Protect your profit margin with project management tools that allow you to identify issues in real time — before delivering a project at a loss. Learn how to track margin on a project your team is working on.
Understanding profit margin is critical to managing any project. Especially when you have offered to deliver it for a fixed fee. Unless you’re a charity, you need to know how to track and measure time allocation and out-of-pocket expenses.
Anyone who has had to quote a flat fee for a project knows that capturing those metrics in a timely manner is a challenge.
The right tools can help you track your margin in real time. Regardless of the size or scope of your business. Giving you the opportunity to make adjustments that prevent you from losing money on a project.
What is Gross Profit Margin?
Gross profit margin is the percentage of every dollar earned left over after subtracting cost. Let’s say that your firm charges $100,000 for a website build, and it costs you $60,000 to deliver. Your profit is $40,000.
$40,000 in profit is equal to 40% of every dollar earned, or $40,000 divided by $100,000. In this example, your firm kept $0.40 of every dollar you made. A firm can increase the size of its margin in two ways: increase price or decrease costs. Your margin is just a percentage.
Calculating your profit margin isn’t necessarily difficult. However, tracking all the various metrics that you need to fill in the above equation can be a challenge in real-time.
You don’t want to find out that you spent $120,000 of your own money to build your client a website that you delivered to your client for $100,000. Yikes!
Determine What it Costs to Generate Revenue
Before you can track margin on a project you need to understand the cost of generating revenue. To do that you need data, including time allocation, out-of-pocket expenses, cost of labor and materials, etc.
Once you fill in the blanks of the profit margin equation with this data, you can determine how much to charge your client for a delivered project. Fortunately, all of the data you need is readily available.
Payroll Tracking and Project Management Software
One way to keep profit-eating project expenses in line is to manage labor costs. A business may start a project with a budget. However, often their sense of how on-budget they are is skewed before they’ve processed payroll.
Payroll is predictable enough when it comes to a salaried workforce, but understanding how much of your salaried team’s time was allocated to a project can be difficult. Allocating a freelancer’s hours to a particular project can cause a real blind spot without the right tools.
The answer to these problems is time-tracking and project management software that allows your team (both employees and contractors) to track time in real-time and convert the hours logged into labor cost on a project immediately.
De-Centralized Sources of Data
The software needed to track profit margin is seldom centralized. It’s often scattered in different places across your network in disconnected systems. When your profit margin data (time sheets, labor costs, etc.) isn’t centralized, you often have to pay someone to collect that data, crunch the numbers and determine your profit margin.
If that type of analysis is performed at all, it’s typically an exercise that involves gathering data from multiple sources and compiling it in Excel. This type of work is costly because of the hours required. Also because it can’t be done until the project is over.
A single source of data, on the other hand, not only makes it simple to track margin on a project, but also gives you the ability to determine whether a specific project phase is profitable and determine if the overall project is still tracking towards a profitable conclusion.
If the project starts off on a bad foot, you still have time to correct course.
FINSYNC’s All-In-One Platform
Many popular accounting platforms don’t track time or offer project cost accounting. Look for an intuitive project management tool like FINSYNC that can collect, track and evaluate all of that valuable data.
FINSYNC’s cash flow, accounting and payroll software is an all-in-one solution. It can replace applications like QuickBooks and other disconnected apps used to run a business.
With FINSYNC you can check up on a project’s health in real-time, with an understanding of what your current margin is and how much of your budget you’ve already spent.
The software collects historical data. Historical data is tremendously useful for future projects. Have you been asked to build another website? Have a look at the last website project you did. Then, clone it and make adjustments.
With all that valuable data stored in FINSYNC, all you have to do is run a report and you’ve got all the information you need to track margin on a project — and make better decisions as a business.
Whether you build websites, apps or houses, you need an intuitive solution that allows your business to track time and expenses, and understand at any point in time how profitable your project will be.
FINSYNC is that all-in-one solution, and it’s just a click away.