Home Market Analysis How Correct is your actual vs. planned time and costs?

How Correct is your actual vs. planned time and costs?


In today’s tight operating environment, cost and efficiency are dominating the corporate agenda. The power to compare and contrast planned against actual time and costs gives professional services firms with greater visibility and tighter control of performance in billable markets where time is highly considered. The power to plan very well is essential for professional services firms functioning in billable markets, for instance accounting, law and consultancy. Resource planning tools and timesheet systems are being applied in isolation, this has made allocating time and cost with sheer assurance that financial and project aims will be attained is difficult.

Timesheet Systems

The timesheets give a correct view of the hours being billed during the end of every week or month. This makes it relatively straight forward to calculate the real coast of resourcing a project and the profit obtained as a result. In other words, if the calculations obtained are not being compared more often versus the time and resources which were in the first place assigned to projects, then there lacks a way to evaluate whether the firm or its staff is performing as efficiently as it is supposed to. In comparison, lack of formal reporting mechanism in place that enables management to regularly compare planned time and cost against actual, it becomes almost impossible to evaluate the accuracy of a firm’s planning. This in turn builds uncertainty in regards to forecasting revenues and impacts on the power to restructure resources and react in the shortest time possible to project peaks and troughs or give clients with approximation that is based on quantified historical performance.

Evaluating variance levels

Resource planning for professional services firms means evaluating of resource requirements in regards to the sales pipeline, but most of the approaches used presently fall short due to lack of visibility all over the business units and lack of a way of pairing particular skill sets and business procedures personal project requirements. Furthermore, spreadsheets or enterprise resource planning software does not grant the users to flex and rationalize resource provision to meet moving targets. To add on, the power to plan allocation of resources and correctly forecast the needed budget and delivery timeline is based so much on the firm’s past knowledge and experience. In most cases, it’s difficult to keep historical data from past projects with every detail of what transpired at the beginning and the end, while forces from outside can imply requirements that are subject to alter right up to the point of execution. The time sheet data is the ultimate that provides the truth in form of real time billed and with the cost of the project which later feeds into the last calculation of revenue and margin obtained.

Firms that gauge performance using internal audits will compare forecasted time and costs with actual time and costs registered inside its timesheets. Analysis like these enables them to observe whether a project delivery performed as planned, with the balance between actual against planned measured in accordance to variance. A negative variance happens as a result of the actual project costs being more than the budgeted costs, while a positive variance implies that the work was carried out within the estimated budget. Effects of negative variance are as follows; cost overruns, decreased margins and revenue. That does not mean out rightly that a positive variance is necessary a great thing. For instance, a positive variance might imply some presence of bad practices being applied. Since the staffs are the professional services firm’s most expensive resource, when they are free on billable client activities, they should engage in something that adds value to the business. Another implication of a positive variance might be completion of the project by use of junior resources while at the same time meeting the budget and timelines agreed.

Improving performance

Before taking any action, most of the professional services firms place a threshold of 5 %. By using an internal audit and analyzing variance levels, there is a possibility of professional services firms to recognize if resources are regularly being over-allocated or regularly re-allocated without expectation at a short notice. In most of the cases, the project manager will over subscribe resources to a project which implies that the hours billed are less than those expected. Also, if a team mostly shows as being fully booked but then later on billing half of what is expected, a closer verification of their performance can ensure internal management departments to reach out to the project manager and the team to ask why. Examining variance levels between actual against planned a bit closer can be very exposing. One of the firms known by many made a discovery that although its staff were showing almost 100 per cent usage each month within its resource planning system, more analysis of the actual hours billed indicated the usage to be at 80 per cent. This is the level at which the bonus scheme of the firm would be applied and furthermore, it also appeared that the staff were taking Fridays off, this meant that the firm in question was lacking 20 per cent of its potential revenue.

With such visibility, both ways can be cut. When there is an improved visibility of the project pipeline and variance levels, employees are in a better position to plan their time more effectively. This can turn out to be of great benefit if employees are paid based on their performance and thus they need to ensure that they are not left on the bench for a very long period of time. Employees can also utilize the time that they are on the bench in a more effective way by attending training courses or placing themselves in front of projects that they are more interested in. Through this process, keeping track of the performance of resources has a good influence in regards to motivating staff. Apart from ensuring that the firm utilizes billable hours and keep in check the performance over time, providing this information to the staff offers them firsthand experience of the planning process and ensures them to give more correct estimations for such projects in the future. Recently, a firm increased the application of its resource planning to ensure that its advisors and consultants to provide feedback on a regular basis to managers on the advancement of the projects, empowering staff and turning the pipeline more manageable and visible.

Staying on track with informed accuracy

A firm that continually enhances its overall effectiveness of planning not only uplifts its performance but also the services level given to clients as deliverables are being attained. With more regular forecasts and client expectations being accomplished, the more experience and confidence this creates within the business. With the current climate that entails declining workforces, profits and budgets, it is very important that the staff are positioned efficiently and capitalized fully. When data held within timesheet systems is reported and compared with the time and costs allocated within a resource planning tool gives c-level executives with the business intelligence they require to evaluate performance based on actual versus planned. In addition, it enables them to create a structure of historical data that guarantees evidenced-based planning, whereby delivery aims turn out to be more accurate, variance levels reduced and revenues and margins increased.

Moreover, actual versus planned reports are able to give management with better visibility on how present projects are doing down to the departmental and even up to the personal level. This enables mangers to know whether a particular department or individual is performing more efficiently and transfer best practice accordingly. They can also be shown to shareholders as a way of proving that utilization is being used to the maximum. All firms are currently trying to become leaner, thus better visibility is highly required. When a firm has a clearer picture of the project progress versus the historical baselines, they can be more nimble and responsive in the re-distribution of resources to ensure that projects remain as planned and they do not fall foul of any peaks and troughs that can happen. This can be said for organizing the workforce in the right way and in respect of the project pipeline and market trends such as the disciplines that are demanded. The evaluation of actual against planned can also show systematic issues and permit firms to take corrective actions, which ensures a process of persistent improvement in all of the business.