Managing project finances can be a challenge for consulting and engineering firms. Without having real-time visibility and control over every project’s finances, they can quickly spiral out of control.
This article examines the key areas of financial management, best practices, and how to leverage technology to facilitate budgetary and financial control.
Businesses that manage project-based work encounter additional complexities that deserve attention, including:
Many consulting and engineering firms lack visibility into the breakdown of project phases and tasks, making it difficult to determine the right time to send invoices and the appropriate amount to bill clients. This challenge also results in a lack of transparency around the project’s finances and profitability.
Tracking all expenses in one place is also challenging, as projects typically involve various types of costs, including direct expenses, employee-related costs, and subcontractor fees. These complexities hinder stakeholders' ability to fully understand the company’s financial performance, which poses a significant risk to the business's overall health and stability.
Before any project begins, the budget, scope of work, and timeline must have been created and approved by the business and the client. The scope, hours, employees, and subcontractors should be decided so that the project can move forward. All parties should sign off on those items in an agreed upon proposal before the project starts. Projects that begin without these aspects in place often miss deadlines, and profitability goals.
Once a budget is made, it should not stay static. Project managers must continuously evaluate progress, hours, and spending to ensure that the project stays within budget. If the scope is creeping up, hours are beginning to increase, and the project’s margin is decreasing, the project manager must proactively communicate to the right stakeholders the changes to readjust the project’s scope and budget.
Stakeholders and management should regularly review all company costs, including software, tools, equipment, and travel expenses, to assess their necessity and determine whether they should be reduced or eliminated. For example, they may find that the company is paying for unused email accounts or software tools. While these may seem minor, businesses can occasionally uncover significant unnecessary expenditures. This review process is a valuable practice that should be performed at least twice a year.
Adopting the right technology can help consulting and engineering firms efficiently manage their finances. Purpose-built software can help firms gain financial control, including tracking incurred costs against forecasts, creating lump sum and T&M budgets with ease, and leveraging historical data to create more accurate budgets.
Software gives you access to real-time data visualized in reports and dashboards. For example, you can easily see the remaining budget for a project or phase of a project or drill down into each subphase. Robust financial reports and dashboards will allow you to view the amount billed, unbilled, and open A/R. This granularity into your project's finances helps you stay in control of the project, ensuring you remain within budget and stay profitable.
Financial management software also makes it easy to bill clients when work is completed. When project phases are complete, all expenses can be automatically included into an invoice with the click of a button. From there, you can edit or modify line items, add markups, and customize the invoice to your client's preference. Once the invoice is sent to the client, multiple payment options can be provided to give your clients convenient ways to pay.
Aldoa is robust financial management software purpose-built for consulting and engineering firms. It was developed from the ground up to accommodate the nuances of project-based work, creating a seamless experience for businesses and clients throughout the project lifecycle.
From proposal to invoice, you gain complete financial control and visibility into cost estimating, spending, profitability. By consolidating your entire workflow into one system, you can ensure that all projects are completed on time and stay within budget.
In addition to providing financial management tools, Aldoa also provides project management and resource management solutions that include task tracking, CRM, timesheets, capacity planning, and more.
Enter a new era of stress-free financial management with Aldoa. Book your free demo today.