How to Write an Invoice for Billable Hours - PowerPoint by syi86989

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									                               Project Invoicing
                            using ]project-open[




Version: 0.7
Date: May 12th, 2009
Author: Frank Bergmann
frank.bergmann@project-open.com

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Benefits


• Free and open-source, SaaS available
• Reduce administrative overhead
• Don’t loose invoiceable hours anymore
• Separate between billable and non-
  billable time
• Integrated with timesheet management,
  budget management, vacation
  management and project tracking

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Features

• Elegant invoices
• Invoice templates customizable by the user
• Management of customer data, customer contact and multiple billing
  addresses per customer
• Project billing from very simple to very complex
    – Ad-hoc invoicing – write your invoice in 20 seconds
    – Billing time and material projects
    – Billing complex projects – warranty, discounts and non-billable time
• Billing wizard for billing logged hours
• Price lists per customer or default global price list. Prices per “material”
  or service type
• Multi currency. Automatic currency updates available (add-on)
• Powerful financial reporting, including data-warehouse (add-on
  module)
• Configurable billing modes
    – Material per task or per logged hour
    – Force billing on sub-projects




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Configuration & Parameters


•   Log on super-projects?
•   Invoice from scratch?
•   Logging hours with budget control?
•   Budget-control switched on?
•   Material per task or material per hour?




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Overview

We will guide you through ]po[ invoicing based
  on 4 real-world cases:
• “My First Invoice” – Invoicing a simple fixed
  price contract
• “Fractioned Invoicing” – Writing more then
  one invoice per project
• “Warranty and Presales” – Dealing with non-
  billable time
• “Time and Material” – Invoicing timesheet
  hours

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My First Invoice

The Case:
• You are an employee of “Tigerpond Inc.”.
    Tigerpond offers consulting and IT services.
• We have just received an order from “Big
    Customer” for 3 days of training services.
Actions:
• Create a project so that you can log hours
    and other costs
• Choose “Create Invoice from Scratch” to
    create an invoice manually

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Overview


• There are different types of projects:
  – Fixed Price
  – Time & Material
  – Mixed
  – Recurring (Service Contracts, …)




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Simple Fixed Price Invoicing


• Create a Project
• Write an Invoice
• Mark the invoice as paid




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Time & Material based Invoicing


• Create a Project
• Define a number of tasks
  – Estimated, Billable and Logged Hours
  – Material to describe the type of service
• Log some hours on the project
• Use the “New Customer Invoice from
  Timesheet Tasks” wizard to create an
  invoice

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Understanding Materials


• “Material” is a type of service
• Material is the link into the customer’s
  price list
• Billable vs. non-billable materials




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Understanding Timesheet Tasks


• Tasks describe an activity of one or
  more persons
• Task Characteristics
  – Estimated, Billable and Logged Hours
  – Material to describe the type of service
• Billable/Non-Billable time is per Task and
  not per logged hours. Each project may
  have a task for unbillable time.


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Understanding the Price List

• The price list maps materials to prices
• There is a default price list defined in the
  “Internal” company
• Specific price lists can be defined per
  customer
• UoM is usually “hour” here. The other
  UoMs are used for simple invoicing and
  may be used in future extensions of the
  system.

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Tracking the Project Progress


• Number of logged hours per task vs.
• Task progress (not the same!)
• Compare task progress with time logged
  for early indications of the project being
  late




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Invoicing Monthly Activities


• UoM: Month
• Modelling: One project with multiple
  sub-projects
• This way, the financials will accumulate
• Define this project as an “SLA” to enable
  use for the helpdesk module




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Project Quoting using ]po[


• Create a schedule via GanttProject or
  OpenProj
• Define the materials in ]po[
• Use the Wizard to create a quote




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          Details

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Summary

The Problem
•   Project invoicing frequently represents an important challenge
•   Not all billable hours are captured or invoiced
•   High workload for senior management to manage invoicing
Why?
•   Project management is a continuous negotiation process
•   Project scope changes during the project execution
•   Negotiation results may documented informally or not documented at all
•   Bug vs. Feature: It can be very challenging to decide whether a service is
    billable (feature/ extension) or non billable (bug/ warranty)
The Solution
•   ]po[ allows to capture informal negotiation results
•   ]po[ allows to model complex projects and contracts
•   ]po[ provides integrated timesheet management
•   ]po[ flexible invoicing wizards allow to create invoices based on captured
    information


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]project-open[ Billing Benefits

• Increases the number of billable hours
• Reduces the administrative overhead
• Reduces the senior management’s time for
  invoicing
• Shortens the time from project to cash
• Provides accurate profit & loss per project and
  customer by integration with project
  controlling
• Integration with travel expenses management
  allows to distinguish between billable and
  non-billable travel costs.


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]project-open[ is Open-Source Software


•   Cost efficient
•   Flexible and adaptable
•   Low up-front risk
•   No vendor lock-in




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Functional Description




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            Sample Scenario
    Costs                                    Revenues

          Sales        Project Plan            1               1. Provider and customer agree to an
              1st phase
                                                    Initial
                     2nd Phase

                                                    Quote
                                                                  initial project plan with a number of
                                                                  phases and deliverables
                                 Support




                                                               2. After finishing the first project phase,
     External
     Provider
                                                                  provider bills customer for part of the
                                               2
       Bills
                     Travel                            1st        work. However:
                    Expenses                         Partial
                                                    Invoice
                                                                    • The project team has already started
                                  Billable                            tasks of the next phase
                                   Hours
                                                                    • Not all deliverable of the 1st phase have
                                                                      been finished
                                                                    • Additional deliverables have been
                       Project Plan
          Sales

                  1st phase
                                                                      added to both the 1st and 2nd phase.
Change
                                                               3. A 2nd invoice is based on a modified
                     2nd Phase

Request                          Support


                                               3                  project plan. It needs to include the
     External
     Provider
                                                      2nd
                                                    Invoice
                                                                  hours that have been delivered
       Bills
                     Travel                                       before issuing the 1st invoice.
                    Expenses
                                  Billable
                                   Hours

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Sample Scenario Schema

                                                                  The Customer


                                            eMail                                         Invoice
                                         eMail         Change
  Specs           Quote         Order
                                        eMail          Request



             Sales / Planning                                            The Project
                           Execution           Milestone

                                               2nd Phase                Sign-Off

                                                                           Support



  Purchase
   Order
                     Timesheet Logging                 Travel
                                                                        Invoice
                     by Employees                      Expen.


                                                           External Providers
                                                              ]project-open[ 2008, Project Invoicing / Frank Bergmann / 22
Supported Contract Types Overview

“Ideal” Contract Types
•   Fixed price
    Customer and provider close a fixed-price project.
•   Fixed price with partial/multiple invoicing
    The fixed price project consists of several independently invoiced phases.
•   Time and material
    Provider bills customer for time and external costs, plus a defined margin.
•   Periodic
    Recurring invoices for support contracts etc.
•   "Many Small Projects“
    Invoicing of independent helpdesk tickets or small but repeating projects such as translation.

“Real-World” Contract Types
•   Fixed price + warranty
    Provider needs to provide additional service to fix errors or mistakes
•   Fixed price + change requests
    A fixed price contract forms the base of the project, but additional elements are added during
    the project during “change requests” or when correcting deficiencies.
•   Maintenance contract + extra time
    Customer and provider have agreed on a monthly maintenance fee, but extra services exceed
    the covered amount of services and have to be billed in addition



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Additional Use-Cases

• Employees might correct hours in the past. How
  to invoice these hours?




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“Fixed Price” Without Project Schedule

]po[ can create invoice documents “manually”:
1.   Go to the your project’s financial page and  1
     click on “New Customer Invoice from Scratch”
2.   You get an empty invoice form where you can
     enter your project details
3.   A template renders your invoice ready to be
     sent to the customer

                                                        2




                              3




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Fixed Price with Project Schedule                                       1



1.   The PM creates a project schedule using
     GanttProject
2.   The PM can add the information on
     “estimated” and “billable” hours for each task.
3.   The PM starts the wizard “New Customer                2
     Invoice from Timesheet Tasks”
4.   The Invoicing Wizard allows to select
     “planned” or “billable” units to create the…
5.   …invoice
                                                                            3

                         5                             4




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“Time and Material” Contracts

1.   “New Customer Invoice from Timesheet
     Tasks” lets you create an invoice based
     on a project schedule                                1
2.   From the schedule you can select
     individual


                                                          2




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Mixed “Fixed Prices” with “Time and Material”

It is best practice for “Time and Material”
contracts to specify project tasks
according to the billing type of different
tasks.
Here is an example:
• Sales and Presales:
    Not billable
•   Implementation and training:
    Fully billable
•   Travel Time:
    Billable 50% of the time, with a maximum of
    8hours/journey
•   Warranty Support:
    Clear product deficiencies are not billable
•   Paid Support:
    Product enhancements are fully billable




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“Time and Material” Contracts

1.   “New Customer Invoice from Timesheet
     Tasks” lets you create an invoice based
     on a project schedule                                1
2.   From the schedule you can select
     individual


                                                          2




                                                ]project-open[ 2008, Project Invoicing / Frank Bergmann / 29
“Time and Material” Contracts

• This billing mode allows you
  to                                        1

• Planned Units
• Billable Units
• All Reported Units                        2


• Reported Units in Interval
• All Unbilled Units




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                                     Tools




 ]project-open[ 2008, Project Invoicing / Frank Bergmann / 31
Tools Overview
The ]project-open[ solution consists of a number of building blocks to capture project
billing information plus a number of tools to process the captured information:
Capturing Financial Information
•   Project Plan/Schedule:
    Defines the project phases and their tasks and deliverables.
    Prices are defined via “Service Types” (i.e. “Senior Developer Hour”, …) per task.
•   Timesheet Logging:
    Allows employees to log hours on projects and tasks
•   Travel Expenses:
    This module captures travel expenses, including partially billable expenses.
•   Provider Management:
    Captures external provider costs


Capturing Fuzzy Information
•   Project Filestorage:
    Allows PMs to store change requests and other project documents for reference
•   Project Forum:
    Forum discussion can be used to capture “notes” about informal negotiation results for reference
•   CRM Mail Tracking:
    Captures mails going back and forth between the PM and the customer.


Processing Invoicing Information
•   Quoting Wizard:
    Calculates a quote based on the project schedule with its “billable hours” duration per task.
•   Invoicing Wizard:
    Calculates (partial) invoices based on:

•   module captures travel expenses, including partially billable expenses.




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Tools: Project Plan/Schedule

•   ]po[ allows for project and
    subprojects of any level
•   ]po[ supports the external
    GanttProject Java Application to
    define schedules quickly
•   Each Task includes three
    timesheet hours:
     – Planned Hours:
       Best guess for task duration
     – Billable Hours:
       Hours billable to customer and
     – Logged Hours:
       Actually logged hours by staff




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Tools: Timesheet Logging

• Sophisticated timesheet
  logging with permissions
  per project, subprojects
  or task
• Logging per day or per
  week
• Optional approval
  workflow for PM to
  confirm hours logged to a
  project



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Tools: Travel Expenses




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Tools: Invoicing Wizard




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How to Create an Invoice

 Sales / Planning        The Project                        Create an invoice from Gantt chart
          Execution
                                                            task durations. ]po[ maintains a
                         Milestone
                      2nd Phase                   Invoice
                                       Sign-Off
                                     Support
                                                            price list per customer.


                          Timesheet                         Create an invoice from timesheet
                                                            information (actual hours logged
                                                  Invoice
                                                            by employees)


                                                            Create an invoice from one or more
          Quote                                             quotes.
       Quote                                      Invoice
     Quote



                                                            Create an Invoice from “scratch”
                                                  Invoice   (manually entering quote lines)



•       ]project-open[ offers a wide range of options on how to create an invoice,
        taking advantage of all available information
•       ]project-open[ provides maximum flexibility in terms of how to combine all
        available information to create invoices.
                                                                     ]project-open[ 2008, Project Invoicing / Frank Bergmann / 37
Document Type Permissions

            Employees              Project               Accounting          • ]project-open[ allows to
                                  Managers                                     specify per profile who
            -                    read and create         read, create and      should be able to read or
                                                                               write certain financial
                                 project’s Quotes        modify everything
 Quote


Delivery
            -                    read and create
                                 project’s Delivery
                                                         read, create and
                                                         modify everything
                                                                               documents.
 Note                            Notes
                                                                             • The table at the left
            -                    read project’s
                                 Invoice (but no
                                                         read, create and
                                                         modify everything     shows a typical
                                                                               configuration.
Invoice                          right to create)



                                                                             • The configuration at the
            -                    read and create         read, create and
Purchase                         project’s Purchase      modify everything
                                 Orders
                                                                               left implies a workflow
 Order


                                                                               between project managers
            -                    read project’s          read, create and
  Bill                           Provider Bills (but     modify everything
(Provider                        no right to
 Invoice)

            read own expenses,
                                 create)
                                 read project’s travel   read, create and
                                                                               (create quotes and
 Travel
Expense
            create new travel
            expenses
                                 expenses                modify everything     purchase orders) with
            log hours (which     read project’s          read, create and
                                                                               accounting (write
 Time
 sheet
            creates timesheet
            cost items)
                                 timesheet costs         modify everything
                                                                               invoices)
 Cost
                                                                             • The configuration can be
                                                                               modified using ]project-
                                                                               open[ maintenance
                                                                               screens.
                                                                                ]project-open[ 2008, Project Invoicing / Frank Bergmann / 38
Decentralized Invoicing

                                                             The Customer

                           Delivery
     Quote    Order                       Invoice
                            Note



                                                             The Company

                 Bill                           Time
   Purchase                            Travel
               (Provider                        sheet
    Order                             Expense
                Invoice)                        Cost


                                                                        Providers



 • The ]project-open[ workflow engine allows to
   formalize important processes, while other processes
   may be kept flexible.
                                                         ]project-open[ 2008, Project Invoicing / Frank Bergmann / 39
Solution


• ]project-open[ provides a single place to store and process
  both formalized and semi-formalized data including quotes,
  timesheet, documents, email traffic etc.
• ]project-open[ has been designed for the level of flexibility
  needed by small and medium service organizations (3-300
  employees).
• ]project-open[ workflow engine can enforce certain policies
  such as order or sign-off phases in larger organizations
• ]project-open[ includes wizards to create quotes and invoices
  from production information such as planned or spent hours
• The ]project-open[ workflow engine allows to formalize
  important processes, while other processes may be kept
  flexible.




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Process Overview


• Sales & Quoting
• Project Planning
• Project Execution
  – Timesheet Logging
  – Project progress tracking
  – Project cost tracking




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Quoting Options in ]project-open[



• Quoting using Project Plan:
   – Create a project schedule via GanttProject
   – Assign “materials” to tasks
   – Use the Timesheet Quoting Wizard to sum up the planned
     hours multiplied with the customer’s price list.
• Repeating Project Structures:
   – Create a “new project from template” to create a copy of a
     previous project.
• Complex Projects:
   –   Write a quote using MS-Word,
   –   Create a new ]po[ project in status “quoting”
   –   Store the MS-Word in the ]po[ project’s Filestorage
   –   Create a ]po[ quote document for financial tracking

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Sales & Quoting


• The Sales & Quoting phase starts during the first contact with
  the customer.
• Deliverables:
   – A textual description of the scope of the project (MS-Word document)
   – A “quote” document as a baseline for the invoicing process

• PO can keep track of potential projects and the size of the sales
  pipeline
• A PO workflow can check the completeness of quote
  information before a “potential” project becomes executed.
• PO allows to store unstructured information such as email,
  meeting and conversation protocols together with the project as
  a reference for the invoicing process.




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Project Planning


• The planning phase intents to specify the
  tasks to execute the project. It may overlap
  with the sales phase or start afterwards

• Deliverables:
  – A detailed project plan consisting of a number of
    tasks
  – Each task consists of a number of “planned” and
    “billable” hours, apart from other project information




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Project Planning


• The planning phase intents to specify the
  tasks to execute the project. It may overlap
  with the sales phase or start afterwards

• Deliverables:
  – A detailed project plan consisting of a number of
    tasks
  – Each task consists of a number of “planned” and
    “billable” hours, apart from other project information




                                      ]project-open[ 2008, Project Invoicing / Frank Bergmann / 45
Thanks for your attention
              ]project-open[

              Ronda Sant Antonio 51, 1o 2a
              08011 Barcelona
              Spain

              Tel: +34 933 250 914
              Cell: +34 609 953 751
              Fax: +34 932 890 729

              www.project-open.com
              www.project-open.org



                      ]project-open[ 2008, Project Invoicing / Frank Bergmann / 46
wastebasket


• Keeps track of unbilled hours
• Calculate Work In Progress (WIP) for
  accounting purposes




                            ]project-open[ 2008, Project Invoicing / Frank Bergmann / 47
Issues Addressed

•   Many different types of contracts
•   Difficult distinction between billable and non-billable hours
•   Contracts with many different parameters
•   Difficulty to assign delivered hours to specific projects
•   Difficulty to assign hours to multiple concurrent projects of a single
    customer
•   Re-assignment of delivered services between projects (for example:
    product development vs. customer server)
•   Difficulty to distinguish between service hours delivered as part of a fixed-
    price contract and additional billable hours
•   Informal negotiations during the project execution lead to a complex
    situation with respect to billable and non billable project item. The results
    from informal negotiations can be captured in the KM module and kept
    together with the project.
•   Difficulty in the financial department to determine services to be
    “activated” in the balance sheet, for example for product development vs.
    customer service
•   Difficulty to capture the results of informal negotiations for the invoicing
    process
•   The informal negotiations make it very difficult for a billing department to
    write an invoice
                                                      ]project-open[ 2008, Project Invoicing / Frank Bergmann / 48
• Contract design
   – List of deliverables
   – Project phases & milestones
   – Billing conditions and parameters

• Project Execution
   –   Advance on defined deliverables
   –   Change requests modify the list of deliverables
   –   Change requests modify the effort to produce deliverables
   –   Project Management represents an ongoing negotiation process
       between all project stakeholders. Negotiation results are documented
       together with the project.

• Project Closing
   – Sign-off of individual deliverables
   – Billing of individual project phases or milestones



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Challenges

•   Service organizations need to provide flexible responses to customer requirements
•   The scope and contents of projects may change during the project lifecycle
•   Projects may contain fixed-cost as well as variable cost phases.
•   It is difficult to distinguish billable hours from non-billable sales and warranty parts.
    Senior management may lose considerable time resolving this type of questions.
•   The customer may be “flexibly” mixing planned with already delivered work to be
    invoice
•   Difficult distinction between billable and non-billable time.
•   Partial invoicing at the end of project phases or milestones
•   Invoicing may depend on a lot of fuzzy information from different sources:
•   Verbal agreements between sales and the customer
•   Change requests incurred during the project execution
•   Timesheet information about planned, billable and logged hours
•   External costs of material and freelance project members
     –   The initial quote and its rules
     –   Verbal agreements between sales and the customer
     –   Change requests incurred during the project execution
     –   Timesheet information about planned, billable and logged hours
     –   External costs of material and freelance project members




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Complex Contract Structure

Service companies frequently have to deal
with complex contract structures. Variables:
• Fixed-price vs. variable-price (based on time and
  material) or a mix of both.
• The definition of “billable time” can be complex:
   –   During sales: Presales time vs. consulting time
   –   In the last project phase: Features vs. corrections.
   –   During support: Paid support time vs. warranty time
   –   During support: Issue fixing vs. user training
• Contracts changes during the project:
   – Formal changes as “Change request”
   – Informal changes as part of negotiations between PM, key
     account and customer.


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• Double-Check for non-invoice hours
• Report shows non-invoiced hours




                           ]project-open[ 2008, Project Invoicing / Frank Bergmann / 52
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