We developed Costlocker from the needs of our digital agency 2FRESH. A cloud based application for time and profitability tracking on projects. The reason was simple: we didn’t want to spend hours and hours gauging the profitability of our projects. Read our story.
So that people often ask us whether we have any rules for using Costlocker at 2FRESH. YES, we do, and we decided to share them with you so you can use them as inspiration for your agency.
Since we hired a lot of people at once, we had to write the rules up as we soon realized that using Costlocker freestyle isn’t sustainable. We weren’t able to create reports that would help us with tracking our financial effectiveness and cash flow.
Here are some examples of what kept happening to us:
- It sometimes took as long as 3 hours to find out who we should invoice for what and how much.
- We couldn’t rely on the Billing Outlook.
- Some projects we invoiced were not even created in Costlocker.
- Our business reports were distorted because we tagged our projects wrong.
#1 — Regular Friday project check
Every week, by Friday noon at the latest, always check the following, because Jana and Lenka will meet you in the afternoon to update your project status.
Check the Estimated End Date of your project
The Estimated End Date is closely related to the Billing Outlook. If the project budget is $10.000 and you have invoiced $3.000 so far, Costlocker will think that the remaining $7.000 will be invoiced by the Estimated End Date.
Check the date and sum of the planned invoice
In this case, you entered the date and sum of a planned invoice yourself. It’s important that you make sure that these are still valid and that nothing has changed. The company will be able to plan its cash flow better, because everyone will know how much will be invoiced and when.
Check the date and sum in Project Expenses
Check, whether the amounts in the Purchased and Invoiced fields are valid. The Purchased field shows the amount we will have to pay for the external expense ourselves. The Invoiced field shows the amount we will be invoicing the client for this external expense.
Check that the dates are correct as well, as we will use our funds to pay for external expenses on these dates. We need to know this in order to adjust our cash flow accordingly.
Check whether your have tracked time for the whole week
The simplest way to do this is to go to your Timesheet, click the Detailed tab, and pick yourself in the All People filter.
#2 Invoicing rules
If you want to invoice, send your request to podklady@2fresh.cz and include these data:
- URL of the project you need to invoice — if you need to invoice more projects on the same invoice, then send all project URLs.
- Attach the project budget or order signed by the client.
- If the client needs it with the invoice, attach the project timesheet too.
- List the client’s billing data (only if it’s a new client we’ve never invoiced before).
That’s not all. It’s critical that everything is in line with what’s entered in Costlocker.
- The invoiced sum should be present in the Billing project tab as a Billing Planned (this means, that the Invoiced checkbox is NOT checked).
- If you’re invoicing the whole project at once, then the project budget (Revenue) has to be the same as the overall amount to be invoiced (Billing). Otherwise, it would not be possible to close the project.
- If there’s a planned invoice in the Billing tab e.g. for $5.000, it’s not possible for us to invoice less or more. Please make sure that the amount is correct.
Example 1
Let’s say your project budget is $30.000, but you’re only going to invoice the client for $28.000.
Solution: Just enter a $2.000 project discount in Costlocker.
Example 2
On the other hand, if you agreed with the client to invoice more than the project budget entered Costlocker, there are two options on how to do it.
Solution 1: edit the Personnel Costs and add more hours.
Solution 2: edit the Project Expenses and enter the extra charge (e.g. success fee) in theInvoiced field. Enter $0 in the Purchased field and leave a note saying that this is a client-approved budget increase.
#3 How to tag projects
Note: never create your own tags, always use the ones available. If there’s a tag you’d like to see, ask Kamil or Jakub, as they are the only ones who can add new tags.
#4 Where to track non-billable client work
Wondering what’s non-billable client work? It’s the time you spend with the client and don’t track the time into a billable project, such as a business lunch or a marketing plan update you need to see in person.
There’s a project called Client Care exactly for these purposes. Track your time spent on such activities into this project.
Why is this important? To know the real profitability of a client, based on all the real costs, not only on the time that gets tracked on budgeted projects. Thanks to this, we’ll be able to compare the Profit margin between individual clients much more effectively.
#5 How to create internal projects
These are the current internal projects at 2FRESH:
- 2F Information architecture
- 2F NadTrello
- 2F PR activities
- 2F Feedback
- 2F Showreel
- AM and PM agenda
- Business Development
- Creative agenda
- Costlocker
- Design Team agenda
- Vacation
- Emails
- Hiring
- Internal non-client meetings
- Doctors and Sick Days
- Compensatory leave
- Don’t have anything to do
- Operation
- Social Team agenda
- Staff meeting
- Study programme
- Testing
- UX Academy
- Atoto
- Web development agenda
- Workshops and conferences
All internal projects need to be created as Recurring projects. That way they will automatically get duplicated.
Enter the project name with no dates:
- correct: 2F PR activities
- wrong: 2F PR activities January
Because the period to which the project pertains will be automatically added at the end of the project name.
The frequency of Recurring project duplication is quarterly, as we also evaluate them quarterly, eliminating the need for monthly duplication.
Choose the Finish Automatically option — by the end of the quarter, the project (2F PR activities 2Q 2017) will automatically close and move from Running to Finished projects, where it gets added to overall Company costs.
Tag the project as Non-billable and Internal. This will enable us to filter out internal projects only and find out how much the work on all internal projects cost us.
There will only be a single activity — Internal work, under which all people working on the project should be added (you can add a new person anytime). The client rate of the Internal work activity will be $0 and the Estimated hrs will be 0 hours.
#6 How to track proposal drafting for existing clients and tenders
We want to know how much we spend on drafting proposals and whether we profit from it. Our goal is to transparently sell all the hours we spent on drafting the proposal to the client.
1. step (Project Detail)
This is the same as when creating a Standard project.
2. step (Tags)
Select the Non-billable and Pending-pitch tags. This will enable us to filter out all the tenders we’re still working on and see how much it has cost us so far.
3. step (Personnel Costs)
Choose the Presales activity and add all people who will be participating on the preparation of the client proposal. Enter 0 hours into Estimated hrs and $0 to the activity Client Rate. This will enable people to track time and generate costs for the time they spent working.
4. step (Project Expenses)
If there are any external costs involved in the preparatory phase of the proposal, enter them here (e.g. printing of the proposal).
As soon as your proposal is ready, don’t forget to check that it includes the time spent on the preparation of this proposal. Find the information about hours spent on the proposal in the Project Overview and transfer it to the cost estimate under “Preparation of proposal”.
What to do if the client accepts the proposal
- Edit the project and remove the Non-billable and Pending-pitch tags and add the Billable tag.
- In the Personnel Costs tab, click the Advanced Options button and enable the Show Tracked Hrs option.
- Transfer the hours from the Tracked hrs column into the Estimated hrscolumn.
- Enter the Client Rate for which you sold the hours spent on the proposal preparation (usually 50%, as part of the work done for the proposal will be used within the project — we never start from scratch).
- Then add Activities, People, Estimated hrs, Client rates according to the approved budget.
Note: If the client hasn’t approved all the Presales hours, enter only the approved number of Presales hours into the Estimated hrs field. If the client has not approved any hours spent on the proposal preparation, enter 0 in the Estimated hrs field. This will, however, burden the project with the costs of worked hours that you were not able to sell.
What to do if the client declines the proposal or becomes on-hold
- Edit the project and remove the Non-billable and Pending-pitch tags and replace them with Lost-pitch tags.
- Close the project by clicking Finish Project— this will raise the overall costs for that client and lower their profitability.
