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Project-Managed Company, the Real Nitty-Gritty!

By Llinas Jean-Christophe, 11:20 AM on October 18, 2016

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Companies that produce goods or services in project mode are known as "project-managed". Each of these business deals comes with a set of technical, staffing and legal commitments linked to a project with a (more or less) defined duration.

This means that a project-managed company is different from an order-based business where the notion of project is less marked and where the activity is centred on honouring a flow of orders from clients. Depending on the context, the case can relate to a mission, a construction site or a project.

With this type of organisation, the signature of a contract adapted to the client's requests is an essential prerequisite, just after a phase of analysis of the client's needs.

The case is the basic analytical axis of a project-managed company. It can be divided into a certain number of basic tasks often grouped together as "client'" deliverables. This case is also linked to the vertical and horizontal analytical structure of your business (profit centre, project type, geographical zone, etc.) and is positioned in its life-cycle (pre-sale, pre-project, production, completion). Thus all costs and income linked to it are analytically connected:

  • Billing schedule and client billing,
  • Time spent, valued by direct cost or standard cost of your employees,
  • Workload schedule, also valued,
  • Mission fees,
  • Sub-contracting costs,
  • Puchase of equipment,
  • Accounting entries enabling the recognition of products and costs at each retained payment.

Software publishers/integrators, research departments, engineering companies, architecture practices or agencies, technical testing centres, research and consultancy companies are all examples of project-managed service companies;

In order to better manage and retain agility, from a certain level of business, it becomes essential to set up an integrated software platform, or ERP, at the centre of your information system and digital transformation. The solution must natively enable management by project, whether with regard to commercial, operational or financial aspects.

Clearly, you should opt for an integrated management software package or ERP that's specifically designed for the company's business. Therefore, you should exclude solutions designed for industry, retail and even generic software packages from your research; they are rarely suitable for the particularities of management by project. Fortunately, several software packages on the market have been designed for the specific needs of such companies.

You need to distinguish between two categories of solutions from among those on offer:

  • Management software packages for "timework" mode
  • Management software packages designed for "fixed price" mode

In the first category (very popular with IT consultancies/digital services companies), it's the time worked that's billed: each day sold is produced and billed with no variance. Usually, the revenue corresponds to the billing. Therefore, recognition of revenue is relatively simple.

In the second category, the billing and production of your business are barely related, if at all. You will need to monitor the rate of progress of your project and deduct billable work at each retained payment. You may also have to audit log situations in order calculate production for each period. In a nutshell, it's a much more complex form of management, requiring very close collaboration between the company's operational and financial staff.

Naturally, companies that market projects in both modes (timework and fixed price) would be advised to opt for a "fixed price" focused solution.

— Why do it the hard way, when there's an easy way?

 

The Akuiteo management software platform is clearly positioned for the management of cases/projects sold at a fixed price, with one important distinction, this solution integrates general, budgetary and analytical accounting, thus enabling automation of cut-offs (by project, of course!) at each retained payment.

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