PM Financials 101

Question 1

Soft Backlog

Answer 1

Estimated Revenue for won opportunities but not yet funded.

OR

Sold not Booked

Question 2

Actual Sales/ Funding

Answer 2

Amount that has been funded for a project through completion

Question 3

Hard Backlog

Answer 3

Funded amount from projects- ITD Revenue

Question 4

ITD Revenue

Answer 4

Revenue recognized on the project to date

Question 5

Total Backlog

Answer 5

Hard + Soft Backlog

Question 6

Revenue

Answer 6

Amount we bill and collect on a project before deductions for project expenses

OR

Cash/Consideration a company ultimately receives for selling goods or services

Question 7

What covers Non Labor

Answer 7

AZCO
BMI
Subcontractors
Per Diem/Travel
Equipment/Small Tools
Computer usage

Question 8

What covers Labor Burden

Answer 8

Employee Raw Cost (Labor Cost)
Labor Burden such as
Discretionary (ESOP & Bonus)
Payroll Taxes
401k matches
Insurance
Paid Leave (1.3$ or 1.0$ of raw labor for 2023)
Contingent Worker (CWK)

Question 9

What is internal reserves

Answer 9

Amount set aside in anticipation of additional costs and/or identified risks

Question 10

Cost % Complete (GAAP Compliant)

Answer 10

ITD Project Costs
____________________
EAC (Forecasted total) Project Costs

Refer to album for pic

Question 11

Revenue formula

Answer 11

Cost % Complete x Funding

Question 12

Gross Profit

Answer 12

Revenue - Non Labor Cost - Labor Cost - Labor Burden - CWK - Internal Reserves

Question 13

Gross Profit Short Formula

Answer 13

Revenue - Project Costs

Question 14

Gross Profit % formula

Answer 14

Gross Profit
——————
Revenue

Question 15

Net income formula (theory)

Answer 15

Gross Profit - Overheads - Equity Charge

Question 16

What covers Project Costs

Answer 16

Raw Labor
Labor Burden
Non Labor
Computer usage
CWK
BMI

Question 17

Break Even Multiplier formula

Answer 17

Direct Labor Cost + Total Marketing + Total Admin + Discretionary + Equity Charge
———————————————————
Direct Labor Cost

Question 18

Net Income calc

Answer 18

(ELM - BEM) x BMcD Raw Labor Cost

Question 19

Pre-Discretionary Income Per Person (PDIP) - Theory

Answer 19

1. Performance metric measuring profitability on a per employee owner basis
2. Serves as means for determining year end pool
3. Reported at EAC level only

Question 20

PDIP formula

Answer 20

EAC Gross Profit - Overheads = Net Income + Discretionary = EAC Pre. Disc. Income / EO AFTE

= EAC PDIP

The above Net income is different from the project based or GP net income and this is a standardized net income across the board for all projects. This is done so that new offices who may have a high BEM will not be hit.

Question 21

EO AFTE acronym

Answer 21

Employe Owner Annualized Full Time Equivalent

Question 22

EO AFTE calc

Answer 22

Total EAC Forecasted EO Hours
———————————————
2088 hours

Question 23

How many work hours in a year?

Answer 23

2088 hours

Question 24

What does the grey bar represent in PDIP tab in Project Gateway

Answer 24

It’s the EAC Global Practice Average across all your top tasks

Question 25

Does CWK come under Non Labor or labor Burden?

Answer 25

Labor Burden

Question 26

What are the types of Reserves

Answer 26

1. Internal Contingency 2. Warranty Reserve 3. Conditional Contingency

Question 27

What is Internal Contingency

Answer 27

Not client facing Based on project/contract specific risks Includes contractual disincentives like liquidated damages

Question 28

What is Warranty Reserve

Answer 28

Typically EPC projects Consider time period, Type of risks, Flow down clauses, Client historical data and expectations

Question 29

What is Conditional Contingency

Answer 29

Based on terms and conditions of prime agreement or contract with the client. Typically used in Shared savings, T&M not to exceed.

Question 30

Physical Progress % Complete is also called as?

Answer 30

Earned Value

Question 31

Cost % complete vs Physical Progress % Complete

Answer 31

Physical Progress based on project progress Cost % complete impacted by contingency or warranty reserves and timing of invoices received from third parties

Question 32

What is Equity Charge?

Answer 32

Equity Charge or credit is a monthly interest charge (6% annually) It is a component of Green Book Financials Not recorded as specific project cost in ECOSYS

Question 33

Equity Charge Calc

Answer 33

Outstanding AR (Accounts Receivable) + Retainage Receivable + Unbilled - Overbilled - Unpaid AP Invoices - Retainage Payable The above total x 0.06/12

Question 34

ELM formula

Answer 34

Revenue - Non Labor Costs - CWK ____________________________________ Raw labor Costs