About
In Precursive you can run Projects with different Budget Methods. You can find this field on the Details Tab of your Project Record and you can select one of the options that have been setup by your Precursive Super Users during the implementation of the platform:
- Fixed Price
- Time & Materials
- Capped Time and Materials: a combination of two
While the Forecast and Actual Cost of a Project and its Phases is calculated in the same way, not depending on the Budget Method,:
- Forecast Cost = Planned Time of all Participants multiplied by their hourly/daily costs + budgeted expenses
- Actual Cost = Actual Time submitted by all the phase participants multiplied by their hourly/daily costs + actual expenses
The Budget Method selection affects the calculations of
Forecast and Actual Revenue, Profit and Margin (
Precursive Project Financials & Budget Information) a Project and its Phases.
What should a Project Manager be mindful of when running these different projects? Let's see the considerations below.
Fixed Price Projects
Fixed Price engagements are usually based on an estimated scope defined and agreed before the contract is signed off. These projects have a set price and it's up to the Project Manager to make sure the cost of delivery doesn't exceed the contracted price.
For this reason, it's particularly important to keep track of the actual time spent on project delivery and it's costs (= cost of labor + additional project-related expenses) to make sure the project is profitable and the margin is high.
Since the
Actual Cost is calculated by multiplying the Total Hours submitted by the Participants of each Phase with their Hourly or Daily Cost + Submitted Expenses, a Project Manager needs to make sure that:
- Costs are calculated correctly for each Participant (please see Edit Participants' Rates & Costs for more information)
- Timesheets and Expenses are submitted on time by all the Participants (see Navigate 'My Precursive' for training on how to run these submissions)
For more information on how these numbers can affect projects' profit and margin, please see
Precursive Project Financials & Budget Information.
Note - Fixed Price projects have an agreed price so the Rates of your team members are irrelevant and are not considered in the calculation of the Forecast nor Actual Revenue.
Time and Materials Projects
When the Budget Method is T&M, the Revenue and Cost of the Project and its Phases are calculated depending on its Participant's Hourly or Daily Cost and Rates. In this case:
- Forecast Revenue = Planned Time of all Participants multiplied by their hourly/daily Rates. Note - ‘Planned Time’ is calculated differently according to the resourcing mode of the Project Phase (please see Precursive Project Financials & Budget Information for more information)
- Actual Revenue = Actual Time Submitted by all Participants multiplied by their hourly/daily Rates
In this case, a Project Manager needs to make sure that:
- Both Costs & Rates are setup correctly for each Participant (please see Edit Participants' Rates & Costs for more information)
- Timesheets and Expenses are submitted on time by all the Participants (see Navigate 'My Precursive' for training on how to run these submissions)
For more information on how these numbers can affect projects' profit and margin, please see
Precursive Project Financials & Budget Information.
Capped Time and Materials Projects
These are Time & materials contracts with a cap! That sis a subtype of time and materials billing model that includes a budget limit. A customer and a company set budget maximum, so the final cost will not exceed the maximum. In this case, it helps to plan expenses more carefully.
In this case, Revenue calculations can be customized and Project Managers can also add a Budget Time to keep track of how much time is remaining at any giving time and make sure the cost of what the team delivers doesn't surpass the set cap.
Please see
Precursive Project Financials & Budget Information for more information on how
Budget and Remaining Time are added and calculated.
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