Monday, June 24, 2013

5 Fundamental Finance Tasks for PMs

Your project managers are key players in ensuring that the financial performance goals of the firm are met. PMs are responsible for managing projects, but to be truly effective, must also understand the firm's monthly financial reporting cycles and have the ability to plan, track, and evaluate each project's fiscal performance. 

Go over this list with your PMs. This is what they ought to know and be able to do:

1. Prepare the project budget and monitor its status. The project manager must prepare the project budget and monitor its financial status. This includes ensuring that the information in the firm's management information system (MIS) is accurate and up to date. In large firms, a project administrator may prepare the various input forms, but the accuracy of this information remains the sole responsibility of the PM.

2. Monitor the work done. The PM must monitor the work done or to be done. This should ensure that it is included in the authorized scope of services.

3. Seek additional fees for extra work. When work is required outside the contract scope of services, the PM must seek additional fees from the client. When extra work is proposed, the project schedule must be reviewed to determine the effect the additional work will have on it. A request for an increase in fees must identify any required work that's outside the contracted scope of services.

4. Get authorization for extra work. This extra work must be identified promptly when it occurs, and the PM must notify the client in writing. Most clients won't pay for extra work performed before it is authorized. The project manager is responsible for ensuring that no unauthorized work is performed on his/her project.

5. Invoice clients promptly. The PM is responsible for ensuring that clients are invoiced promptly and for following up on the payment of outstanding invoices.

Monday, June 17, 2013

Your Best Marketing is a Happy Client

Take a proactive approach to avoiding client service problems. Negative interactions with clients happen, and you need to address these situations quickly, so that projects are not derailed and relationships strained.

Many negative client encounters revolve around service failures when your firm did not meet, or is not meeting, expectations. “Failure” may sound strong, but not meeting expectations is clearly failure. What are some common causes of these client service mishaps?

• Lapse in quality – One of the biggest frustrations with internal work is poor quality. If you get mad, how might an external person react? Clients pay you a lot of money to be the experts and to do the work they can’t accomplish. They don’t want to find and correct our mistakes.

• Poor communication – Every project and personal interaction requires good communication, written or verbal. Breakdowns can occur when communication is untimely, inaccurate, conflicting, unclear, or otherwise ineffective. Clients want to know what’s going on. It gives them a sense of comfort and control.

• Cost overruns – This may sound obvious, but is worth stating. When a budget is exceeded, the owner will be upset. Consider how you felt the last time you had work done on your house or your car repaired, and the final cost was more than you expected.

• Multiple stakeholders – Often your client—the person or entity paying the invoice—has to satisfy others’ interests. Whether it’s an end user of the facility, an interest group in support or opposition of the project, or her boss, additional people create a matrix of expectations to meet.

• Changing out project staff – Even when everything else goes well, a change in staffing can cause a misstep on the project. New people create budget pressures, and add complexity to communications. The worst situation is caused by changing the PM.

Recovery from failure is essential. You know what to do. Set up an urgent meeting to get stakeholders aligned, clarify expectations, or adjust schedules and budget. But rather than focusing on recovery, just don’t let there be any failures in the first place. Prevention is the cure. More than just doing the opposite of the things listed above, following are some helpful hints and processes to consider implementing.

• Conduct a kickoff meeting, and invite your client – An internal kickoff meeting is essential. Agenda topics should include communications protocol, assignments and budget (allocating hours), and schedule milestones. Invite your client to participate in the meeting, or a portion of the meeting. Even a phone conference can be a step in the right direction.

• Use client feedback and report cards – Many firms have a formal system to obtain feedback. Advocate that your project is included in the process. And make sure you don’t only get feedback at the conclusion of the project.

• Promote executive engagement – Sometimes the project team is too close to the work to get the real issues out on the table, or not senior enough to get to higher levels in the client organization to make a mark for your firm. Consider getting executives involved in your client interactions.

• Institute project reviews – Try conducting a formal sit-down with your client on a periodic basis to review all aspects of your firm’s work—financial performance, schedule of deliverables, adequacy of resources, and quality of work.

• Practice good QC hygiene – Every firm I have worked for has established quality control procedures. Follow your process, use peer review, check calculations and drawings, and prevent quality lapses.

The best marketing tool is doing good work. And clients may not be inclined to rehire your firm if you have service failures. Be diligent about recognizing when you are going down the road of missed expectations, and follow good practices to stay on track with your operations.

Monday, June 10, 2013

Strategies to Manage Cash Flow

Cash is the lifeblood of your A/E firm. As PM, you must manage the process to get the cash into the door as quickly as possible for professional services performed. There are two financial elements in play here that you must understand: 

1. Work in Progress (WIP). This is a measure of the amount of work in dollars that has been completed, but the firm has not yet invoiced the client. In many cases this also means that you may have already received a paycheck for the work completed, yet the firm has not even sent an invoice for those services.

2. Account Receivable (AR). Once you have sent an invoice to the client for the work completed, it is no longer referred to as WIP—it becomes AR. This is a measure of the amount of money we have billed the client, but have not yet been paid. When you add the two amounts together (WIP + AR) you have an amount commonly referred to as your "project investment." This is the amount of money the firm has "invested" at any one time in the project. 

It is the responsibility of the PM to keep this project investment as small as possible. Here are some effective strategies to minimize both WIP and AR.

Strategies to manage WIP: 
  • Bill more often than every 30 days, if the client will accept 
  • Ask for a retainer prior to starting the work 
  • Bill lump-sum projects on the first day of the month; the PM only has to send accounting a percent complete in order for an invoice to be prepared, so lump-sum in voices can go out at least a week ahead of hourly billings 
  • Make sure timesheets are filled out correctly, so valuable time isn't wasted transferring charges before invoices can be finalized 
  • PMs need to quickly review draft invoices prepared by accounting staff 
Strategies to manage AR: 
  • Understand the client's billing cycle 
  • Follow up with the client once an invoice is sent to confirm that it was received 
  • Send an accurate invoice—in the proper format with appropriate back-up—as required by the contract 
  • Send invoices and receive payments electronically 
Above all, the best strategy to getting paid in a timely fashion is to: Pick the right clients Develop a great relationship with your clients through excellent client service and quality delivery.

Monday, June 3, 2013

Improve Your Networking Skills

We have all been there, attending a conference or social gathering of A/E/C professionals where we find ourselves in a room full of people – potential customers or teaming partners – that we don't know. Here are a few tips that can help you "work the room" and expand your network:

• Set a goal to introduce yourself to at least five people. You can't get to know someone if you don't take that first step in approaching them. You will be surprised that most people are receptive to a friendly introduction. 

• Have an "elevator pitch." You need to be able to tell someone, in a 30-second summary, about your company. It doesn't need to be detailed, but it does need to be interesting – enough so that they want to hear more. 

• Listen more than you talk. The more you listen…the more they will tell you about themselves, their business, etc. 

• Ask questions. You don't always have to carry the conversation. By asking interesting questions, you'll keep them talking. 

• Don't oversell. Remember, you are just trying to get to know them at this point. They aren't interested in a sales presentation. 

• Follow up. Don't toss their business card into your desk to collect dust. Drop them a quick email. Let them know that you enjoyed talking with them. Mention something specific from your conversation, such as how their kid's baseball game went. 

• Use an application (i.e. Outlook, Google, etc.) to help solidify your networking. Use the notes field in Contacts to remember information such as where they went to school, their spouse's name, and the hobbies that interest them. Also, use your calendar for follow-up reminders in a few weeks.
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