What can you gain by tracking project costs?
Using a project expense tracking software gives you an advantage across several areas:
- Easily analyze different cost categories - you can see costs from practically every perspective. A few clicks, and you can check your profitability level per project, per team, or even per individual developer. You can also see what costs are generated in your billable and non-billable projects to keep an eye on your company-wide profit margin.
- Get actionable insights - for example, you can see how much there is to gain if you made an effort and finally optimized your non-billable costs.
- View costs over a long-term - this is especially helpful for understanding the profitability of a project and your entire company within a longer time horizon. Your organizational overheads might change because you're planning to open a new office location. A project management solution takes that into account and shows you how that rise in costs impacts the profit margin of your projects three quarters from now.
Needless to say, spreadsheets can't give you any of these things.
Manual tracking vs. automated project cost tracking
Many businesses get away with budget tracking using a standard spreadsheet tool like Excel. They enter and crunch numbers manually by adding row by row. Sounds like a drag, doesn't it?
Tracking a project budget manually requires lots of patience, attention, and awareness. Sure, you can use Excel templates but prepare for lots of customization to make them reflect how your team actually works.
Alternatively, I've seen many IT companies using various project management apps for different purposes - like financial management, resource allocation, and time tracking.
But the problem is bringing all of this data together to create a detailed view of costs and profitability.
What usually happens is this: someone has to sit down, export data from all the project management apps, and bring them all together in a spreadsheet - managing different file types, formats, and formulas.
That way, you at least skip the step of manual data entry, which comes with the potentially dramatic chance of human error. But it's still not ideal.
Tracking a project budget automatically is the only way to go. You basically outsource the entire task of managing, analyzing, and updating the budget to a fully automated cost tracking solution.
What is a project expense tracker and how does it automate things?
A project expense tracker (also called expense manager) is a piece of software that helps you to keep an accurate record of your financials - i.e., the money flowing into and out of your business.
By using a cost tracking solution, you can easily keep track of how much you spend per project, per team, or per individual developer (this is where employee overhead costs come in).
Budget tracking tools: key features to look for
There's plenty of project management software out there, so how can you tell that the cost tracker you're looking at is a good fit for your business?
When looking for an expense tracking solution, you need to make sure that it comes with these key features:
Intuitive dashboard with plenty of data visualizations
Practical and easy-to-understand dashboards are an essential feature of an expense tracker.
You don't want to dig for information every time you need to quickly update a client or estimate the cost of a project. One glance at the dashboard and the use of some handy filters will show you everything you need to know.
Naturally, a centralized dashboard makes a massive difference if you're managing a project portfolio. That way, you get a bird's eye overview of all project performance, costs, and revenue in one clean space.
Financial performance and calculating overhead costs
You can't set the right hourly rate for a long-term project without having a firm grasp over your overhead costs.
That's why your project costs tracker needs to have that option ready.
For example, Primetric automatically calculates your overhead rate during project planning and resource allocation to ensure that you get the profit margin your business needs.
The ability to track project financial performance over time and monitor how it influences your cash flow and project settlement is critical.
Resource allocation, finance, and time tracking under one roof
The market is full of solutions that solve one specific problem for you - logging and tracking working time, allocating people to projects, or generating financial reports.
Bringing them all together makes a lot of sense because it gives you a real bird's eye view of what's happening in your business and how different parts of it impact one another.
Why does it make a difference? Here's one good example:
When you're a small IT services company, you make a lot of compromises to win a project.
But over time, other settlement methods might be more beneficial.
The trouble is, if you don't have visibility into your finances, you just don't know that this should change.
Quality software gives you budget predictions when you're allocating employees, and as they record working time, the real budget is filled in real-time.
You no longer have to export data from a time tracking tool and multiply working hours by the hourly rates found in several other spreadsheets. All the data is now completed automatically, allowing you to see all the things that could benefit from optimization.
3 real-life examples that show how tracking project costs increases your revenue
HSD said goodbye to spreadsheets and increased revenue by $200,000 per year
To track resource allocation and availability, HSD used a collection of bulk Excel spreadsheets. However, using and maintaining this technology proved to be time-consuming. It also made it impossible for HSD to share data between departments or anticipate project profitability.
This is why HSD implemented Primetric. The company reduced the time spent working on Excel spreadsheets from 15 hours per week to 30 seconds, achieving a savings and revenue increase of over $200,000 per year.
Future Mind reduced bench time by 4% and increased its capacity
Future Mind used Harvest Forecast to plan projects and assign specialists to them. However, the system was too basic and lacked crucial features such as financial forecasting, comparing projections to actual results, and complex authorization settings.
By bringing Primetric on board, Future Mind can now allocate developers to projects, make projections, and compare them to reality. All of the information is saved in one location and is accessible to team members with varying degrees of authorization. This is how Future Mind increased its capacity and reduced the bench time by 4%.
Monterail optimizes project costs thanks to full visibility
Monterail had a sophisticated and detailed planning process but no proper tool to support it. After implementing Primetric, the company's PMs receive complete insight into resources, which makes resource planning and scheduling faster, simpler, and more cost-effective.
The team doesn't have to waste time on assembling data from spreadsheets anymore and can optimize project costs easily by tracking project costs.
Want to achieve similar results?
Book a demo with me; I'll walk you through Primetric to show you how a project expense tracker can change your business.