The Keys to Project Financial Management

For Reference of NECA 2016 Boston Attendees Only  1

October 9, 2016

The Keys to Project Financial Management

The Keys to Project Financial Management

Michael McLinMaxim Consulting Group

This session is eligible for 2 Continuing Education and 2 Contact Hours.

For these hours to appear on your certificate, you must:– Have your badge scanned at the door– Attend 90% of this presentation– Fill out the online evaluation for this session

For Reference of NECA 2016 Boston Attendees Only  2

October 9, 2016

Objectives

• Identify ways to integrate people, process, and technology

• Identify best practices

• Develop long term solutions with scalability, flexibility,

and significant business impact

• Build value for your organization

For Reference of NECA 2016 Boston Attendees Only  3

October 9, 2016

Best Practices

• Creating competitive advantage for contractors

• Define “Best in Class”

• Competitive landscape

– Increasing global competition

– Volume orientation – Excess capacity

– Poor value propositions and lack of differentiation

• Escalating complexity and sophistication

Cash Flow

• Metric

– Cash receipts less cash disbursements

• Significance

– Represents Cash Position of project

– Project Cash Position rolled up to Business Unit or Enterprise level

For Reference of NECA 2016 Boston Attendees Only  4

October 9, 2016

Labor Productivity

• Labor Productivity =

– Earned Hours / Actual Hours

• Significance

– > 1, beating estimate

– < 1, behind estimate

• Value

– Provides insight to underperforming projects and tasks

– Supports cost to complete forecasting

CPM Management (1 of 2)

• Key indicators– Schedule variance in days

– Variance as a percent of remaining schedule

• Significance – Performance against plan

– Proactive vs. reactive

– Identification of opportunities and risks

– Coordination of trades

– Mitigation of claims

For Reference of NECA 2016 Boston Attendees Only  5

October 9, 2016

CPM Management (2 of 2)

• What value does it provide?– Organizational credibility

– Communication and collaboration

– Effective resource utilization

– Actionable opportunities Identify, quantify and communicate changing

conditions to all project stakeholders

Make better project decisions

– Competitive advantage

Cash Demand (1 of 2)

For Reference of NECA 2016 Boston Attendees Only  6

October 9, 2016

Cash Demand (2 of2)

• Calculation components

• Significance

– Cash collected or provided by operations

• Why is this important to you?

– Best of class contractors are liquid

– Key component of financial management

– Superior project management produces strong cash flow

Work in Process (WIP) (1 of 6)

• Key elements to monitor– Margin preservation

– Cash flow

– Change orders

– Unexecuted commitments

For Reference of NECA 2016 Boston Attendees Only  7

October 9, 2016

Work in Process (WIP) (2 of 6)

Work in Process (WIP) (3 of 6)

For Reference of NECA 2016 Boston Attendees Only  8

October 9, 2016

Work in Process (WIP) (4 of 6)

• Key Metrics– Margin Preservation Cumulative variance Period variance

– Cash Flow Cash billed and collected less cash paid to date

– Change Orders Costs incurred on pending changes

– Unexecuted Commitments Buyout status

Work in Process (WIP) (5 of 6)

• Significance– Tool to control the outcome of our projects

– Identify project cash flows

– Understand and capture impacts associated with change orders

– Buy out of project risk

– Identify actionable items

For Reference of NECA 2016 Boston Attendees Only  9

October 9, 2016

Work in Process (WIP) (6 of 6)

• What value does it provide?– Stability in profit margins

– Improved cash flow

– Risk mitigation

– Increased stakeholder satisfaction

– Tool to control and predict outcome of projects

Backlog (1 of 3)

• Metrics– Contractual revenue less

earned revenue

– Contractual margin less earned margin

– Months of SG&A

For Reference of NECA 2016 Boston Attendees Only  10

October 9, 2016

Backlog (2 of 3)

• Significance– Pipeline

– Execution of business plan

– Monitor margin performance

– Hit rates

– Impact on pricing decisions

– Resource management

Backlog (3 of 3)

• What value does it provide?– Project pricing implications

– Tracking business plan vs. actual

– Resource management

– Strategic project acquisition

– Proactive management of business

For Reference of NECA 2016 Boston Attendees Only  11

October 9, 2016

Project Delivery Scorecard (1 of 3)

• Significance– Qualitative measures

– Provide a weighted scorecard

– Feedback on critical success factors

– Identification of opportunities for improvement

Project Delivery Scorecard (2 of 3)

• What value does it provide?– Opportunity for self evaluation

– Feedback to senior management

– A way to measure our qualitative performance

– Identify compliance with processes and procedures

For Reference of NECA 2016 Boston Attendees Only  12

October 9, 2016

Project Delivery Scorecard (3 of 3)

• What value does it provide?– Improved productivity

– Better quality

– Safer projects

– Employee retention

– Performance metrics

– Training and development opportunities

Key Performance Measures

• Cash Demand

• CPM Management

• WIP

• Backlog

• Project Delivery Scorecard

For Reference of NECA 2016 Boston Attendees Only  13

October 9, 2016

What do I do?

• Better Solution– Identify internal champion– Identify needs Use outside resources

– Fully integrated business solution

• Typical Solution– Legacy Software– Boxed Software– Disparate systems– Excel spreadsheets

Conclusion

• Integration of people, process and technology

• Long-term endeavor – Commitment to continuous training

– Capital investment

– Providing people with the necessary time

• An integrated solution and commitment offers a higher return

For Reference of NECA 2016 Boston Attendees Only  14

October 9, 2016

Thank You

Don’t forget…• 10:15 - 11:30 am Special Session: Boston

Strong• 11:30 am - 4:00 pm NECA Show Hours

Michael McLinManaging Director

Maxim Consulting Group, LLC100 Fillmore Street, 5th Floor

Denver, CO 80202Office: 303.688.0503

www.maximconsulting.com