The Workamajig Blog
In a creative agency, few problems can spoil your day like a blown budget. Exceeding your project’s budget erodes your client’s trust and your agency’s profitability. Like many kinds of trouble, budget problems are easier to create than to solve; you must keep your project within budget if you want to be successful.
If you already use revenue forecasting, it is clear that there are a lot of factors that need to be considered. From accounting for different client requirements to adjusting for team size, there are a lot of areas that can make or break your revenue forecasting model. A lot of those are simple to factor into a revenue prediction and are pretty easy to remember to adjust as well. There are other factors that are less obvious and often overlooked, such as the market or staff experience. Take a look at these three areas that you should address when you’re setting up your revenue forecasting for the next period:
Spreadsheets are a great starting point for anything dealing with agency accounting. In fact, you’ll probably find a few similarities between spreadsheets that you’re using and an agency accounting software suite. However, there are a handful of benefits to using the software that you won’t be able to tap into with a spreadsheet program alone.
Picture your project budget as a sandcastle. You shape it to be creatively pleasing as well as efficiently built.
Your project should please your client, but it should also be profitable for both your client and for your agency. Achieving these objectives, which can sometimes seem contradictory, requires you to create a project budget that can withstand the shifting pressures of the creative process, like unanticipated delays or resource shortages.
Taxes are as much a part of business as selling projects and servicing clients. But unlike making sales and completing projects, accounting for and paying taxes is probably not at the forefront of your mind. You may even want to squeeze taxes from your thoughts altogether, merely deeming them something to be handled by someone else (i.e. your finance department). However, taxes can greatly impact profitability for projects and creative agencies. Thus, overlooking taxes is one of the most common budget mistakes that you’re probably making.
The purpose of planning a project budget is to make certain that you’re prepared for all possible circumstances. Running out of money is not an option, any more than delivering an incomplete project is. If you do find yourself staring at a budget overrun, then most likely things started slipping well before you found out and could have been prevented.
Establishing your project budget is a crucial step to successful project management. But a budget is only as good as your follow-through. A key component to following a budget is the proper use of tools. Some of these tools are pretty obvious, like revenue forecasting or reporting. But others might be a little more surprising.
Managing the project financials is probably the most critical task that the project manager or creative manager performs on any engagement – after Job One which is effective and efficient communication.
Looking into your agency accounting figures and wondering where you could make some improvements? You’re not alone in that regard. There’s many ways to use metrics from accounting to increase efficiency. Here’s three things that you can start on to make a big impact right away.
Your project budget just doesn’t determine what you can do. It also measures your success. A project isn’t successful if it isn’t profitable. So, you must set a project budget that lets you deliver quality work to your clients within the time and scope that they expect without compromising profitability.