The short answer is Yes!
The percentage of the total project budget that labour costs contribute can vary significantly depending on the nature of the project, industry, and specific tasks involved. And it’s not uncommon for labour costs to range from 30% to 70% or more.
For the project manager, understanding and managing the labour costs is crucial for effective project planning and tracking. To assist, PPO is able to automate your labour cost, both the budget and the actual costs. Let’s look at these options in detail below.
- Automated Labour Budget
- Automated Actual Labour Costs
- How do I automate the Labour Costs?
- How does it work?
Automated Labour Budget
The first step in the process is defining the resource requirements and knowing how the resources will be allocated to specific tasks or work items within the project. The next step is to develop a resource schedule that outlines the start and end dates that the resource is needed and the planned hours or percentage allocation. While this can be done manually (not recommended), PPO automates the resource planning process which includes notifications, audit trails, exception alerts and interactive reporting by allowing project managers to record all this information in the resource allocation entity..
Now, for professional service PMO organisations or external-facing projects where the labour budget is tracked and invoiced, determining the value of the labour budget is particularly important. Using the “Automated Labour Cost” functionality, PPO’s business rule will automatically create the cost records for the labour budget which will not only streamline the budgeting process but will also reduce the administrative burden and minimise the risk of errors.
These records will be recorded per month, ensuring the ability to report on labour cost per month for the project. This supercharged workflow will also automatically adjust the budget when planned hours are either increased or decreased.
Automated Actual Labour Costs
The most effective way to determine actual labour cost is to record actual time spent is timesheets. Introducing timesheets is not easy for even the best PMOs and we’ve put together a list of Things to consider when introducing Timesheets. In PPO, Time Entries are used to record the actual time spent by the project’s resources on tasks and/or project-related work.
As project activities progress, the project resources record the actual hours spend on the work which in turn updates the actual costs in real-time against the cost records. With the “Automated Actual Labour Costs” business rule, measuring actual cost versus planned cost per month helps the project manager to assess variances and take corrective action as it happens. The cost records in PPO reflects the time entry updates instantly, providing an up-to-date view of the project's financial performance against the labour budget.
Whether your PMO is wanting to facilitate more accurate billing and invoicing or optimise the resource allocation process, automating planned and actual costs will contribute to increased efficiency, reduced administrative overhead, and better management of resources, making it a valuable investment for any PMO.
The workflow for automated budgets and actual costs has the same features as all the other automations (project gate approvals, document approvals, scope change approvals, etc) you may use (and love).
Contact your Success Manager today if you’re considering automating planned and actual time in PPO!
How do I automate the Labour Costs?
You can contact your Success Manager or the Support Team if you’re considering automating planned and actual time in PPO!
How does it work?
To set up automated labour costs (Budget & Actuals) one requires four Business Rules. These business rules relate to the Time Entry entity & the Resource Allocation entity.
In doing this you can compare what was planned vs actuals for labour costs.
The below example used is to create Cost records based on Time Entries being captured.
Let’s assume all has been setup on your instance as above. Now let’s look at the automation of the labour cost in action, by using Joe Bloggs as an example.
The first example shows what happens when time entry records are ADDED by a user.
- Joe’s Standard Charge Out Rate on his resource record = $720
- The Rate to Use on the project is set to use the “Standard Charge Out Rate”, as below.
- Initially, the project starts with an empty cost list.
- Then Joe Bloggs captures his time.
- The following cost record is then automatically added to the project once Joe submits his time entries. It therefore simply took the 2 hours that Joe booked and multiplied it by his standard charge out rate which is $720 and added an actual / spent on the cost list of $1440.
The next example shows what happens when time entry records are UPDATED by a user.
- Joe Bloggs already spent some time on this project in the previous month and adds this to his time entries.
- The previous months’ time entry is then added to the project costs (for January).
- Joe updates his time entry record again, by adding an hour on the billable entry for Monday.
- The actual / spent on the cost records is then automatically updated from 2 hours to 3 hours with a charge out rate of $720 per hour.
The next example shows what happens when time entry records are DELETED by a user.
- Joe then realises that his time entry records for the end of February was incorrect and zero's out the hours on the time sheet.
- The cost record is once again automatically updated. It should be noted that a cost record is not deleted but it is “zeroed” if all time related entries are removed.
From the examples above it can be seen that it is beneficial to use the automated labour cost functionality when you are already using the time entries functionality.
The same rules can be set up based on Resource Allocation records being added for resources against Projects to give you the consolidated view of Planned vs Actuals.