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Topics: IT Project Management, Risk Management
How is the profit and loss statement affects the software project

Hi Friends,

There has always been a question if the project manager is adhering to the profit and loss account statement to check if the project is within the budget and the profits are not minimizing when some deliveries are compromised.

Any suggestions on this ?
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It is the PM resonsibility to have a control over agreed budget and margin. Once figures tend to "loose green color" PM has to analyse with the team, comes up with impact analysis and suggestions to discuss necessary improvment actions with the steering committe/ sponsor.

Project manager accountability is about project costs. A project has no profit. The organization will give profit thanks the product/service/result the project creates. The only thing the project and the team can do is creating the product/service/result as defined and that is achieved thanks project quality.

I compare P&L with the control room meters in a factory setting. A project manager should be able to not only gauge project health looking at the P&L but also draw trends and anticipate the problems which may happen in future. This can come only through experience and knowledge, but this art is worth mastering. This art comes handy when you are leading a large (50M) project spread across geographies (say 20 plus location) across 3 to 5 years of delivery time. It will be impractical to visit 20 location regularly or see dashboard of every location. In real life situation you end up depending on judgment of local project managers and taking decisions that may not address the problems. P&L however will give you a direction where to dig deeper. Impact analysis and root cause analysis will help a PM to isolate the issue leaving Green side into Amber or Red.This has worked for me in many cases and hence my humble input.

I would like to respond to this question from the perspective of a software vendor. The PM is responsible for the profitability of the project and in order to ensure that the project is delivered within cost, scope, schedule, and quality, the PM must be proactive in managing risks throughout the life cycle of the project. Of course, the risk register is the main source that the PM needs to visit regularly and obtain responses from the project team with reference to the high-risk items and the contingency costs associated with them. When these risks are managed within the agreed budget allocations, the project cost will not be affected. However, when a particular project deliverable is late or exceeds the schedule, an additional cost will be incurred. You need a tool to capture this data that will reflect the correct financial position of the project profitability in real time. We provide special coaching related to the method and technique of managing risk in software projects to assist project managers in managing risks and profitability of the project.

P&L are a Finances department control to show forecasted revenues and expenses . As a project manager, you are usually required to review the P&L on a regular basis to explain variations in actuals vs forecasted. As well, you usually want to revise the forecasted amounts, as necessary.

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