix the issue immediately. Since most of the calculations happen automatically, it helps leaders and managers course correct any deviation and make smart decisions quickly. For instance, if a project is not meeting the set goals, managers can quickly use SmartBudget to adjust billing rates, costs, or margins before things get completely out of hand.
Explore the Power of SmartBudget
With SmartBudget, businesses can plan their revenue considering all costs and leverage historical metrics to make informed pricing decisions. Managers get complete visibility into true costs and billing rates in real time, which lets them make necessary changes before they eat into the project profitability. Get a demo to learn how using SmartBudget with our professional services automation software, Polaris, can help your business.