Being the Finance Manager for a company that does rollouts and installs of POS and Voice systems for major retailers, I really get to see the impact of project management on the companies’ bottom line, be it positive or negative.  We quote our projects between a 30 and 40 percent margin, but in 2011 we saw projects running anywhere between 65 and negative 25 percent.  Our CEO estimated that 80% of the variability was due to our own operational inefficiency, while only 20% was due to factors beyond our control.  While the wide range and inconsistencies of our project margins were troubling, the biggest issue was that overall the margins were down, with over 75% of our projects coming in under quote.  At the beginning of 2012, my boss and I were assigned to investigate what was causing the lower margins, and to come up with a plan to turn it around.  It may seem strange that Finance was assigned this task, but our CEO’s reasoning wass was that we are the ones who look at projects on a macro level and are responsible for explaining the margin variation, while every other department is only focused on their one piece (i.e Sales, Logistics, AR, etc.).

       After spending two months auditing our operations, talking with people in Sales Engineering (quoting), Sales, Operations, Logistics, and AR, we identified many problems contributing to the lower margins, but the overall problem that we identified was a lack of a clearly defined process for our projects.  While every project is different in terms of the scope of work at the site and the deliverables that the customer expects, if the administration of a project on our end is done consistently, many of the problems we run into could be eliminated. 

       Some examples of simple steps that have been skipped leading to a hit in our margins are: 1) final revisions to quotes not being authorized by the customer, 2) sales not reviewing the first invoices that are sent to the customer, 3) work orders not being created in time so that contracting has to rush to contract the labor and has to pay premium rates, 4) AR not putting job notes on the invoice, 5) Logistics shipping the wrong equipment to the site, and 6) work being approved without a customer PO.

       To control the problems and get all the departments on the same page when it comes to our project management, we developed a project checklist and worked with IT to implement this checklist into the current PM software we are using. With this checklist, every adminitration step has a due date, a responsibility assigned, and needs to be checked off before moving on. The benefits of this include increased organization, increased accountability, and better communication. Since we implemented this new checklist, we have seen an increase in our margins each month in the last 3 months, as well as increased cash flow by ensuring we are collecting the revenue quicker from our customers.  It’s amazing to see what an impact the simple step of creating a comprehensive checklist can make to the bottom line.

Here is an excel copy of out Project Accountability Checklist for anyone interested.

What do your companies do to keep projects organized on the back-end? Do you have any kind of defined project process or checklist?