Table of contents
- Overview
- Three financial states in Primetric: Scheduled, Not Settled, Settled
- What is the project budget structure?
- Budget Dashboard - a quick overview
- Planning project budget - Scheduled Tab
- Project overheads
- Non-billable project budget
- Budget Impact on Project Report and Organizational Financial Report
- Resume
Overview
Planning the budget in the project helps us to control not only our costs related to the work of assigned people in the team but also to predict income in a specific time interval or add additional costs or income that appear in the project and which are not directly related to the planned work.
In this lesson, I will try to show why the budget tab was included in the project? What are the three financial states in Primetric and why should you plan them? What is the impact of working in a Fixed Price, T&M, or Non-billable project on the options in the budget tab?
Finally, I will show the overall correlation between the budget and its three states and the project report and the financial report.
Three financial states in Primetric: Scheduled, Not Settled, Settled
When looking at the dashboard of the budget tab, you can easily see that there are three available tabs next to it: Scheduled, Not Settled, and Settled.
These are the three states that Primetric reflects on finances:
- Scheduled - it concerns planned activities (only the outline),
- Not settled - is performed but not settled yet (lighter filling),
- Settled - already performed and accepted for settlement (darker filling).
Each of these states is reflected in the project report and financial report, which is why it is so important to carefully plan the budget to fully control future costs and revenues of the company and easily plan its development.
What is the project budget structure?
The budget consists of:
- Project work - tracked time by employees and/or contractors recalculated to costs and incomes,
- Overhead costs / incomes
- Recurring overhead costs / incomes
- Cost settlement dates - specific dates of planned settlement (in most cases it is based on a monthly basis because you pay your employees on a monthly basis). Based on the cost settlement dates you will be able to settle specific date ranges between cost settlement dates.
- Income settlement dates (available only in the Fixed Price billing model) - if you have expected income payment dates, you can specify and name them.
What's more, you can notice that every project budget is divided into the project phases that we've created in the Estimations in the Planning tab, e.g. UX, Frontend, Backend, etc.
Budget Dashboard - a quick overview
The budget dashboard lets you to:
- settle incomes and costs generated by employees or contractors divided into project phases occurring during the cost settlement date,
- settle project overheads that you planned to bear,
- settle income milestones (available only in the Fixed Price billing model) that you planned to get,
over the specific cost settlement milestones.
Below you can find an example:
You can notice that the last not settled period is February 2021. There were 3 people working in the sprint 1 phase over this period. They generated 34 782$ costs and 94 000$ incomes, which gives you 63% profitability.
So, if everything seems ok to you, you can click the Settle button, and close this period of time.
When you click the Settle button all financial data will change status from "not settled" to "settled" and move from not settled to the settled tab.
More about settling costs and incomes you will find in the lesson 16.
Note: Below the project settlement, there is also the income settlement option. Income settlement, which allows us to settle scheduled income, or change it due to changes in arrangements with the client, settlement time, or e.g. currency change
Planning project budget - Scheduled Tab
You can plan your budget in the Scheduled tab.
The scheduled tab allows us to accurately plan the project budget, gives an overview of the overall financial perspective of the project, the cost of hours worked, Income, and takes into account scheduled overheads, both one-time and recurring in the project.
Work costs and incomes
You need to remember that people allocation is strictly correlated with work expenses and incomes.
It has a huge advantage - when you assign people to the project, Primetric automatically calculates work costs and incomes (if it is Time & Material project).
To see more granular information about work costs and incomes you can scroll down and find the Work section.
You can quickly analyze costs, incomes, the number of scheduled hours, tracked hours, and profitability of each project phase and people assigned to them.
You can also quickly compare the number of scheduled hours vs already tracked hours in a given period.
Green color means tracked time when gray tells you about your expectations.
Settlement dates - overview
One of the most important areas is cost and income settlement dates. It allows, first of all, to indicate the periods in which we settle both costs and revenues, and at the same time to freely change their accounting periods.
What's more, both areas, both cost, and income are separated from each other (in the Fixed Price billing model), which allows us to settle costs at different times and revenues in another, which reflects the realities prevailing in the company.
After all, settlements with our employees are often not connected with settlements with our clients with whom we can settle weekly, monthly, and maybe even in two-month periods. What's more, our income may look different each month and we can plan this in advance.
Cost settlement dates
Cost settlement date - it is the date when you settle with your employees and contractors. In most cases, it will be the last day of each month. If you pay your people on a weekly basis or bi-weekly basis you can quickly add additional cost settlement dates.
After cost settlement dates creation, Primetric will display the last not settled cost settlement date in Budget Dashboard.
Hint: Primetric automatically creates cost settlement dates for each month of project duration.
Remember! You cannot create a cost settlement date before project start date, and after project end date! If you want to create such cost settlement dates, you need to change project duration first.
Income settlement dates (available only in the Fixed Price billing model)
Income settlement date - it is the date when you expect to receive an income from a client. Besides the fact that you can specify the date, you can also provide the amount of money that you want to get.
Additional information about cost and income settlement dates
After the cost and income settlement dates creation you will see them in:
- project financial report (blue = income, green = profitability, orange = cost)
You can see that in July 2021 there is no income settlement date created.
- project budget dashboard - you can see there last not settled cost and income settlement date
Below you can find an additional example from the Fixed Price project in a pre-payment model:
In this case, you can notice that you expect that client will pay you at the beginning of the project
(May 2021), and at the end of the project (October 2021).
Project overheads
One-time project overheads
One-time overheads allow you to plan additional costs and incomes not related directly to people's work. It helps you in forecasting the 2nd-degree profitability of the project.
How can I add a one-time project overhead?
You can add it in the Scheduled tab in the Project Budget.
Let's go deep into the above one-time overhead creation form:
- Overhead amount - can be specified in organization currency or you can change currency, and provide currency exchange rate,
- Title - it is a title of your overhead,
- Auto commit - if you want to allow Primetric to automatically move overhead from scheduled to the not settled or settled stage after the expected date, you can enable it by ticking the checkbox,
- Date - expected date of bearing costs / receiving incomes
- Note - additional information about overhead
What "Auto commit" stands for?
Auto commit allows Primetric to automatically move the scheduled overhead to the Not settled stage (if chosen "Not settled" from the dropdown list) OR to the Settled stage (if chosen "Settled" from the dropdown list).
Recurring project overheads
Recurring overheads allow you to plan additional recurring costs and incomes not related directly to people's work. It helps you in forecasting the 2nd-degree profitability of the project.
How can I add a recurring project overhead?
You can add it in the Scheduled tab in the Project Budget.
Let's go deep into the above recurring overhead creation form:
- Overhead amount - can be specified in organization currency or you can change currency, and provide currency exchange rate,
- Prefix - it is a title of your overhead,
- Start and end date - these dates tell how long recurring overhead lasts,
- Bill every month day - it is a specific day in a given month when Primetric should settle / commit overhead,
- Commit - you can specify whether Primetric should move overhead to the Not settled stage or Settled one,
- Note - additional information about overhead.
Non-billable project budget
The dashboard of non-billable projects is truncated with most of the information contained in the two previous projects. This is due to the fact that we are mainly interested in what costs we incur for such projects to which our employees log in. It is an ideal place to include any work that goes beyond the order for our client, relating to administrative work, lunches, training. Therefore, what we can do in the budget dashboard of an unpainted project is: cost planning, setting deadlines for their settlement, and assigning permanent and one-time overheads to such a project.
Budget Impact on Project Report and Organizational Financial Report
Setting and planning a budget affects both the financial report of the organization and the project. We will discuss both reports in the next lessons.
Resume
The budget panel in the project gives us not only access to information about already logged in hours and their settlement but also adds many options that help us plan our financial activities, thanks to which, using reports, we will be able to predict the challenges facing our project or company in a financial aspect. Budget planning also helps us to better control the financial aspects of the project and its settlements over time.
Go to Lesson 15 - Not Settled Budget state