October 9, 2016

The Keys to Project Financial

Management

The Keys to Project Financial

Management
Michael McLin
Maxim 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  1
 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  2
 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  3
 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 
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 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 
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 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 
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 October 9, 2016

Work in Process (WIP) (2 of 6)

Work in Process (WIP) (3 of 6)

For Reference of NECA 2016 Boston 
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 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  8
 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

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 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  10
 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  11
 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  12
 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  13
 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 McLin
Managing Director
Maxim Consulting Group, LLC
100 Fillmore Street, 5th Floor
Denver, CO 80202
Office: 303.688.0503
www.maximconsulting.com

For Reference of NECA 2016 Boston 
Attendees Only  14