Welcome to the first in a series of
Our aim with this series is simple – to create a helpful resource which addresses the current themes and challenges we face as CFO’s and finance directors operating in the digital industry. We hope you find it useful, and please do join the conversation.
As commissioning
So, let’s start the clock.
Who has time for timesheets?
One of the biggest pains in my career to date is:
Will they ever be popular? Of course not. Are there alternatives to this tried and tested pricing model? Potentially. Fixed price? Value priced? Even if we did persuade clients to adopt these approaches, would it ever do away with the information timesheets tell us?
Ok, let’s take a scenario where we get rid of timesheets. TH_NK colleagues, please don’t quote me on this…
We price work based on our estimates to complete a defined scope of work within a fixed budget, or we base the price on the perceived value to the client. How do we work out the cost? Bottom up approach would be a sensible start based on a fully loaded cost rate including overheads, salaries and recoverability assumptions. Once we estimate the costs, we negotiate the agreed acceptable margin based on a client’s constrained budget or value creation.
Fast forward to delivery phase. How are we performing against the projected margin? Are we on target to complete on time and within our cost budget? How do we know if we have no data on timesheets? What are the sources of information that will give you this insight on a client level? (Answers to Anita.Rajdev@Think.eu)
As it turns out, we over-burned on the project as we underestimated the effort to complete it. How do we know? Call it gut instinct. Oh dear, a fixed price piece of work with no proactive information for us to put it right. If we had access to actual time spent on the projects on a weekly basis, we could’ve linked back the hours to the resource plans and the actual hours the client is forecasted to pay for.
Even if we sold this piece of work on a value based pricing model – how would we calculate actual margin and compare to forecasted margin? Who knows how much time we spent on it? Which skill-set we miscalculated? Lessons learned for next time? Was it valuable to us as well as the client?
I sadly can’t think of any pricing model whereby the information timesheets provides us can be replaced.
From timesheets, we analyze actual utilisation against planned, supply v demand needs, capacity planning and recruitment decisions. Not to mention the substantiation and validation of R&D tax credits. It is a key enabler for resource planning.
So for those culprits in my team that I hound down periodically, I ask that they’re aware of the following:
Now, if you’ll excuse me, I have one last thing I need to complete before I leave the office…
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