Financial Planning Overview

Welcome to Financial Planning. The Overview section covers:

  • Introduction - Read about Clarizen Financial Planning capabilities
  • Concepts and Data Fields Used in Financial Planning - Understand financial terminology, calculations, top-down vs bottom-up planning, labor and non-labor resources (NLR), and more.
  • Getting Started - For administrators, learn how to enable and set up Financial Planning. For Project Managers and Controllers, learn how to set up project financials and track your financials.

Introduction

Plan, manage and track your project financials using Financial Planning in Clarizen. Financial Planning provides a fast, simple, and familiar way of working with project budgets that combines the simplicity of a spreadsheet for data entry, with the control and structure that organizations need to keep track of the bigger picture, at scale, and over time.

Financial Planning includes standard features for Capex/Opex spend planning and Revenue Forecasting and tracking for Billable projects. 

Tracking actual costs and revenues is frequently done with a counterpart Project Controller in a Finance or Operations team and may involve setting up an integration with an external financials or ERP system like SAP or Oracle.

Financial Planning views offer time-phased planning capabilities with a financial dimension for estimating and controlling projects.

Financial Planning lets you capture Non-Labor Resource (NLR) costs and revenues. NLRs can include any materials, equipment, infrastructure or other costs that impact the overall cost and revenue of your project. 

Financial Planning views allow for adding Non-Labor Resources to a Project and setting Budget plan, Forecast and Actual amounts for Costs & Revenues per time period. Amounts are summarized by NLR and period (e.g. Travel costs, by financial quarter). Total aggregate amounts are rolled up to the project and incorporated in the Budgeted & Actual Cost, Expected & Actual Revenue as well as other standard Clarizen financial KPIs including Year to Date Actuals, Financial Year Forecasts.

All data in Financial Planning views can be reported on in Reports using the Projects > Financial Resources special collection which combines all Labor and Non-Labor data including all data about the resources (e.g. categories, job titles) and financial month time phase data. 

Features of Financial Planning include:

  • Project cost estimation (initial costing/pricing)
  • Project cost budgeting (detailed budget with work plan)
  • Project cost control (monthly tracking of actuals)
  • Project revenue forecasting (month, quarter, year)
  • Revenue recognition for time & materials projects (revenue actuals)

Financial Planning can also be used as an input for:

  • Project procurement plans (coordinating purchasing plans)
  • Project funding requests (FQ or FY Capex/Opex planning)
  • Professional services account planning and revenue forecasts
  • Revenue Recognition

Depending on your requirements, you can use Financial Planning for different workflows:

High-Level Budget Estimate

Detailed Budget Planning

Tracking Monthly Actuals

Cross-Project Financial Reporting

Concepts and Data Fields Used in Financial Planning

Learn about financial concepts and how they are used for Financial Planning in Clarizen.

The Fundamental Four

These are the anchor fields of Financial Plans for your projects in Clarizen.

Balancing these will help you plan for profitability and manage against plans.

Note: If you’re not running billable projects, use Expected Revenue to capture monetary benefits. You can rename the fields to suit your organization's terminology.

Standard Work Item Fields for Budget Management

The table below describes the fields used in Clarizen for Financial Planning and include manually-entered fields and calculated (‘formula-based’) KPIs.

The Fundamental Four (highlighted) may be manually set, but otherwise will be calculated based on hourly rates.

Field

Definition

From Financial Plan

Can be Manually Set

Formula-Based

Budgeted Amount

A top-down budget amount total. The amount allocated to the Project.

 

 

Budgeted Cost

A rolling-up cost field. Also known as Budget at Completion. (Planned Work * Hourly Cost Rates) + Non-Labor Budget Costs

 

Budget Variance

Budgeted Amount - Budgeted Cost

 

 

Actual Cost

Work Item progress + Non-Labor Actual Costs

 

% Invested

(Actual Cost / Budgeted Cost) %

 

 

Expected Revenue

(Planned Work * Hourly Billing Rates) + Billable Non-Labor Budget Revenue

 

Actual Revenue

Timesheets Duration * Hourly Billing Rates) + Billable Non-Labor Actual Revenue + Actual Billed Expenses

 

Remaining Budget

Budgeted Amount - Actual Cost

 

 

Cost Balance

Budgeted Cost - Actual Cost

 

 

CPI

Cost Performance Index. Earned Value / Actual Costs

 

 

SPI

Schedule Performance Index. Earned Value / Planned Value

 

 

Planned Value

Expected Progress * Budgeted Cost. This is not displayed but is calculated on a daily basis.

 

 

Expected Progress

A linear projection of a task’s work distributed over that task’s duration as defined in the Work Plan. It’s affected if you update the Work or the Duration. When assigned to a resource, the work is assigned to that resource’s work load according to that person’s availability (working hours and time off). This is the task’s Resource Load.

Example: 

Project 1 has 2 tasks: 

Task A is an 8 hour task. And has one resource (let’s call him “Bob”). Bob has an 8 hour work day and full availability to take on new project work, so we expect Bob to complete the task in one day.

Task B is a 3 day task. It has a dependency on task A, so that it is scheduled to start only after A is complete. Again it has only one person, Bob, assigned to do the work. As Clarizen only takes into account working hours, the 3 day task with a single resource is the equivalent of 24 person/hours of work (that is: 8h * 3 = 24h).

 

 

 ✓

Earned Value

Budgeted Cost of Work Performed (BCWP). Completed Work expressed in terms of the Budgeted Cost.

 

 

Cost Variance

Earned value - Actual Cost

 

 

ETC

(Budgeted Cost - EV)/(CPI*SPI). A forecast of how much more money will need to be spent to complete the project.

 

 

EAC

Estimate at Complete = Actual Cost + Estimate to Complete

 

 

 

For time-phased planning, there are forecasting fields that allow intra-month manual tracking of forecasted amounts that do not alter your work plans.

Financial Planning Fields

Definition

From Financial Plan

Can be Manually Set

Formula-Based

Budget Cost

Rolls up to Work Item Budgeted Cost. Labor Costs are calculated from Resource Planning * Cost Rates

Actual Cost

Rolls up to Work Item Actual Cost. Labor Actuals are calculated from Timesheets.

Forecast Cost

Manually set, does not roll up to work item.

 

Budget Revenue

Rolls up to Work Item Expected Revenue. Labor Revenues are calculated from Resource Planning * Billing Rates

Actual Revenue

Rolls up to Work Item Actual Revenue. Labor Actuals are calculated from Timesheets.

Forecast Revenue

Manually set, does not roll up to work item.

 

 

Labor and Non-Labor Resources have an Expense Type field (Capex and Opex) to be used with the following fields:

PLAN

ACTUAL

Budget Cost Opex

 

Actual Cost Opex

 

Budget Cost Capex

 

Actual Cost Capex

 

Budget Cost Labor

 

Actual Cost Labor

 

Budget Cost Non-Labor

 

Actual Cost Non-Labor

 

 

Top Down and Bottom Up Planning

Depending on how you work, the methods below will define how you work with Financial Planning.

Top-Down

  • Budgeted Amount - A top-down currency amount, not time-phased. Use this to record the total contract amount or funding amount of a Project.
  • Budgeted Work - A top-down duration amount, not time-phased. Use this to record total sold hours. Does not drive any calculations.

Bottom-Up

  • Work - A roll-up duration amount reflecting planned effort. Can be time-phased with Resource Planning.
  • Budgeted Cost - A roll-up duration amount reflecting the planned effort * hourly rates. Can be time-phased with Financial Planning.

Track the Amount between what was budgeted (sold) vs your work plan costs with:

Budget Variance = Budgeted Amount – Budgeted Cost (“Contingency” or “Buffer”)

Fixed Cost and Fixed Price Items

All Work Items in Clarizen can have a Fixed Cost or Fixed Price that overrides Budgeted Cost and Expected Revenue respectively.

Limitations

  • Fixed Cost, Manually-Set: Budgeted Cost, Expected Revenue, Actual Cost & Actual Revenue amounts set on work items can not be time-phased and are not displayed in the Financial Planning view. Amounts cannot be divided into Labor/Non-Labor and Capex/Opex. 
  • Work Item Direct Planned Expenses & Direct Planned Billed Expenses are not time-phased and are not displayed in the Financial Planning view. Amounts cannot be divided into Labor/Non-Labor and Capex/Opex. 

Best Practices

  • Fixed Price and Fixed Price Milestone projects and can be managed using the Billing Type field - read more about Billing Types
  • Unless you are setting the Fixed Costs & Direct Planned Expenses via an integration (for example, Salesforce), plan to retire these fields, remove them from profiles and layouts and migrate users to the more accurate Financial Planning.
    • Use Non-Labor to capture time-phased budget (plan) and actual amounts.
    • Use Validation rules to prevent manually-set Budgeted & Actual cost values that block time-phasing.

Labor Budget: Standard Rates and Labor Calculation

A Project’s Labor Budget setting offers an additional option for Labor Budget Costing:

  • Task Assignment will calculate Labor Budget based on Work * User Hourly Rates
  • Project Assignment will calculate Labor Budget based on Total Project Assignment * User Rates

Non-Labor Resources (NLRs)

Non-Labor Resources lets you maintain consistency of common project non-labor resources across the organization. At this point, NLRs do not contain cost or pricing information, though these can be easily added with custom fields, as needed.

Categorization of project costs as Capital Expense (Capex) varies by industry and jurisdiction.

Generally, only internal projects can be capitalized. Consult your Finance team to verify.

Default Categories

  1. Hardware
  2. Software
  3. External Consultant
  4. Materials
  5. Travel
  6. Other

NLRs can be defined on the organization level and managed in Work Item lists as well as from within the Financial Planning view.

Getting Started

Administrators

As an administrator, you must enable and set up some system settings in Clarizen. See Setting Up Financial Planning.

Project Managers and Project Controllers

Plan and track your financials. See Working with Financial Planning.

 

 

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