If you were discussing a pay rise with the boss would you ask for a percentage increase or a dollar amount. When you organize your household budget do you ever use percentages?
Of course you don’t, dollars mean cash income, percentages are for government spin doctors and bean counters. If you apply for a car loan or a mortgage the prime question is about how much do you earn ie cash.
So how to change this way of financial reporting? and get away from margins to the real world of cash – dead easy – stop trying to make us all accountants.
Readers have seen my views previously regarding killing off spreadsheets which is aka accountancy current practices. But that is a completely separate discussion. However, it was the bean counter who first started using Lotus 123 and now the expectation of employers is that is how the project manager will report on the project’s financial performance.
When a tender is accepted we know what the client is going to pay and if the estimate is accurate we know our costs. At the financial wrap up we know what we have been paid and what it has cost. The skill in forecasting between these two points in time is aided by using good project management systems such as Jobpac or Cheops.
The margin percentage is just a result of a simple calculation. The cash profit is what shareholders want.