Is your professional services business thriving? It may appear so, but keep in mind business profitability most often measures a company’s profits relative to its expenses.
It’s not always that simple for professional service businesses. Where expenses and resources are often easily quantifiable, services a professional services business offers are often intangible, so nailing down some of your expenses becomes complicated.
Newer service businesses may do well with an out-of-the-box financial software to help determine business profitability, but for growth-oriented professional service companies, it will never be enough.
The Challenge: those financial systems barely scratches the surface
Any financial system can undoubtedly determine your basic business profitability because it can analyze your past costs and expenses and calculate your overall profits.
But, we are living in an era where professional services agility is a significant metric for business growth, sustainability, and profitability. This challenge requires a solution that will not only consider your current and past costs but one that:
- Analyzes your results in real-time
- Tracks your actual profitability against your budgeted profitability
- Indicates real-time differences among these profitability metrics
- Captures projections for the future of your business
You want to build a profitable professional services business, right? Regrettably, a traditional, off-the-shelf financial system can’t get you there.
On the other hand, a financial system that collects purposeful data and measures what matters is able to tabulate timely results that help you and your stakeholders make critical business decisions from a knowledgeable front.
The Solution: Professional Services Automation (PSA)
The beauty of using a PSA solution is that it identifies and tracks all your business operations, assets, liabilities, costs, and revenues for multiple entities, your overall business, or even a single project.
Professional services automation unifies every function of your business by automating these processes, thus, making project management and customer satisfaction easy, efficient, fast, accurate, and profitable.
Here’s how a PSA solution helps your professional service business get profitable:
1. Professional Services Resource Management
Resource management and utilization is a challenge for many professional services businesses because different projects might require various resources, like getting an external consultant for one project but not another. With a purpose-built professional services financial system that delivers real-time visibility, you can quickly tell whether your business is truly profitable or not.
Let’s not forget that supervisors can easily overlook factors like employee overtime because your workforce works on multiple projects. This means you need a system that optimizes resources to ensure your resource utilization score is suitable.
2. Professional Services Can Focus on Innovation
A professional services business is constantly under pressure to innovate and offer excellent services without adding costs. A financial solution that actively monitors and reports service quality, costs, revenue leakage, project health, and resource utilization.
Using a PSA solution gives you the upper hand because it works with other systems like your CRM, financial, ERP, and HCM systems and draws information from these systems. As a result, you can use the data you collect from your PSA to understand your business profitability and then innovate, manage resources, and streamline operations.
Dive deeper: What’s holding YOUR professional services organization hostage?
3. Removing Revenue Leakage
A PSA ensures that every working hour is billed using a time entry interface accessible on multiple devices. The system also provides the setting for reminders and notifications to ensure nothing is left to chance. As a result, any time input into the system automatically becomes part of the billable hours. The system also produces a report that indicates variances like overtime. This ultimately removes revenue leakage prone to manual financial systems like Excel.
4. Resource Utilization Tracking
PSA solutions help project managers prepare resources by determining the available resources, skills, and experience currently available for a project. Any project manager can assign the right resources and skills to ensure maximum efficiency and budgeted profitability.
Additionally, because the PSA solution integrates with other solutions like an ERP, tracking the cost and use of resources becomes a seamless process. Identifying gaps concerning resource use of availability is also easy because data is sourced from different systems within the organization. If a project manager can determine that specific resources are unavailable on time, they can outsource within the project timeframe and budget.
Another way to ensure resource planning is through capacity and demand planning which allows you to prioritize the most critical work and then assign available resources. As a result, projects are completed fast, labor burnout is reduced, and issues like double bookings are eliminated.
5. Automating to Eliminate Manual Service Processes
As your business grows, time-tracking is crucial because of how dependent some professional services are on hourly billing.
Your PSA solution will remove any manual processes that dip into your working time and efficiency. Time is a crucial asset for a business, meaning more time spent on tasks that matter increases profitability.
Proper time management reduces overhead costs, faster billing, and improves employee tracking. This, in turn, leads to faster customer billing and more cash flow for your business.
Measuring What Matters for Profitability
An influx of data can be useless if it is not purposeful. The trick is to collect data that will profitably steer your professional services into growth. A PSA solution collects your essential data and integrates it into your entire business operations.
Sage Intacct is designed to provide visibility for your finances and operations, ensuring enhanced automation, customer satisfaction, and profitability. You see your profit and losses in real-time, filtered by project, region, or customer type, making it easier to know where to invest and improve.
Learn how Sage Intacct’s Professional Service Dashboards and Reporting can set your business up for profitability.
What are the key metrics that determine profitability for a professional services business?
Utilization and margins. Utilization measures the time used by resources to deliver services to the customer. This can be in the form of billable, realization, or overutilization. Margins are the actual average rate of cost per project, day, or given time, depending on client needs and billable utilization.
How do you measure what matters in a professional services business?
You start by deciding who is in charge of conducting the performance measurement for your organization and why they qualify. You then determine what is essential to measure and why it is vital for business performance. Lastly, determine how your measurements reflect on your business.
What is the role of PSA in enhancing profitability for a professional services business?
A professional service automation solution automates manual processes and collects data in real-time. This allows professional service businesses to get the information they need to make informed business decisions, analyze business performance, and predict the future of the business.
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