KPI #11 – PROPOSALS PENDING

One final KPI to think about is the value of any proposals for new work that are pending. Seeing both the various stages of the proposal process and the probability of success allows managers to determine both short-term and long-term impacts. Is there the possibility that more staff will need to be hired if a lot of the work comes through? Or is there just enough to keep the current size of the firm going. Worse, though, is there too much competition or uncertainty about enough of them that something else needs to be planned?

It is often tempting to consider potential projects in the backlog/runway analysis and some managers will do so if a pending proposal shows a 50 percent or greater chance of becoming a contract. However, a more conservative financial approach recognizes that plenty of things fall through, often due to no fault of the firm. The economy can change, a client may not really have everything in place to proceed, or a new decision-making Board may vote to break with tradition and hire a new firm. Hence, it is often best not to consider the proposals pending in the runway numbers, even if they have a 99 percent probability. Running the business finances conservatively in this regard allows firms to afford taking the type of risks they would prefer when it comes to performing the services.

SELECTING COMPUTER SOFTWARE TO TRACK KPIS AND FIRM HEALTH

Based on all of the foregoing, it is clear that there are some fundamental and useful points of information that, when provided in real-time, allows project managers, firm principals, and other employees to assess the financial health of a firm. It also allows them to react, plan, and respond to current and future needs. It should also be clear that the best way to track and receive the needed information is using computer software that is specific to design firms. While there are several such programs available, selecting computer software for managing projects and firms should be based on meeting a variety of needs, which can include the following:

Integrated Functions Firms can improve efficiency and accuracy with an all-in-one platform that combines front office functions (project management, Client Relationship Management) with back-office processes (time and expense tracking, invoicing, electronic payments, accounting, and HR). This allows managers and principals to understand the full financial implications of project decisions with integrated project accounting and project management tools.

Streamlined Input Process The software should allow all employees to save hours every week with streamlined, automated processes, including time/expense tracking and invoicing. It should accurately account for every billable hour and expense with time tracking and automated expense capture/mapping to projects and invoices. Less manual input means teams can focus more on project delivery.

Real-time Reporting Software should provide real-time views into profitability at the levels of the firm, the client, project, phase, and employee. Instantly seeing a firm's health and project performance with easy-to-read dashboards is a plus. Real-time visibility into project performance at each phase helps prevent cost overruns, poor team performance, and missed deadlines. It also ensures everyone stays in the loop with flexible, automated, sharable reporting.

Project Management Support Managers should be readily able to confidently manage phased projects and invoicing based on percent-complete values. The software should also easily separate basic services from additional services on a single invoice. At the same time, it should help prevent overworked or underutilized staff by monitoring utilization rates in real-time. All of this allows project managers to focus on true profit and loss issues.

Mobility Many firms require the ability to manage from anywhere. This can be achieved with the full functionality of a mobile app.

In the end, it is up to the firm’s principals to decide on which software to use and how to implement it, but it is certainly beneficial to keep all the project managers and other employees in mind. They are the ones who will need to embrace it and use it as much as the principals.

Conclusion

Responsibilities for practice management are varied and significant, so finding tools that illuminate Key Performance Indicators of the financial health of the firm are often welcome. Principals and Project Managers should think carefully about which KPIs are most important to the firm and set up a process for getting that information quickly and efficiently. While it is true that you can’t manage what you can’t measure, it is also true that if there are areas you don’t intend to manage, then don’t waste time measuring them. Rather, use the tools available to create the most appropriate and useful system to track the financial health of projects, employees, and the firm overall.

Peter J. Arsenault, FAIA, NCARB, LEED AP is a nationally known architect and a prolific author advancing positive acoustical experiences through better building design. www.pjaarch.com, www.linkedin.com/in/pjaarch

Resources

How to improve your utilization rate.

Learn more about the difference between utilization and realization rate.

How to improve project profitability.

Learn more about what earned value can teach you about the clients you work with.

Learn more about how to analyze your firm’s contract, budget and billability reports..

Get tips on how to create a strong Work in Progress report here.

Learn 6 tips to improve receivables and get paid faster.

Prevent your firm from losing revenue. Download the ebook, “Your Office is Leaking Money: How to Identify Losses and Plug the Holes".

Learn how to build a better proposal on this webinar.