The ProProject Deep Dig
We best serve our clients by digging into their books, operating workflows and processes to determine the best steps going forward.
Learn more about ProProject's Deep Dig, the 1st Step of the ProProject Process. Why do we take the time to do this and how does it benefit your bookkeeping and finances?
PODCAST TRANSCRIPT
Darell Brown:
Welcome to the Pro Project Podcast with Pro Project Bookkeeping. This is your host, Darell Brown, bringing you bookkeeping tips and tricks to make your project finances run a little smoother. We'll be returning to our shorter format again for today's podcast, but we still want to give you a little bit more strategy advice in this podcast, similar to our interview podcast last week with Sarah Roach Lewis. I want to introduce today's topic by reading a quote from Susie Armand. The only way you will ever take control of your financial life is to dig deep and fix the root problem. This quote is related more to personal finances, but definitely applies to business finances as well.
When I start working with a client, I like to do what I call a deep dig. If I understand the overall needs of your business, I can develop a workflow around it. I want to understand the sales funnel, their back-office operations, and the project cycle or workflow. Taking the time to do this gives me insight into their business, allows me to be proactive and make suggestions from the beginning, rather than take a reactionary approach, and only make suggestions when issues arise. So, the three areas I delve into are the sales funnel. How long does it take you to typically close a sale from start to finish?
The project cycle or workflow. Once you actually finish the sales process and you sign the contract, what does the project cycle look like? Is it six weeks? Is it three months? What's the invoicing structure for that project? Is it all due once the project ends? Is it multiple payments due at different project benchmarks? What do the reimbursables typically look like? Do the consultants need to fly out? Are they going to have to purchase items for research? What does that like, so I can plan around that as well. Then last, not least, back office operations. How does the back office support the sales funnel process, and how, does it also support the project workflow?
Starting with the sales funnel, I want to know more so what a company's sales funnel or sales process is, more so for cash flow purposes. How long does it take to close a sale or get to the point where you're getting a contract signed? Many companies in project industries respond to requests for proposals or RFPs. Depending on the company requesting the proposal, this can be anywhere from a three-month or longer process before getting a firm, yes, signing the contract and sending the invoices out. Then, even depending on this, depending on the company's payment terms, the invoice could be anywhere from 10 to 30 or even 60 days from payment.
So, this allows me to really forecast cash flow, and should the RFP process take too long, I can plan ahead. I can show this to the sales team or whoever the decision-maker would be and say, "Hey, you need to and make sure that you're sending out multiple RFPs, because cashflow is only going to take you through three months or six months or eight months, so we really want to make sure that you have multiple proposals out at any given time." Once you start working, what does this look like? Is your team working primarily in the office or flying out and working on client site? Do they have company credit cards or do they need to be reimbursed for their out of pocket expenses?
What is the project length? So, knowing the project workflow allows me to better plan for expenses. If your contract only allows for 10K of expenses, systems need to be in place to track this. When you're working with bigger companies, they usually have Master Services Agreements or MSAs in place that governs reimbursable expenses. They usually have limits in place for meals, per night hotel costs, and the flights, the flight class consultants are allowed to book. So, having systems in place for this, when I'm reviewing expense reports allows me to flag expenses early on in the project that might be breaking with the MSA, and inform the project manager, so that expenses don't get out of hand towards the end of the project.
Keeping on the topic of project workflow, the project length is actually very important for cash flow. If your staff is expensing travel and research cost, this can eat into your cash flow. If the project is especially long, you want to make sure you have terminology in your contract to recoup reimbursable expenses at various intervals throughout the project. You also want to make sure to invoice for project fees at various intervals throughout the project as well. The last part of the deep dig is the back-office operations. For budgeting purposes, whether it's for an annual company budget or a project budget, I like to ask about the general company overhead. What is the rent, the utilities? What are your typical marketing costs?
What are your research costs, and what are your biz development costs, and are these expenses accounted for in your pricing strategy? I know, a general mistake, when you’re pricing a project, is to only think about the consultant's cost, but that project is really supporting the overall company. So, it's important to make sure that the overhead is also included in the pricing strategy. Then, in addition to this, how does your back office, including your administrative team, your operations team, and you might have an internal finance person or, myself, the external finance person support the project and overall workflow. There's a lot of coordination that goes into a project and the back office is usually responsible for this.
So, in addition to coordinating the accounting workflow, knowing the back-office operations also lets me know who to contact, if I have questions about how the project is going, besides the project manager, if there's someone internal that I would be dealing with on a day-to-day basis to make sure that everything is running smoothly. So, this part of the deep dig is more about figuring out the logistics of the accounting workflow, and how I'll be able to work with the company to implement this. These three areas are the typical parts of my deep dig. My deep dig could involve more steps for a company with more moving parts. To recap the sales funnel, I need to understand how they acquire new business and how long the process takes, so I can forecast cash flow.
The project cycle, this is the heart of what the company does, so understanding the project workflow is crucial to understanding the income, the expenses, and then of course, again, cash flow. Last, is the back-office operations. The logistics of how the company runs and what those overhead costs are, are necessary for financial planning, and good communication. Based on what I find during the deep dig, I make suggestions on workflow improvements, accounting processes, accounting software, financial apps, and if the company is big enough, Enterprise Resource Planning or ERP systems. So, this has been a small summary of what we do as a part of the Pro Project Process.
The deep dig, in particular, we've found that this process is useful for most companies. It helps us to figure out the accounting workflow, and at times it also helps the company to reexamine their workflow, and see if any improvements need to be made. So, as always, if you like what you've heard, please shoot us a note at info@proprojectbooks.com. Once again, that's info@proprojectbooks.com. We're going to be back at you again next week with some more strategy tips, and to close out, we're going to leave you with the Susie Armand quote once again. The only way you will ever permanently take control of your financial life is to dig deep and fix the root of the problem. Right? This is Darrell, the Pro Project Books, signing off. See you next week.