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Profit & Loss Fixed Costs per Project #373

Open ghost opened 7 years ago

ghost commented 7 years ago

Linked to https://github.com/dwyl/hq/issues/321

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

Projects:

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

ghost commented 6 years ago

@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 commented 6 years ago

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:

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 commented 6 years ago

@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 commented 6 years ago

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 https://github.com/dwyl/hq/issues/321#issuecomment-323323949

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) https://github.com/dwyl/hq/issues/325 or even on smaller things that are important to us as an organisation to discuss such as doing lovely things for dwylers https://github.com/dwyl/hq/issues/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 commented 6 years ago

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 (https://github.com/dwyl/hq/issues/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, https://github.com/dwyl/hq/issues/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 https://github.com/dwyl/hq/issues/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 commented 6 years ago

Mark, as the person actually making decisions on allocation of resources in this organisation, please allow me to determine what information I feel is necessary for me to make the decisions I need to make.

I have been requesting a better view of our financial position verbally since you joined us and in writing for the last 5 months through #321. We have equally been talking about how this is the highest priority since that time by pushing back on many other issues. If it was not the highest priority in February of this year, the passing of time has made it so over the last 6 months.

I have read all of your points and taken them into account, but rather than spending the rest of our day responding to each other point by point in this issue, I will look to update the individual issues you have mentioned.

I would ask that you respect the fact that I (and clearly Nelson, from the comments across various issues) feel very strongly that this remains the single highest priority for us and is integral to good decision making. There is no silver bullet here and each person's experience determines what they view as important in the decision-making process. This is ours.

ghost commented 6 years ago

I agree that it's useful, I just don't think it's as high priority as other issues and I'd encourage you to reconsider based on the logic above

Also we previously said #328 was the single highest priority issue

With regards to taking the next steps to close this issue off can you clarify the minimum requirements to achieve what you consider is the most urgent data you need?

iteles commented 6 years ago

The minimum requirement as of now is to:

A separate issue will need to be opened to allow us to capture this for older projects. Thanks.

ghost commented 6 years ago

@iteles can you clarify the order of post-jan17 projects for which are most urgent to least urgent in order for you to make decisions?

iteles commented 6 years ago

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 commented 6 years ago

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

iteles commented 6 years ago

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

rub1e commented 6 years ago

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 commented 6 years ago

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 commented 6 years ago

After discussion with @iteles about Xero projects (https://github.com/dwyl/hq/issues/383#issuecomment-418654965), 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 commented 5 years ago

@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 commented 5 years ago

@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 commented 5 years ago

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

nelsonic commented 5 years ago

@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

image

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

rub1e commented 5 years ago

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 commented 5 years ago

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: https://github.com/dwyl/hq/issues/506

nelsonic commented 5 years ago

@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 commented 5 years ago

506 is now complete, so the reports mentioned in https://github.com/dwyl/hq/issues/373#issuecomment-439865848 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))