In addition to supporting multiple methods for recognizing Fixed Fee revenue, Ruddr allows you to specify the method for attributing services revenue across the team members that have performed the work on a Fixed Fee project.
Why is Revenue Attribution Important?
Traditionally, Fixed Fee projects are managed against a desired margin target for the project. As such, understanding project-level labor costs and project-level services revenue are a priority. However, when you need to analyze margins across the individual members of a team, you may need to specify how the services revenue should be distributed at that level. As project teams can be either homogenous in makeup or varied in terms of labor costs, bill rates, experience, how you distribute revenue can have a profound impact on margins reported across individual members of the team.
Two Methods of Fixed Fee Revenue Attribution in Ruddr
Having an accurate attribution of services revenue per team member can be based on two different attribution methods in Ruddr:
To set the Fixed Fee Revenue Attribution on a project, simply access the Billing settings (Figure 1) on the Edit Project drawer and select the desired attribution method from the Revenue Attribution Method dropdown.
Figure 1 - Specify a Fixed Fee Project's Revenue Attribution Method
Percentage of Billable Hours
For services teams that generally deliver Fixed Fee work with a homogenous team that can be priced out at a single Average Bill Rate, you may attribute services revenue based on the number of hours worked by each member of the team -- a percentage of hours worked may correlate to a percentage of the earned / recognized services revenue.
This is often the case with small project teams where multiple consultants may "jump in and jump out", often sharing duties on common tasks and working to complete the project within a budgeted timeframe and budgeted set of hours. In those cases, your projects may be structured / priced according to an Average Bill Rate that will drive the project margins you set for the engagement.
In such projects, labor costs and presumed bill rates are so similar that a distribution of revenue based on the percentage of hours worked provides an accurate view of the margin driven by those delivering the services.
When the Percentage of Billable Hours method is selected, services hours will be attributed to project members based on the percentage of the billable hours that they work. The calculations would be as follows:
- (Member's Billable Hours / Total Project Billable Hours) * Recognized Services Revenue
Percentage of Time & Materials Revenue
On larger, more distributed services teams delivering large, more complex Fixed Fee projects, teams may be structured with members that have varying degrees of expertise, labor cost, and presumed bill rates. Additionally, the distribution of hours is often times more slanted to a particular group of resources on the team than on smaller, less complex projects.
To accommodate this complexity and to provide a more accurate distribution of services revenue across members of the team, Ruddr provides the Percentage of Time & Materials Revenue attribution method. This method will attribute services revenue to project team members based on the percentage of recognized services revenue they would have produced had the project been a Time & Materials project.
As this method is based on the the calculation revenue as determined by hours and bill rates, this method requires project bill rates to be established either via Project Roles or through member rate assignment.
The calculation of attributable revenue for a member is as follows:
- (Member's Time & Materials Revenue / Total Time & Materials Revenue) * Recognized Fixed Fee Services Revenue