Presented live at AIA26 in San Diego, this session features Jan Owens, Co-Founder and CFO of Accounted. Drawing on more than 30 years of experience helping A&E firms improve their financial performance, Jan explains how project costing can do much more than improve profitability. It can also strengthen cash flow, improve forecasting, and help firms make better financial decisions before problems arise.
Profitability Doesn't Always Mean Positive Cash Flow
One of Jan's biggest messages is that profitability and cash flow are not the same thing.
A firm can be profitable on paper while still struggling to pay bills, make payroll, or fund growth. The difference often comes down to timing, specifically when work is billed, when clients pay, and when expenses need to be covered.
Understanding project costs in real time gives firms the visibility they need to manage both profitability and cash more effectively.
Using Project Costing to Improve Profitability
Project costing provides valuable insights that go beyond tracking whether a project is over or under budget.
Jan explains that firms can use project costing to:
- Identify their most profitable project types.
- Improve fee estimates for future projects.
- Spot clients that consistently under perform.
- Detect and eliminate scope creep.
- Improve staffing and resource planning.
- Increase project manager accountability.
Rather than reviewing profitability after a project is complete, firms can make informed decisions while work is still underway.
Why Profitable Firms Still Experience Cash Flow Problems
Even profitable firms can experience cash flow challenges for several reasons.
Jan highlights some of the most common causes:
- Delayed invoicing after project milestones are completed.
- Slow client payments and collections.
- Paying consultants before receiving payment from clients.
- Performing additional work before change orders are approved.
- Growing faster than available working capital.
None of these issues necessarily reduce profitability, but they can create significant pressure on cash flow if they aren't managed proactively.
Practical Ways to Improve Cash Flow
Throughout the presentation, Jan shares several practical strategies firms can implement immediately.
She recommends establishing clear billing milestones so project managers know exactly when invoices should be sent. Billing promptly after a project phase is completed can significantly reduce the time between performing the work and receiving payment.
She also encourages firms to automate collections through electronic invoicing, payment reminders, and customer statements, helping reduce the amount of time invoices remain outstanding.
For firms that regularly work with subconsultants, Jan discusses using "paid when paid" agreements where appropriate, helping reduce the cash flow gap between paying consultants and collecting from clients.
Better Visibility Leads to Better Forecasting
Forecasting becomes much more reliable when project and financial information work together.
Instead of manually combining spreadsheets, accounting systems, and project reports, firms can monitor project costs, billing, profitability, and expected cash flow from a single source of truth.
With real-time visibility, leaders can identify upcoming cash shortages earlier, adjust plans before problems develop, and make more confident financial decisions throughout the life of a project.
Why Factor Makes a Difference
Throughout the presentation, Jan shares several examples of firms that improved both profitability and cash flow after implementing Factor.
One architecture firm reduced its average time to invoice by 18 days after replacing spreadsheet-based billing with milestone-based invoicing in Factor. Another firm improved reporting by connecting its project management and financial systems, eliminating hours of manual work while gaining real-time visibility into project performance and cash flow.
Factor also supports automated invoicing, electronic payment reminders, project costing, profitability reporting, and integrated financial data, giving firms the tools they need to turn project visibility into healthier cash flow.
Reach out to Jan Owens at Accounted by emailing her at jan@accountedco.com or by phone at (503) 567-4102.
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