“A number only comes to life when it is shared and enriched by all the stakeholders in the chain.”
This statement by Matthieu Didailler, CFO of Insign, resonates with particular relevance in the agency world, where financial management goes beyond mere number monitoring. It aims to be a complex dance, where precision, anticipation, and adaptation are fundamental reflexes to avoid the trap of inaccuracy.
When we know that only 36% of organizations succeed in delivering their projects within the initial budget (Project Management Institute survey), the statement underscores an inescapable reality even more.
As companies grow, financial managers find themselves overwhelmed by a flood of daily and repetitive tasks, losing the necessary perspective to manage the strategic aspects crucial to their organization’s profitability.
Is the time spent on each project measured and adjusted based on the internal skills assigned to these projects?
Are my business units profitable? What about my individual occupancy rates?
Beyond observations and questions, it is time for everyone to take action by adopting strategic reflexes that allow for the evaluation of project profitability at any time, with just a few clicks.
Back to basics with the keys to an immediately applicable practice for you, in three simple steps, proven by the largest French-speaking agencies, to transform financial management and securely ensure the profitability of their projects
The urgent issue to address: which projects are you currently running at a deficit?
In the competitive world of agencies, quickly identifying unprofitable projects is crucial.
A project can end up in a deficit situation for several reasons, such as inaccurate initial budget estimates, inadequate project scope management, or delays in deliverables that lead to additional costs.
Identify the warning signs
The first step to address this urgency is to implement a system for detecting early warning signs of budget overruns.
This includes monitoring the hours worked versus budgeted hours, direct and indirect costs, and the effectiveness of communications within the project team. Modern project management tools offer reporting and alert features that can facilitate this task.
To have a clear understanding of a project and move forward confidently, you must have access to two key metrics:
- Project progress: where the teams are at the current moment in production compared to what was sold.
- Actual time spent on the project: the workload expended by team, skill, or business unit.
For a financial manager, this exercise is challenging. Still too infrequently used, underutilized, or scattered, the tools each team uses internally rarely prove to be sufficiently efficient financial tools for these matters
Aggregating the data then becomes a tightrope walk, constantly at risk of falling into inaccuracy with each additional step, balanced on the thin line of sporadically and individually shared information.
However, if you want to facilitate financial tracking and easily access the right metrics, this is inevitably a step you must take.
Analysis and Diagnosis
Once the unprofitable projects are identified, a thorough analysis is necessary to understand the underlying causes. This analysis may reveal issues in resource planning, errors in cost estimation, or gaps in change management.
For each identified project, it is crucial to document the discrepancies between the planned budget and actual expenses, focusing on areas where budget overruns are most significant.
Action Plan
With a clear diagnosis in hand, the next step is to implement an action plan to rectify the situation. This plan may include measures such as reallocating resources, renegotiating deadlines or deliverables with clients, and adjusting estimates for the remaining phases of the project.
Communication is also essential at this stage: complete transparency with clients and internal stakeholders is necessary to manage expectations and ensure support for the recovery strategy.
To avoid deficits, a rigorous approach to planning and budget monitoring is essential. This includes implementing robust systems for change and risk management, using budgeting methodologies appropriate to the project type (traditional vs. agile, top-down vs. bottom-up, value-based budgeting), and carefully considering common challenges such as ineffective scope management and inaccurate estimates.
Jérôme Balmain, COO and co-founder - La Haute Société
Having a tool that spans the entire value chain—from centralization at the beginning (quoting during pre-sales) to production and delivery—allows us to be more coherent and better control our processes.
If you are fortunate enough to have a common management tool across your entire value chain, effective from finance to project management to sales, make sure you can track both your project progress and client billing in a timely manner (ideally, automated at each milestone!), and that the resource planning for each project is anticipated at least three months in advance. So that, if necessary, you can reallocate your key resources and easily check the impact of these changes on the project budget and its margins..
- Above: view of budget metrics by project on Furious
Surgical Action: Increase Your Capacity to Anticipate Budget Overruns
Anticipating budget overruns requires agile and responsive financial management. This ability to anticipate and react to unexpected events is likened to a surgical intervention in that it requires precision and responsiveness. To achieve this, adopting an agile budget management methodology is crucial. Unlike traditional management, where budgets are often rigid and set annually, an agile approach allows for continuous adjustments based on the project’s progress.
Adopt a Proactive Vision
It is often inevitable that projects exceed the initial estimated budget, and that’s OK. However, you must know which areas these overruns occur in, and adjust accordingly. If not for the current project, apply the learnings to future ones.
Understanding profitability precisely from the quotation stage is crucial. Managing the time spent during the project, as well as in pre-sales, is equally important.
To avoid cutting too deeply and making overly drastic choices—if there is still time—regularly monitor on a weekly basis, using the metrics we previously developed alongside your clients.
Paul Vedrine, Management Control Officer - Jin Agency
The advantage of using multitasking software is the obvious connections between the different tasks. Using such software allows you to keep a broad financial scope in mind.
Finding the right co-pilot for your organization is not easy. The era of using good old Excel for project tracking is over and is no longer effective when you have more than fifteen employees. Because effective budget management begins well before problems arise.
It relies on accurate estimates, careful planning, and most importantly, the ability to adapt to changes. Agile budgeting, for example, promotes incremental resource allocation and supports collaboration within project teams.
This approach allows for the separation of budget objectives into multiple manageable processes, offering more opportunities to react to sudden internal or external changes.
Integration of Risk Management
Risk management plays a crucial role in anticipating budget overruns. A risk analysis conducted upfront and throughout the project helps identify potential failure points and implement strategies to mitigate them.
Modern project management tools offer advanced features for risk management, including risk monitoring and assessment, risk response planning, and effective communication about identified risks (such as automatic alerts when key budget expenditure milestones are reached, e.g., 50% or 75%).
Communication: The Pillar of Anticipation
Transparent and regular communication with all project stakeholders is essential. It allows sharing of progress, challenges encountered, and necessary budget adjustments in real-time.
Regular follow-up meetings, progress reports, and the use of collaborative platforms are all ways to ensure effective communication.
Ensure the operation: use project budgeting from the start and throughout the project to improve results.
Budgeting should not be seen as a one-time task done at the start of the project. On the contrary, it should be integrated throughout the project lifecycle, allowing for continuous improvement of the results.
Define a clear scope and precise objectives
Defining the project scope and clearly identifying objectives are the first steps towards successful budget management. This includes creating a detailed Work Breakdown Structure (WBS), which helps to understand all components of the project and facilitates the estimation of associated costs.
Choose the Appropriate Budgeting Methodology
Depending on the type of project, different budgeting methods can be applied, from top-down to bottom-up budgeting, as well as value-based budgeting. Each method has its advantages and can be chosen based on the nature of the project, the industry, and the preferences of the management team.
Monitoring and iteration for continuous improvement
The key to successful budget management lies in continuous monitoring and iteration. This means regularly monitoring expenses against the planned budget, adjusting estimates based on project changes, and implementing corrective measures when necessary. Using integrated project management tools can greatly facilitate this task by providing real-time visibility into budget performance and enabling quick adjustments.
Heal without scars and become Furious to boost your profitability.
It is now undeniable that adopting an integrated software solution can revolutionize your agency’s budget management.
Furious, a true all-in-one co-pilot, is the ideal tool to ensure not only flawless financial management but also to optimize all your agency’s operations.
Streamlining Processes with Furious
Furious offers a centralized platform for managing all facets of a project—from initial planning and budgeting to billing and performance tracking. By integrating financial data, time tracking, and project management in one place, Furious simplifies processes, improves data accuracy, and facilitates informed decision-making.
Improvement of Collaboration and Transparency
Effective communication is at the heart of successful project management, and Furious facilitates this collaboration. By providing real-time visibility into budgets, expenses, and project progress, all stakeholders—whether project teams or clients—have the information they need to act proactively and adjust plans as necessary.
- Above: a customized financial overview for tracking billed projects, recorded purchases, and various margins (gross, net, signed) over a chosen period.
Real-Time Tracking and Automatic Alerts
One of the key advantages of Furious is its ability to provide real-time updates and automatic alerts on the status of budgets and projects. This feature allows project managers to stay ahead of potential overruns, take corrective actions quickly, and ensure that projects remain on the path to profitability.
Data-Driven Decision Making
Furious transforms project management data into valuable insights for decision-making. With detailed reports and profitability analyses, CFOs, CEOs, COOs, and your teams can gain a deep understanding of their projects’ financial performance, identify trends, and take strategic actions at their respective levels to enhance future profitability.
What are you waiting for to take the plunge?
With the right strategies and tools, it is possible to overcome the obstacles of financial management in an agency and secure the profitability of your projects. Focus on anticipation, communication, and the use of flexible budgeting methodologies, and you will be able to significantly improve your results.
By leveraging Furious for its real-time tracking, collaboration, and analysis capabilities, your agency can not only heal deficits without leaving scars but also pave the way for increased profitability and sustainable success.
