the keys to project financial management
TRANSCRIPT
For Reference of NECA 2016 Boston Attendees Only 1
October 9, 2016
The Keys to Project Financial Management
The Keys to Project Financial Management
Michael McLinMaxim Consulting Group
This session is eligible for 2 Continuing Education and 2 Contact Hours.
For these hours to appear on your certificate, you must:– Have your badge scanned at the door– Attend 90% of this presentation– Fill out the online evaluation for this session
For Reference of NECA 2016 Boston Attendees Only 2
October 9, 2016
Objectives
• Identify ways to integrate people, process, and technology
• Identify best practices
• Develop long term solutions with scalability, flexibility,
and significant business impact
• Build value for your organization
For Reference of NECA 2016 Boston Attendees Only 3
October 9, 2016
Best Practices
• Creating competitive advantage for contractors
• Define “Best in Class”
• Competitive landscape
– Increasing global competition
– Volume orientation – Excess capacity
– Poor value propositions and lack of differentiation
• Escalating complexity and sophistication
Cash Flow
• Metric
– Cash receipts less cash disbursements
• Significance
– Represents Cash Position of project
– Project Cash Position rolled up to Business Unit or Enterprise level
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October 9, 2016
Labor Productivity
• Labor Productivity =
– Earned Hours / Actual Hours
• Significance
– > 1, beating estimate
– < 1, behind estimate
• Value
– Provides insight to underperforming projects and tasks
– Supports cost to complete forecasting
CPM Management (1 of 2)
• Key indicators– Schedule variance in days
– Variance as a percent of remaining schedule
• Significance – Performance against plan
– Proactive vs. reactive
– Identification of opportunities and risks
– Coordination of trades
– Mitigation of claims
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October 9, 2016
CPM Management (2 of 2)
• What value does it provide?– Organizational credibility
– Communication and collaboration
– Effective resource utilization
– Actionable opportunities Identify, quantify and communicate changing
conditions to all project stakeholders
Make better project decisions
– Competitive advantage
Cash Demand (1 of 2)
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October 9, 2016
Cash Demand (2 of2)
• Calculation components
• Significance
– Cash collected or provided by operations
• Why is this important to you?
– Best of class contractors are liquid
– Key component of financial management
– Superior project management produces strong cash flow
Work in Process (WIP) (1 of 6)
• Key elements to monitor– Margin preservation
– Cash flow
– Change orders
– Unexecuted commitments
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October 9, 2016
Work in Process (WIP) (2 of 6)
Work in Process (WIP) (3 of 6)
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October 9, 2016
Work in Process (WIP) (4 of 6)
• Key Metrics– Margin Preservation Cumulative variance Period variance
– Cash Flow Cash billed and collected less cash paid to date
– Change Orders Costs incurred on pending changes
– Unexecuted Commitments Buyout status
Work in Process (WIP) (5 of 6)
• Significance– Tool to control the outcome of our projects
– Identify project cash flows
– Understand and capture impacts associated with change orders
– Buy out of project risk
– Identify actionable items
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October 9, 2016
Work in Process (WIP) (6 of 6)
• What value does it provide?– Stability in profit margins
– Improved cash flow
– Risk mitigation
– Increased stakeholder satisfaction
– Tool to control and predict outcome of projects
Backlog (1 of 3)
• Metrics– Contractual revenue less
earned revenue
– Contractual margin less earned margin
– Months of SG&A
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October 9, 2016
Backlog (2 of 3)
• Significance– Pipeline
– Execution of business plan
– Monitor margin performance
– Hit rates
– Impact on pricing decisions
– Resource management
Backlog (3 of 3)
• What value does it provide?– Project pricing implications
– Tracking business plan vs. actual
– Resource management
– Strategic project acquisition
– Proactive management of business
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October 9, 2016
Project Delivery Scorecard (1 of 3)
• Significance– Qualitative measures
– Provide a weighted scorecard
– Feedback on critical success factors
– Identification of opportunities for improvement
Project Delivery Scorecard (2 of 3)
• What value does it provide?– Opportunity for self evaluation
– Feedback to senior management
– A way to measure our qualitative performance
– Identify compliance with processes and procedures
For Reference of NECA 2016 Boston Attendees Only 12
October 9, 2016
Project Delivery Scorecard (3 of 3)
• What value does it provide?– Improved productivity
– Better quality
– Safer projects
– Employee retention
– Performance metrics
– Training and development opportunities
Key Performance Measures
• Cash Demand
• CPM Management
• WIP
• Backlog
• Project Delivery Scorecard
For Reference of NECA 2016 Boston Attendees Only 13
October 9, 2016
What do I do?
• Better Solution– Identify internal champion– Identify needs Use outside resources
– Fully integrated business solution
• Typical Solution– Legacy Software– Boxed Software– Disparate systems– Excel spreadsheets
Conclusion
• Integration of people, process and technology
• Long-term endeavor – Commitment to continuous training
– Capital investment
– Providing people with the necessary time
• An integrated solution and commitment offers a higher return
For Reference of NECA 2016 Boston Attendees Only 14
October 9, 2016
Thank You
Don’t forget…• 10:15 - 11:30 am Special Session: Boston
Strong• 11:30 am - 4:00 pm NECA Show Hours
Michael McLinManaging Director
Maxim Consulting Group, LLC100 Fillmore Street, 5th Floor
Denver, CO 80202Office: 303.688.0503
www.maximconsulting.com