In this episode, I talk to Mike Lozanoff. P.E., owner at Lozanoff Consulting Services, LLC about invoicing in engineering firms, write-offs, and how these two actions can affect the project profitability of a consulting engineering firm. Engineering Quotes: Here Are Some of the Questions I Ask Mike: Why do you think invoicing is a necessity of doing business and why is it often loathed by Project Managers? What tips can you share with the listeners on making monthly invoicing go more smoothly and efficiently? Would you say that all write-offs (or write-downs) are bad? Is profitability a better metric for tracking successful project outcomes? Is project profitability and firm profitability the same thing? Here Are Some Key Points Discussed in This Episode About Invoicing, Write-Off’s, and Project Profitability: Engineers come from a technical background, but project managers must remember that they are business managers and not just project managers. Project managers are the people who make money for the firm. Without proper invoices that have been meticulously checked and sent to the client, money does not get paid. Writing something off means that you have spent more than you had budgeted for, and the company writes that lost revenue off. Sometimes a company wants a project that is new to them and had to take it for a lesser fee. The budget will most likely be difficult to adhere to and will probably be overrun. It is not necessarily a bad write-off because it is a planned write-off. Project managers must manage this kind of project more closely because the company does not want to overrun the budget without any oversight. Remember that any write-off is still a loss for the company. If you have a first-time project manager, ensure that you are checking up with them every few days to ensure that the project tracking is in place and that the budgets are being adhered to. You will decrease the amount of write-off for that project by doing this, and the new project manager will learn how to do proper project tracking from the beginning. When looking at project profitability, it is better to look at the percentage of the profit instead of the amount in money. If you only know the amount that was written off in a project, you will have no idea of the profitability. Only focusing on the write-offs in your projects will make all of them seem like a failure. Focusing on both the write-offs and the profit made will be better for the entire team. Project profitability and firm profitability are two different things. Firm profitability is the amount of profit the firm has once all the expenses have been paid. Project profitability is ensuring that the expenses and losses to do a project do not outweigh the budgeted profit for that project. If they do, then the project would have been done at a loss to the company. 3 Tips to Make Monthly Invoicing Run More Smoothly and Efficiently Setting Things Up Correctly From the Start – Ensure that you have the phases of your project set out correctly before you have the kickoff meeting. It will ensure that you have your time schedules and budgets in place. Time Keeping – Running a business always starts with a timesheet that is accurately filled in. In your kickoff meeting, show everyone and write it down where they must post their time, and have them do it every day. It must be done daily because nobody can accurately remember what they have done in previous days. Then check that they are doing it every day. If people are posting time to the wrong places, you will have no idea where your budgets are. Review Often - Check that your team members are filling in the timesheets every day and review them often. If people are posting time to the wrong places,