In the services industry, maintaining up-to-date records to account for time spent on jobs and projects is essential to being able to bill customers in a timely, efficient, and accurate manner. Without effective record keeping, business and professional services firms run the risk of damaging hard won, trusted relationships with their clients, which can ultimately result in a loss of business and reputation.
Cost Management Challenges
With an increasingly competitive environment, services firms need to be extremely cost-conscious as well as innovative in their offerings. While this sounds simple, there are many variables in managing cost that can disrupt projects and derail revenue streams.
Project-based environments require the preparation of cost estimates in advance of project work. After completion of the project, it’s possible that billing will vary, depending on subsequent changes to the project post-estimate. Capturing the data to prepare an accurate estimate and then provide precise billing at project end is a tedious, manual, and often error-prone process. When things go wrong, this can lead to broken engagements, lost business opportunities, and customer attrition.
The Link Between Data Access and Cost and Efficiency
Finding and viewing data on utilization, cash flow, billable ratios, overhead rates, and other areas affecting cost can be a challenging process. In some cases, services firms’ teams don’t even realize they are missing this information. Data access and quality are directly linked to cost and efficiency. Having quick access to cost data from other systems—including employee productivity systems, ERP systems, custom designed GLs, and custom entities—can give you a significant boost in both efficiency and accuracy in reporting.
Project and time tracking involve cost areas such as expense management, including how much revenue is attributed per employee, utilization rates (or for professional services, how much time is lost when a consultant is “on the bench”). Having access to this data is clearly important to measure utilization versus cash flow. Keeping track of billable hours, project variables, and job costs all add into project and expense management.
How Financial Reporting Can Help
Your finance teams need to have this cost data to produce accurate balance sheets or cash flow forecasts. They require access to the right data to support and report on business fluctuations such as branch performance and consolidations, managing client write-offs or bankruptcies, or managing specific areas such as unapplied receipts.
Business and professional services firms can reduce the complexities of accessing data required to optimize costs through financial and operational reporting. If you can quickly extract and drill into pertinent information from your ERP to better understand cash flow, profit, and productivity—such as budget versus actual costs and billable ratios—you are already ahead of the game. With flexible, finance-owned reporting, you can calculate true costs and enable more accurate quoting to improve margins and profits.
Client demands for details on billing, payments, or jobs become an easy task for finance teams if they have access to the real-time data they need without having to manually pull down sets of data and reformat to find answers.
How Data Access Facilitates KPI Reporting
Reporting on income statement and balance sheet KPIs could be an on-demand, ad hoc process if your teams had direct access to source data. They could easily manage multiple entities in the General Ledger without enlisting the help of IT and populate reporting on KPIs such as:
- Utilization rate (% of total staff labor charged to billable projects)
- Net labor multiplier (amount brought in per dollar spent on direct labor)
- Overhead rate (non-billable costs compared to billable costs)
- Average collection period (length of time it takes to collect A/R)
- Current ratio (relationship between liabilities/debts & assets)
- Debt to equity ratio
Self-service financial reporting that can unify source data on people, process, and operations and quickly deliver custom reports based on real-time data can make a significant difference in managing cost within services firms. It can improve strategic planning backed by accurate financial data to highlight areas for improvement, resulting in cost savings and improved efficiency. It can help reduce risk and the cost of penalties due to inaccurate data. And it can increase client satisfaction and retention, all adding up to greater profitability and business success for your firm.
insightsoftware allows you to chart financial performance in real time through the familiar Excel interface. You can better understand your cash flow with quick access to the information you need from ERPs, without enlisting the help of IT. Streamline your calculation of true costs for more accurate quoting to improve your margins and profits. Request your free demo now.
Juggling multiple projects and clients can make reporting on billable hours for invoicing more complex, and manual processes aren’t sustainable. View our infographic to learn how technology can improve both your workload and your clients’ experience.