Project profitability in an engineering, architecture or consulting firm comes from two places: the project system knows the hours, budgets, stages and unbilled time, and Xero or MYOB knows what was actually invoiced, paid and spent. If both are kept honest and joined on the same project codes, you can see profit by project, client and partner each month without a spreadsheet marathon. If they aren't, the WIP report becomes a number someone types in, and nobody quite trusts it. This guide covers what belongs in each system, where the numbers usually go wrong, and how to join them.
Start with the honest question: does one tool already cover it?
Some firms don't need anything joined. Practice and project management tools built for architects, engineers and consultants sell WIP, budget tracking, utilisation and profit reporting as standard features. WorkflowMax by BlueRock, for example, advertises unbilled time and cost tracking, budget against actual by job and profitability dashboards, with a Xero integration.
If your firm runs everything through one of these tools, uses it properly, and the partners are happy with its reports, you probably don't need us. Spend the time on getting staff to enter time daily instead.
The problem starts when the tool doesn't hold the whole picture. Common signs:
- Time is in one app, invoices are raised in Xero or MYOB, and the two are reconciled by hand.
- The firm has more than one entity (a services company, an employment company, a second office) and each has its own ledger.
- Contractor and consultant costs are entered as bills in the ledger and never reach the project.
- The monthly partner report is rebuilt in Excel from three exports.
What belongs in the project system, and what belongs in the ledger
The cleanest setup gives each system one job and doesn't ask it to do the other's.
Keep in the project system
- Projects, stages and budgets. Fee by stage, hours budget, variations and change requests.
- Time. Every hour, against a project and a stage, with the staff member's cost rate and charge-out rate.
- Unbilled time and WIP. Time and costs recorded but not yet invoiced. The project system is closest to the work, so it is the natural home for the WIP figure.
- Write-ups and write-offs. When an invoice is for more or less than the time it covers, record the difference against the project, with a reason. This is how partners learn which clients and project types leak fees.
- Utilisation. Chargeable hours against available hours, per person and per team.
Keep in Xero or MYOB
- Invoices, receipts and debtors. The ledger is the legal record of what you billed and were paid.
- Bills and overheads. Subconsultant invoices, travel, software and rent.
- Payroll and actual staff costs. Including super and leave, which is what a true cost rate is built on.
- Entity accounts and the balance sheet. Each company's books, intercompany charges and the WIP balance your accountant puts in the accounts.
The rule is simple: an invoice should be created once, in one place, and the other system should read it. Many firms raise invoices in the project tool and send them to Xero. Others raise them in Xero and need the project tool to know. Either works, as long as both use the same project number on every invoice and bill.
Where the numbers go wrong
WIP that doesn't match the accounts
The project system says there is a certain amount of unbilled time. The balance sheet shows a different WIP figure, because the accountant journalled it at year end from a spreadsheet. Unless someone reconciles the two each month, the partners are looking at one number and the bank or investors at another. Decide whether WIP is valued at charge-out rates or cost, and agree the method with your accountant.
Unbilled time that never gets billed
Time sits on a closed stage, on a project with no budget left, or under a code nobody invoices. A monthly aged WIP report, by project and by partner, shows time older than a set number of days so someone has to bill it or write it off on purpose.
Costs that never reach the project
A subconsultant bill is entered in Xero or MYOB against an expense account but no project. The project looks more profitable than it is. Tracking categories or job codes on every bill fix this, but only if the code list matches the project system.
Multi-entity firms
Staff may be employed by one company and work on projects billed by another. Profit by project then needs the time from the project system, the invoice from one ledger and the payroll cost from another. This is where single-app reporting usually stops. We cover the wider topic in our guide to a multi-entity finance dashboard.
How to join them: integration plus a reporting layer
Joining the systems has two parts.
1. An integration that keeps codes and transactions in step. New clients and projects are set up once and copied across. Invoices and bills carry the project code both ways. Many project tools already have a Xero connector; check what it moves. Some send invoices but not bills, some send totals rather than lines, and support for MYOB varies by product. Where the connector stops short, a custom integration fills the gap.
2. A reporting layer that reads both. A reporting tool such as Power BI pulls time, budgets and WIP from the project system and invoices, costs and payroll from each ledger, then lines them up by project, client, partner and month. The monthly partner pack comes from that, not from exports. We set this up as Power BI reporting over Xero and MYOB.
A typical monthly partner report shows, for each project: fee and budget, hours to date, billed to date, unbilled WIP and its age, write-offs, costs including subconsultants, and margin. Then the same rolled up by client, partner and entity, with utilisation by person beside it.
The technical side (for whoever looks after your systems)
Most project tools and both Xero and MYOB offer APIs, which is how the integration and the reporting layer read data without anyone exporting files. The reporting layer usually keeps a copy of each source in a small database refreshed overnight or more often, so reports stay fast and keep history even if a system changes. Project codes are the join key, so cleaning up mismatched codes is normally the first piece of work.
If you moved off WorkflowMax
Xero retired the original WorkflowMax on 26 June 2024, and BlueRock relaunched the name as a new product, WorkflowMax by BlueRock. Firms that moved in a hurry often lost reports along the way. Choosing and moving to a replacement is covered in our WorkflowMax replacement guide. This article is about what comes after: getting project profitability and WIP reporting back, whichever system you landed on.
Frequently asked questions
Can Xero or MYOB report project profitability on their own?
Partly. Both can track income and costs by project or tracking category if every invoice and bill is coded. Neither holds timesheets at charge-out rates, stage budgets or unbilled time the way a practice tool does, so most professional services firms need the project system as well.
Should WIP be valued at charge-out rates or cost?
It depends on what the number is for. Partners often watch unbilled time at charge-out rates to chase billing, while the accounts may value it differently. This is an accounting question, so check with your accountant and use one agreed method in both systems.
What is a good utilisation rate?
It varies by role and firm. A director's target is usually lower than a graduate's. Set targets per role and track the trend rather than comparing to a figure from elsewhere.
Do we need Power BI, or will spreadsheets do?
If one person can build the monthly report in an hour from one system, a spreadsheet is fine. Once it takes several exports, several entities or several days, a reporting layer that refreshes itself is usually worth it.
We use WorkflowMax by BlueRock and Xero. Is that enough?
For a single-entity firm that codes everything properly, it may be. The gaps tend to appear with several entities, MYOB in the mix, or partner reports that combine data the project tool doesn't hold.
To see how we approach this for firms like yours, read about WIP and project accounting for professional services and our work with professional services firms. If your monthly profit report still means a day of exports, book a free initial chat. We'll tell you honestly whether your current tools can do it or what is missing.