Profit & Loss Fixed Costs per Project

[ghost]

• Investigate projects feature in Xero
• Decide process for generating per-project profit report
• Document process

Linked to #321

Contribution to Fixed Overheads for each project (i.e. does the project make or lose money? and if so exactly how much?)

Projects:

• Oxford Abstracts
• LDMW
• Healthlocker
• Oxleas
• QUODL

https://docs.google.com/spreadsheets/d/1xZAE8CuapVPaun2p1ksKAjoNeBGO9UfYxYQe09jxHJo/edit#gid=0

[ghost]

@iteles I have completed this for the most recent sprints of the current projects (please see spreadsheet) - please let me know if this format works for you?

[iteles]

I'd come to check in on the status of this and realised that the comment I thought I had made has either disappeared or was not posted at all 😔 Apologies for the hold up @markwilliamfirth, I didn't realise this was the case (as you know, this has been the top priority for me for more than 6 months).

This looks like a good start, thanks.

We also need to take account of the following:

• Your days column won't work as-is because as you know (and mentioned here), we do ocassionally bill our clients for less days that we are billed by dwylers, so this needs so tweaking
• Expenses for the project need to be included eventually where possible for a realistic picture (but of course this can very much be a second step as they are negligible compared to dwyler rates)

I'm not sure how you're planning on adding the other sprints to the existing sheets or how the full project overview will look, but looking forward to seeing this. Glad it's in progress.

[ghost]

@iteles I'm not sure why this issue is such high priority - it doesn't really give us that much more information. The sprint profit shows which projects are more profitable and can be used to estimate future sprint profit margins. What is the problem here that we're actually trying to solve? What will these exact figures allow us to do?

[iteles]

Thanks for the question @markwilliamfirth, you're definitely correct in reminding me that the motivation/problem to solve should be very clear for everything we're doing 👍 I'm happy to elaborate on #321 (comment)

tl; dr: As the person responsible for allocating resources in dwyl, I feel like I am 'flying blind' which severely hampers my ability to make the absolute best decisions for the organisation in many areas as a significantly important (for a still young company without massive cash reserves) portion of the information is not available to me when making these.

We are a young organisation that has been making decisions on which clients to take on, which projects to pursue, how to direct sales efforts and what to pay people (and many other decisions), based on what amounts to a data-less finger in the air gut feel.

For example, without any data on how much a project contributes to our fixed overheads, we have little more than an inkling of whether we are in fact losing money on a project because although it appears we are eeking out a tiny margin on the surface, it is in fact not contributing enough to our overheads or making any contribution towards supporting our internal projects and therefore we would be better off seeking other opportunities, particularly for our longer projects.

Without this, we are unable to carry out any kind of forecasting (unless we just make it up, without basing it on our experience, which seems foolish when the data is available to us and just needs to be organised into something useable). This in turn means that we are unable to make final or educated decisions around bigger things like for example markets to pursue (because we don't know whether the ones we're in now work for us or not) #325 or even on smaller things that are important to us as an organisation to discuss such as doing lovely things for dwylers #331

I hope that helps to clarify the motivation of why this is such high priority and has been referred to in so many other issues which are also (quite clearly) high priorities.

[ghost]

I wouldn't say we're flying blind - the sprint margins provide enough data to make decisions on and I'd say we have significant cash reserves compared to most young companies.

We are a young organisation that has been making decisions on which clients to take on

This isn't decided with this information, our pipeline isn't that big and deciding factors are usually - does the project align with our values? Is it over 10k? Can we deliver the requirements?

which projects to pursue, how to direct sales efforts

This hasn't been decided yet (#379)

what to pay people

This should be based on experience and market rate, not our bank balance or profitability

we have little more than an inkling of whether we are in fact losing money on a project because although it appears we are eeking out a tiny margin on the surface, it is in fact not contributing enough to our overheads or making any contribution towards supporting our internal projects and therefore we would be better off seeking other opportunities, particularly for our longer projects.

we should be basing rates on market rates, #325

we are unable to make final or educated decisions around bigger things like for example markets to pursue (because we don't know whether the ones we're in now work for us or not)

We should first outline which markets are possibilities, and which markets we're already in. The sprint margin shows which are more valuable - it's clear b2b healthtech pays more

Without this, we are unable to carry out any kind of forecasting

Forecasting is a separate process to this #390

even on smaller things that are important to us as an organisation to discuss such as doing lovely things for dwylers #331

We're not running out of cash anytime soon, so this one isn't really a high priority issue

[iteles]

Whichever order makes your life easier for coming up withe the process (e.g. our longest running project (OA) first or a short one like medcheck first).

Behavioural science is a bit of an anomaly and tiny, so it won't yield much info, please leave that one til last.

[ghost]

@iteles to clarify - OA has been going for a long time before feb17, so it wouldn't be included in this initial set

[iteles]

@markwilliamfirth Thanks for your clarification, please include only the sprints you have information on for OA 👍

[rub1e]

UPDATE: a big part of being able to work out per-project profit was completing #437

It did require going through all historical invoices and assigning client and sprint references (they were all just marked spend money), which did take a a few days... 😩

... 🤑 but totally worth it as we can now run reports in Xero splitting out clients (and sometimes but not always sprints) - which is what we need before we can look at P&L

(Actually it was quite easy to create tracking categories for Clients and Sprints - shame it wasn't done sooner, but we've got a process in place going forward)

Next steps: the goal is to start the new business year being able to run a report for any project whenever we want and be able to tell how profitable they are

One further piece of desk research required is to investigate whether the projects feature in Xero can make this even easier

(#321)

[rub1e]

See comment about Xero Projects

tl;dr - my instinct is that it wouldn't meet all of our needs and it might end up being a bit of an albatross, but @iteles might feel differently when we chat!

[rub1e]

After discussion with @iteles about Xero projects (#383 (comment)), we agree that they don't provide an easy solution to this issue, and we're better off investing some thought into how to build something that will do exactly what we want it to

We should start by getting down our requirements, then having short chats with e.g. someone from Outlandish, InFact, businesses that work a lot with freelancers...

I'll keep this issue at the top of my todo list and get the ball rolling on this asap

[nelsonic]

@rub1e is there a single-page report where I can see the P/L of all projects we have undertaken as an "Agency" since records began? (please/thanks!) ✨

[rub1e]

@nelsonic I've saved a couple of all-time reports in Xero.

Log in to Xero, go to Accounting > Reports from the top menu, and then you'll see a custom tab, where I've saved three reports titled all-time....

Two are very top-level P&L summaries, and one is a very granular transaction summary split by client

You can export them into an xls or Google sheet if you want to play around...

...but if you're viewing them on Xero you can click through from the summary into a more detailed breakdown

Why don't you take a look and see if any of the reports is what you're looking for, and if not just tell me what's missing / how you'd like it presented and I'll take another look (there's literally dozens of different reports we can run)

[nelsonic]

@rub1e when you have 10 minutes to sit with me and go through this, please let me know. thanks!

[nelsonic]

@rub1e Thanks for granting me access. 👍
I can see the dashboard when I login and have navigated to the Reports > Custom > "All Time".

https://reporting.xero.com/!MmKfl/v1/Run/4105352?isCustom=True

All-time client project PL

Am I correct in reading that the "All-time P&L for Client Projects" is a Loss of £137,889.44 ?

[rub1e]

OK, that's bizarre. After investigation, this is because it's only tracking our Sales account from January this year - it's ignoring all previous invoices

I'm on the case

[rub1e]

OK, so after even more investigation, this is because I filtered the report to client projects only, but invoices before January didn't have client references on them so they got filtered out.

The upshot of this revelation is that you can't trust any all-time reports because you can't be sure that they've got correct client references

The solution to this is that I'm just going to have to knock it on the head and go through all historical payable and receivable invoices. With c. 300 receivable (mostly wrong) and c. 800 payable (mostly right), I'll reckon I can bash this out tomorrow morning

Issue: #506

[nelsonic]

@rub1e thanks for confirming that the data in Xero is "inconsistent". 👍 😞
Please keep me posted with your progress on this.

Context: my renewed desire to have accurate management accounts was prompted by your "money" question last Wednesday ... I agree that we need to have highly-accurate data for P&L and specifically "Free Cashflow from Operations" to know with certainty how much we can re-invest into product in the coming months. Without this data/info/insight it is imprudent to continue. Until now I have been waiting patiently for #321 ... but cannot "wait" anymore.

[rub1e]

#506 is now complete, so the reports mentioned in #373 (comment) are now based on up-to-date information. (NB The navigation menu has just changed so I've updated the instructions on how to access)

(Additionally, if you want overall P&L / transactions / Balance Sheet reports - i.e. not filtered by client projects - just go to Accounting > Reports and you'll find them under Financial or Accounting (the ones we already use are starred))