How to Measure Project Profitability


2022-09-20 19:00 project manager


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As projects are all about the bottom line, you can imagine the importance of project profitability in project management. Being able to determine beforehand whether a project will turn a profit is how organizations can decide which projects to initiate and which ones to skip. But what exactly is profit profitability and how does it relate to professional services teams, consultants, CFOs and accountants? We’ll define the term and explore how to analyze and measure profit profitability to help you better allocate your resources. What Is Project Profitability? Project profitability measures how much money a project will make for the organization that initiates it, tracking the financial gain or loss of a project. Project profitability is part of project accounting and uses profit (the revenue left over after accounting for costs) and margin percentages to express the money made. It works by comparing the revenue collected from the work done for a client (the actual revenue) and compares that to the cost to the organization for delivering those services such as salaries and other direct costs. Unlike rate realization analysis, which compares actual earnings with earning potential, project profitability is only concerned with comparing actual evenings against the cost of generating that revenue. Issues that can impact project profitability include scope creep and low employee utilization. Even the type of contract that’s used can affect the profit expectation. That’s why project management software is so important. ProjectManager is an online tool that plans, schedules and tracks costs in real time with Gantt charts. Not only that, our Gantt charts can link dependencies to avoid scope creep and filter for the critical path so you know which tasks must be completed to successfully deliver your project. You can also set a baseline to track your actual costs against your planned costs to stay on track. Get started with ProjectManager today for free. Profit Margins A profit margin is used for the profitability ratio in project profitability and helps you determine which activities make money in your project. This is an essential part of project profitability as the profit margin tells you how much money you can keep out of every dollar that you earn. The larger your profit margin in a project, the more money that project will generate. It’s easy to calculate the profit margin. It’s total project cost minus total expenses divided by total project cost multiplied by 100. Or, if you’ve already calculated the profit, you can simply divide the project profit by the total project cost and then multiply that by 100. Project Profitability Analysis Project profitability analysis is a project accounting technique that focuses on the health of an organization or project. It’s a way to deliver detailed data to better inform delivery management, employee management and organizational performance. The importance of project profitability analysis is wide-ranging. The biggest advantage is that the more profitable an organization is, the more it can thrive. On a more operational level, project profitability analysis allows organizations to make better business decisions such as which projects or clients to take on based on data. Another aspect of project profitability analysis that isn’t as obvious is that it helps align teams. When everyone knows the profit-driving projects or target clients, it puts all departments on the same track. From the project team to sales to marketing and other departments, they’ll all be working together. How to Measure Project Profitability You can see the importance of project profitability; if you’re not making a profit, you’re not in business. Therefore, the projects or clients you contract with have to be profitable and this is one of the metrics by which you’ll measure the project. How you calculate project profitability can vary, but all approaches should follow these best practices. 1. Evaluate More Than the Budget It’s easy to get lost in the budget. After all, the cost is part of the triple constraint, which also includes scope and time. These are certainly critical metrics and will help you deliver the project on time. However, for project profitability, you have to have a bigger picture that focuses on the project’s profit and margin. We’ve discussed those terms above and they’re key to understanding the profit after delivering the project. Related: Free Cost Benefit Analysis Template for Excel 2. Start Early It might seem like a task to focus on project profitability after the project has been delivered. While it’s good to do this after you completed the project, it’s a mistake to only perform this function at the end of the project. Project profit analysis should be estimated and tracked throughout the life cycle of the project as it’ll help make the project more profitable. Ideally, you’ll look into this quarterly to help you meet your profit expectations. 3. Always Track Tracking is essential for managing a project successfully. That means tracking the hours your team works on tasks, tracking time spent on tasks and understanding how those hours translate into costs. It’s also critical to track the planned costs against your actual costs to stay on track and better forecast profitability in the future. There are more practical tools to measure project profitability, and we’ve outlined some below. Project Profitability Index A project profitability index (PI) is also called a cost-benefit ratio or profit investment ratio. It helps you determine the potential profitability of a project. The project profitability index is equal to the present value of future cash flows and initial project investments. That’s the money earned for every dollar invested. If a project is worth taking on, it will have a project profitability index higher than one. If it’s lower than one, the project likely isn’t viable. This is a project that will cause you to make more of an investment than it will see in profit. You’ll probably pass on this type of project. If the project profitability index is equal to one, the project will likely break even. Even though that’s not a loss, most companies want to make a profit. It’s unlikely that there would be a scenario where this would be a viable project for an organization to pursue. This is another project that should be passed. When the project profitability index is greater than one, that project will likely deliver the profits an organization needs to survive and grow. The project profitability index is a great tool to help make these decisions about which projects to take on and which ones should be avoided. Project Profitability Index Formula Let’s get specific and outline the formula for a project profitability index. The first thing you need to do is identify the cash inflows and cash outflows for the project. The next step is determining an appropriate discount rate. A discount rate is an interest used in discounted cash flow (a valuation method to estimate the value of an investment using its expected future cash flows) analysis to determine the current value of future cash flows. Once you have the discount rate, use it to find the present value of all cash inflows and outflows. The project profitability index equals the present value of future cash flows divided by the initial investment. ProjectManager & Project Profitability One key aspect of project profitability is the ability to track the project across several metrics. ProjectManager is online project management software that gives you real-time data to keep better track of your project’s profitability. Once you set the baseline on your project plan in the Gantt chart, our software calculates project variance in real time. Track Project Profitability With Real-Time Dashboards Setting a baseline feeds live data throughout our software. For example, our real-time dashboard automatically collects live data and does the calculations for you. The results are then displayed in colorful graphs and charts. You get a high-level view of the project across six metrics, including the cost to help you track profitability. Best of all, unlike other software products that make you configure the dashboard, ours is ready to go and no setup is required. See How Many Hours Your Team Spends on Tasks Another metric you want to follow outside of overall costs is the hours your team spends on tasks. Our software allows you to capture your team’s hourly rate and then use secure timesheets to track how much time they’re spending on tasks. This translates into money that’s going to impact the profitability of your project. Timesheets, beyond streamlining payroll, give you transparency into the profitability of your workforce. These are but a few of the features that help track project profitability. There are also customizable reports that can be filtered to show only what you want to see. They can then be shared with your project stakeholders to keep them updated. ProjectManager is award-winning project management software that helps you deliver profitable projects. You can plan, schedule and track all in the same tool, with the task, resource and risk management features to give you unprecedented control over your project. Join teams at NASA, Siemens and Nestle who are using our software to succeed. Get started with ProjectManager today for free.
由于项目都是关于底线的,你可以想象项目盈利能力在项目管理中的重要性。能够事先确定一个项目是否会盈利,这是组织可以决定发起哪些项目以及跳过哪些项目的方式。 但是,利润盈利能力到底是什么?它与专业服务团队,顾问,首席财务官和会计师有何关系?我们将定义该术语,并探索如何分析和衡量利润盈利能力,以帮助您更好地分配资源。 什么是项目盈利能力? 项目盈利能力衡量一个项目将为发起它的组织赚多少钱,跟踪一个项目的财务收益或损失。项目盈利能力是项目会计的一部分,使用利润 (计入成本后的剩余收入) 和保证金百分比来表示赚的钱。 它的工作原理是比较从为客户完成的工作中获得的收入 (实际收入),并将其与组织提供这些服务 (例如工资和其他直接成本) 的成本进行比较。 与将实际收益与盈利潜力进行比较的比率实现分析不同,项目盈利能力仅涉及将实际晚上与产生该收入的成本进行比较。 可能影响项目盈利能力的问题包括范围蠕变和员工利用率低。即使是使用的合同类型也会影响利润预期。这就是为什么项目管理软件如此重要的原因。 ProjectManager是一个在线工具,可以使用甘特图实时计划,计划和跟踪成本。不仅如此,我们的甘特图还可以链接依赖关系,以避免范围蠕变并过滤关键路径,以便您知道必须完成哪些任务才能成功交付项目。您还可以设置一个基线来跟踪您的实际成本与您的计划成本保持在轨道上。立即免费开始使用ProjectManager。 利润率 利润率用于项目盈利能力中的盈利能力比率,可帮助您确定哪些活动在项目中赚钱。这是项目盈利能力的一个重要部分,因为利润率告诉你,你可以从你赚到的每一美元中保留多少钱。你在一个项目中的利润率越大,这个项目产生的钱就越多。 计算利润率很容易。它是项目总成本减去总费用除以项目总成本乘以100。或者,如果你已经计算了利润,你可以简单地将项目利润除以项目总成本,然后乘以100。 项目盈利能力分析 项目盈利能力分析是一种关注组织或项目健康状况的项目会计技术。这是一种传递详细数据的方法,可以更好地告知交付管理,员工管理和组织绩效。 项目盈利能力分析的重要性是广泛的。最大的优势是,一个组织的利润越多,它就越能蓬勃发展。在更具操作性的层面上,项目盈利能力分析允许组织根据数据做出更好的业务决策,例如承担哪些项目或客户。 项目盈利能力分析的另一个不那么明显的方面是,它有助于调整团队。当每个人都知道了推动利润的项目或目标客户时,它使所有部门都走上了同一轨道。从项目团队到销售到市场营销和其他部门,他们都将共同努力。 如何衡量项目盈利能力 你可以看到项目盈利的重要性; 如果你没有盈利,你就没有做生意。因此,与您签约的项目或客户必须有利可图,这是您衡量项目的指标之一。计算项目盈利能力的方式可能会有所不同,但所有方法都应遵循这些最佳实践。 1.评价超过预算 在预算中很容易迷路。毕竟,成本是三重约束的一部分,这也包括范围和时间。这些当然是至关重要的指标,将帮助您按时交付项目。然而,对于项目盈利能力,你必须有一个更大的图景,关注项目的利润和利润率。我们已经在上面讨论了这些术语,它们是理解交付项目后利润的关键。 相关: Excel的免费成本效益分析模板 2.早点开始 在项目交付后,专注于项目盈利能力似乎是一项任务。虽然在完成项目后执行此操作是很好的,但仅在项目结束时执行此功能是错误的。项目利润分析应在项目的整个生命周期中进行估算和跟踪,因为它将有助于使项目更有利可图。理想情况下,你会调查这个季度,以帮助你达到你的利润预期。 3.始终跟踪 跟踪对于成功管理项目至关重要。这意味着跟踪您的团队在任务上的工作时间,跟踪在任务上花费的时间,并了解这些时间如何转化为成本。跟踪计划成本与实际成本之间的关系也很重要,以保持跟踪并更好地预测未来的盈利能力。 有更多实用的工具来衡量项目的盈利能力,我们在下面概述了一些。 项目盈利能力指数 项目获利能力指数 (PI) 也称为成本效益比或利润投资比率。它可以帮助您确定项目的潜在盈利能力。项目盈利能力指标等于未来现金流量和初始项目投资的现值。这就是每投资一美元所赚的钱。 如果一个项目值得承担,它的项目盈利指数将高于一个。如果低于1,则该项目可能不可行。这是一个项目,它将使你做更多的投资,而不是它将看到的利润。你可能会传递这种类型的项目。 如果项目盈利指数等于1,项目将有可能实现盈亏平衡。尽管这不是亏损,但大多数公司都希望盈利。不太可能出现这样的情况,即这将是一个组织追求的可行项目。这是另一个应该通过的项目。 当项目盈利指数大于1时,该项目可能会带来组织生存和发展所需的利润。项目盈利能力指数是一个很好的工具,可以帮助做出这些决定,决定要承担哪些项目,哪些项目应该避免。 项目盈利能力指数公式 让我们具体介绍一下项目盈利指数的公式。你需要做的第一件事是确定项目的现金流入和现金流出。 下一步是确定适当的贴现率。折现率是指在折现现金流量 (一种估值方法,利用投资的预期未来现金流量估算其价值) 分析中使用的利息,以确定未来现金流量的当前价值。 一旦你有了折现率,用它来找到所有现金流入和流出的现值。项目盈利能力指数等于未来现金流量的现值除以初始投资。 项目经理和项目盈利能力 项目盈利能力的一个关键方面是跨多个指标跟踪项目的能力。ProjectManager是在线项目管理软件,可为您提供实时数据,以更好地跟踪项目的盈利能力。一旦您在甘特图中设置了项目计划的基线,我们的软件就会实时计算项目差异。 使用实时仪表板跟踪项目盈利能力 设置基线在我们的软件中提供实时数据。例如,我们的实时仪表板会自动收集实时数据并为您进行计算。然后将结果以彩色图形和图表显示。您可以从六个指标 (包括帮助您跟踪盈利能力的成本) 获得项目的高级视图。最重要的是,与使您配置仪表板的其他软件产品不同,我们的软件产品已准备就绪,无需进行任何设置。 看看你的团队在任务上花费了多少小时 在总体成本之外,您要遵循的另一个指标是团队在任务上花费的时间。我们的软件允许您捕获团队的小时费率,然后使用安全的时间表来跟踪他们在任务上花费的时间。这转化为资金,将影响你的项目的盈利能力。时间表,除了精简工资之外,还让你透明地了解员工的盈利能力。 这些只是帮助跟踪项目盈利能力的一些功能。还有可自定义的报告,可以过滤以仅显示您想要查看的内容。然后可以将它们与您的项目利益相关者共享,以保持它们的更新。 ProjectManager是屡获殊荣的项目管理软件,可帮助您交付有利可图的项目。您可以在同一个工具中计划、安排和跟踪所有任务、资源和风险管理功能,让您对项目进行前所未有的控制。加入NASA,西门子和雀巢的团队,他们正在使用我们的软件取得成功。立即免费开始使用ProjectManager。