Do you have long term projects? Keep them profitable!

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Do you have long-term projects that last many months or even years?

Hi, this is Judi Otton with GrowthCast. And I’ve been working with a few companies in the AEC Architecture, Engineering, and Construction industry and one of my clients manages their projects very well and one of them has some areas where they could be improved.

One of the things, one of the dangers with long-term projects, is that you’re working along, your folks are doing work, you’re using up the budget, but if you’re not tracking the work remaining – not the budget remaining – the actual labor remaining, you could get to the end of your budget, the end of the money that you’re entitled to on this project and still have many hours of work to complete.

So a project that looks profitable as you’re going along (and you’re monitoring the profitability of your projects, I hope) will in the end suddenly and very quickly become very unprofitable.

Now, there’s a technique in project management called Earned Value Analysis and this is moderately complex. But I want to give you an easy way to look at this. I just want you to track the work remaining, again, the labor remaining, not the budget remaining, track the work remaining on your projects and compare that to the budget remaining. And they should be roughly equivalent. If you’re finding that the work remaining on a project is exceeding and growing much larger than the budget remaining, you’re going to have to do some work to rein that project in, but certainly better to know that this risk is coming while you’re still working on the project, then to get to the end of your budget and still realize that you have 100 hours of labor. I realize this is a fairly complex concept. If you have questions about that, please, I am always happy to answer questions on this or anything else.

I’ll see you next week with a new Fiscal Fitness Tip of the Week.

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