Every design firm is in the business of providing professional consulting services to its clients. To be successful and remain in this business, however, its projects must be profitable (i.e., the revenue must exceed all costs including overhead and profit expectations). In addition, clients must receive invoices in a timely manner, and your firm must receive payment for the completed work within the time specified in the contract.
A PM is assigned to each project, not only to manage the project team and to ensure that the project budget is met, but also to ensure:
The client receives invoices for the scope of services
Payments are received from the client within the contract payment period
The project achieves its “as-sold” financial results with no write-offs
In a nutshell, the PM is responsible for the project’s financial management in two primary areas: cash flow and profitability. This means the PM must be familiar with the monthly financial reporting cycles and have the ability to plan, track, and evaluate the fiscal performance of a project. He or she must understand how the project’s total gross revenue relates to the project direct labor and project expenses, including consultants. Plus, the PM must also understand how the planned and actual project performance contributes to the overall profitability of the firm. In this course we will look at all these responsibilities and concepts in detail.
Business Practices / Contracts / HR
Health, Safety and Welfare
At the conclusion of this course, you will be able to:
Describe the PMs financial responsibilities to a project.
Identify the components of the billing process.
Identify the key financial performance ratios.
Differentiate between accrual and cash accounting.
Recognize the different fee adjustments that can occur within a project.
Explain why profit is a necessity and the steps that can be made to generate profit.