1. A Case for Project Revenue Management Peter Varani PMP ©

2. 2 A Balanced PMBOK? PMBOK GUIDE (4 th edition) Cost Revenue Unisys Annual Report (2008) Cost Revenue 845 3 174 152

3. 3 The Project Manager’s “Decision” High Salaries v. Ticket Sales Cost based approach or balanced approach

4. 4 PRM Defined Timely revenue recognition Positive project cash flows Payments/credits closed out at completion Maximize revenue

5. 5 Revenue Processes Require Consistency with accounting standards Integration with existing knowledge areas Assessment of revenue performance Project manager responsibility

6. 6 The 10 th Knowledge Area Knowledge Area Project Management Process Groups Initiating Process Group Planning Process Group Executing Process Group Monitoring & Controlling Process Group Closing Process Group Project Revenue Management 1 Identify target project revenue 2 Determine or confirm pricing 3 Identify revenue milestones 4 Develop project revenue plan 5 Recognize revenue 6 Submit invoices 7 Process payments 8 Conduct Revenue control 9 Close account

7. 7 Earned Value Limitation F SV and CV both > 0. Therefore, ahead of schedule and budget F Is this a financially sound project?Have we recognized revenue? Have we invoiced client? Have we received any payment?

8. 8 Revenue Value GM A B C A B C Project should recognize $75,000 in revenue Project should recognize another $75,000 in revenue Project should recognize final $75,000 in revenue

9. 9 Revenue Value D D SV and CV are both greater than zero E RSV = RV – RPV, RSV < 0 (behind revenue plan) RCV = RV – AC, RCV < 0 (negative margin) E

10. 10 Revenue Value GM F G H F G Project recognizes its first $75,000 Project recognizes its second $75,000 (on revenue plan) H Project recognizes its final $75,000 RCV = RV – AC (overall profitability) GM

11. 11 Total Financial Performance Earned ValueRevenue Value PV – budget for assigned workRPV – planned revenue for work EV – value of work performedRV – actual revenue recognized AC – actual costs are actual costs regardless of EV or RV SV = EV – PV (> 0 is good)RSV = RV – RPV (> 0 is good) SPI = EV/PV (> 1 is good)RSPI = RV/RPV (> 1 is good) CV = EV – AC (> 0 is good)RCV = RV – AC (depends on target GM) CPI = EV/AC (> 1 is good)RCPI = RV/AC

12. 12 Example LOI executed August 15 th Work starts immediately based on timeline Contract executed October 4 th effective date August 15 th Can revenue be recognized in the 3 rd quarter? No LOI does not equate to a contractual arrangement Revenue would be recognized on December 31 st

13. 13 Example B A LOI executed on August 15th A B Project plans on recognizing revenue at the quarter end on September 30 th and is profitable

14. 14 Example D C Contract is executed on October 4th C D Revenue cannot be recognized until quarter ending December 31st

15. 15 Example – Impact Incorrectly forecasted revenue timeline Incorrectly forecasted cash flows Financial statements Risk planning Financing plan

16. 16 Revenue - Not Just for Accountants Anymore Enablers of growth Expert revenue managers Earnings contributors Executive career path

17. 17 Summary PMBOK must balance cost & revenue PRM Defined –Consistent with accounting standards –Integrated with project management processes –Complete assessment of financial performance –Responsibility of Project Manager What is our decision?

18. 18 Thank You please send comments and feedback to peter.varani@unisys.com PMI Global Congress Monday October 11, 2010