Two-Story PnL method

INNOVATIVE MANAGEMENT ACCOUNTING FOR SOFTWARE DEVELOPMENT

✓ Successfully implemented

✓ Publicly discussed with IT professionals

✓ Positive feedback from management accounting professors

PROBLEMS TO SOLVE

In a maturing Software company, delivering many projects in parallel, with a "traditional 1-story" [or no] management accounting:

Line managers have no clear financial KPIs per their zones of responsibility
Project's profitability depends on decisions out of its managers direct control
Financial performance of departments and offices is too approximate
Middle management has to validate too many decisions with top management

SOLUTION

Gross Profit report structured in a 2-story way - "Projects" and “People resources" layers.
Each "slice": width represents revenue, height - profitability in %, and volume - contribution to company gross profit.

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TARGET CUSTOMER PORTRAIT

Software development company that:

is on its late "start-up" - early "growth" stage, eager to build a foundation for sustainable growth
dreams of management accounting, organically compatible with all pricing models and resources employment types
plans to really offset tactical decisions to middle management, by assigning transparent financial KPIs to their responsibility zones, so that top management could focus on Strategy

Would hardly benefit from the 2-story PnL method, frankly speaking:

Software companies working in T&M only (like out-staffing partners)
with no resources shared between projects (dedicated teams only), and feeling no need in this

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