Define: Earned Value

Earned Value: The amount of money a project has already earned, based on percent complete.

Calculating earned value will let you know approximately how much money is in the bag.  Obviously, it has to pass through the Accounts Receivable department, but eventually the money will be there.  This scheme works well for projects where money tightly follows work.  In other words, you do the work, and the money follows soon after.  While that’s often true of service-based companies like consultancies, it is not always true of manufacturing projects.

When a company manufactures goods, there is a much longer pipeline to cash.  Money does not tightly follow work.  You develop the product, test it, manufacture it, test it again, market it, sell it, and then your customer pays.  That process can take months or years.  So earned value is not as tangible.  And, there is the upside of selling the same design for several years.

Standard Time® calculates earned value based on Actual Work times the Client Rate.  Obviously, this is very tightly connected to the work you perform.  Every hour means billable time.  For consultancies, this matches reality pretty closely.