Over the last 10 years, a trend has become apparent in the use of timesheet software among companies of all sizes. More and more, corporate executives are seeking to understand their project accounting costs. If they know their project costs – and many don’t – they can discover financial problems with projects early on and fix them. This can potentially save you millions.
According to a study by McKinsey and Company, research shows that "on average, large IT projects run 45 percent over budget and 7 percent over time, while delivering 56 percent less value than predicted." Sometimes, companies can do something about that – like cancel the project, put different resources on it, or change the scope – but sometimes they don’t discover the problem until it is too late to save the project. This means that many projects may fail for reasons that could have been discovered and fixed!
The projects that get rescued often do so because they had accurate project accounting cost data which allows for discovery of the problem early enough to fix it. Web-based timesheet solutions provide companies with an early warning system to detect out of control projects early, and take action.
Project management data – which is obtained from time-tracking information – is often an area that could be improved in many companies. Recent studies have shown that cost reductions of 6.5 percent are common from improvements in tracking time from the project management area alone. This compares with improvements of about 5 percent for billing automation or 1 percent for payroll automation.
Time-tracking data (payroll, billing, project management, and strategy) can be used to improve project management in the areas of:
- Project cost accounting - How much have we spent?
- Tracking - Are we done yet?
- Management - What should we do next?
- Estimation improvement - How much is this going to cost us?
- Sarbanes-Oxley Act- Are IT capitalization costs and revenue recognition numbers accurate?
Project Cost Accounting
If a time tracking system supports pay rates and pay rules, such as overtime calculations, it can provide extremely accurate per-project cost data. If not, a record of hours worked per project is still a powerful indication of cost if an average hourly cost per employee can reasonably be applied.
Most project time-tracking systems support some way of indicating what percentage of each project is complete. Combined with the cost data described above, this can create an early warning system for projects that are going out of control. If you've spent 45 percent of the money allocated for a project, but you are only 10 percent done, it's time to hit the panic button.
Any project time-tracking system that is worth its salt will be able to limit an employee or department’s visibility into the project list. An employee confronted with 500 entries on his timesheet will usually enter bad data. Pushing this burden up to an administrator will vastly improve data accuracy. You can also use this mechanism to assign people to projects, limit hours on projects, and see who has been assigned to which tasks. Typical HR time tracking systems from vendors such as Kronos are aimed primarily at payroll automation and do not do as well of a job at project management automation.
Expensive and complex portfolio planning systems are designed to help you refrain from starting projects you don't have the resources to finish. While they can save you lots of money, they have a nasty Achilles heel aimed at bad estimates. Time tracking can be particularly helpful in estimation improvement when many of the projects in your company are similar, and they usually are.
Detailed time-tracking data shows the cost of the first phase of a project. If the cost is 10 percent and you've spent 100 hours gathering requirements, then any estimate far from the 1,000-hour mark should be reexamined. Furthermore, 10 percent is probably the wrong number for the projects in your company, so your mileage may vary. But historical time data will give you important insight into what this average is and how variable it is, and therefore, how to perform that calculation.
Ultimately, owning any piece of project management is about understanding your processes and putting controls in place to mitigate risks.A good project time-tracking system will do just that.
About the Author: Curt Finch is the CEO of Journyx. Journyx strives to be relentlessly creative and to build tools that help you spend your time on things that matter. After all, time is all we have. FoundedJournyx offers customers two solutions to reach the highest levels of profitability: Journyx – project, time and expense tracking software – and Journyx PX – resource management software that provides work and financial forecasting for a complete picture of project and budget status, employee time and availability. Connect with Curt on Google+.
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