Lesson 19 - Organization overheads

Table of contents

• Overview
• Creating and settling company budget
• Organization overheads and the impact on the organization finance report
• Organization overheads and the impact on the project finance report
• Wrap up

Overview

In this lesson, I will show you how you can create a company budget and settle organization overheads to forecast your company and projects' profitability at different levels of costs and incomes (1st, 2nd, 3rd profitability degree).

In Primetric you can plan costs and incomes on three levels:

• employee / contractor level,
• project overhead level,
• organization level, e.g.:
  • Administrative costs,
  • Office maintenance costs,
  • Management costs,
  • and many more.

Creating and settling company budget

To create your company budget you need to go to the Overheads section in the Organization tab. In this section, you can create different organization overhead categories.

After different organization overheads categories creation, you can plan specific one-time and recurring overheads. After doing that, you will see the total costs and incomes that you expect to bear.

Basically, the mechanism is the same as in the project budget. 

As I mentioned, overheads in Primetic can be scheduled once or set as recurring.

Let's see how to do it step by step.

As you can see planning company budget is almost the same as the project budget. There are two main differences:

• there is no dashboard, so settling can be done from the scheduled or not settled tabs,
• there are no work costs and incomes directly associated with people.

Orgnization overheads and the impact on the organization finance report

When you create your organization's overheads they will be reflected in the company finances report in three stages (scheduled, not settled, settled). The mechanism is the same as in the project budget.

Organization overheads and the impact on the project finance report

In addition to the project overheads mentioned in the previous lessons, organizational costs can also be included in billable projects. What is the idea behind that?

You want to see what % of total overheads your project should cover / is responsible for.

To see that, you need to go to the project report and enable the "Include organization overheads".

After that, Primetric recalculates the profitability of your project taking into account organization overheads.

How? Let me explain that.

Before showing you the calculations you should know three concepts:

Share in organization overheads - the percentage share of costs covered by the project.

Calculation formula: number of scheduled or settled billable hours in a single project / total number of scheduled or settled billable hours in a company in a selected period of time

Per hour cost overhead - average company cost overhead per hour

Calculation formula: the total sum of scheduled or settled organization overheads / total number of scheduled or settled billable hours in a company in a selected period of time

Organization overheads - the total sum of company overheads that should be covered by a specific project

Calculation formula: scheduled or settled per hour cost overhead * total number of scheduled or settled billable hours in a single project in a selected period

Example:

Let's assume that we have Project A and we scheduled 100 billable hours in May. 

In May we also scheduled additional 400 billable hours across other projects.

The total sum of scheduled company overheads in May is USD 10 000. 

Share in organization overheads = 100h / 500h = 20%

Per hour cost overhead = 10 000$ / 500h = 20$

Organization overheads per project = 20$ * 100h = 2000$

In this example, Project should cover an additional 2000$ in May, so when you set with your client you should take into account that every hour will costs you an additional 20$.

Wrap up

Planning company overheads helps us better understand the state of our finances, additional costs incurred or take into account additional income. Planning overheads may seem like an additional complication, on the other hand, it gives a full and real financial picture of our company, so due to precise budget planning, you should take it into account using Primetric.