There was once a time when managing a project at work was fairly straightforward.
Profitability is the key that defines whether a professional services firm should pursue a project or not. Project profitability is the standard against which firms measure if it’s worth investing the time, effort, and resources. When there are two or more projects, profitability becomes a deciding factor for prioritizing and allocating resources within an organization.
Professional services automation (PSA) software helps firms to understand the profitability of a project even before kick-off and ensure the profits are realized as the project progresses. Here’s how you can use Polaris, the world’s first self-driving PSA, to measure and improve project profitability.
How to Measure Project Profitability
How can professional services firms measure and ensure project profitability? It starts with setting your projects up for success. According to a recent SAP study, 80 percent of the project profitability is determined at the bid stage, and more than half of all projects do not deliver to plan. There are many reasons why this happens: disconnected execution, manual updates, missed deadlines, incorrect/incomplete timesheets, and many more. By leveraging historical actual data on similar projects, you can quickly tweak the bid to represent what can be achieved in reality.
Monitoring and tracking profit metrics — hours, costs, expenses, and utilization rate — in real time helps to course correct any deviations and achieve the set profits. You need 360-degree visibility into all project metrics to manage project resources, time data, and finances.
This is where Polaris PSA comes in. Polaris helps professional services firms achieve profitability from bidding to billing.
Maximize Profits by Optimizing Bids and Pricing with SmartBudget
At the bid stage, project managers need the flexibility to analyze “what if” scenarios to fully understand the impact of changes to cost, price, and utilization rate on a project. SmartBudget feature in Polaris is designed to give managers and business leaders the ability to simulate profit and revenue scenarios based on the utilization goals, margin goals, average billing rate goals, and revenue goals they want to target for the project.
SmartBudget automatically consolidates all project-related costs to calculate the most profitable values for metrics that contribute to profitability. For instance, the auto-calculated billing rate considers the organization’s entire business and labor costs, and the desired margin and utilization rates. Managers can view the billing rates in real time to quickly identify those rates which can negatively impact profitability.
Also, since project management is agile, managers might have to adjust billing rates to match profit goals. Now, imagine doing all these calculations on a spreadsheet that is highly susceptible to accidental human errors. An unnoticed change to even one number can derail the entire project. SmartBudget overcomes this challenge by giving managers the flexibility to adjust the rates dynamically to achieve optimized revenue. Since all these calculations happen automatically with zero scopes for human-induced errors, managers can rest assured that their profitability goals would be met.
Maximize Resource Utilization Rate with SmartMatch and SmartBeats
Simply put, the resource utilization rate indicates the time spent on billable tasks in terms of percentage. For instance, if an employee spends 35 hours on billable tasks and five hours on non-billable tasks, the utilization rate is calculated as (35/40)*100 = 87.5%. To calculate resource utilization accurately, you need to track both billable and non-billable hours without any errors.
Professional services firms are leaving a ton of money on the table in terms of efficiency gaps and missed opportunities to drive increased utilization, revenue, and profitability. Finding the right resource for the right project without the fear of under- or overutilization of resources can easily become a cumbersome task with spreadsheets and siloed systems. For instance, a resource you wanted for your project could be released earlier than planned. But if that information does not reflect in your resource management tool in real time, you could unnecessarily wait or hire another resource at a higher price.
The SmartMatch feature in Polaris PSA, backed by advanced AI features, solves inefficiencies caused by the manual allocation of resources. To explain: SmartMatch is designed to tap into 360-degree resource information — availability, skills, location, rate, employee type, and more — to automatically suggest the best resource for your requirement. The unified view gives business leaders complete control over their resources, schedules, and costs.
This bridges the resource recruitment gap. What about efficiency after the project kicks off?
This is where SmartBeats comes in. SmartBeats, or simply “Beats,” are real-time updates on task progress sent from a task owner to their project manager. It is an advanced system that continuously harvests data from users and systems to provide instant visibility into the progress of projects and tasks. Project managers can approve or edit user beats and even give feedback to users on work done, remaining work, and estimates to complete. This helps them identify early warnings of project derailing and plan course corrections. Also, the instant feedback enables team members to re-prioritize their tasks to maximize productivity and efficiency.
Strengthen the Handshake Among Sales, Project Delivery, and Finance Teams
Project hand-off between sales, delivery, and finance teams is easier said than done. The seamless exchange of data among the teams makes the organizations work like a well-oiled engine. However, when there is no strong handshake, there is a high chance for critical information to fall through the cracks.
The in-built workflows in Polaris PSA ensure no ball is ever dropped. Our integrated platform connects with the CRM you use to automatically pull projects into Polaris when they are ready. This gives project managers enough time to forecast resource requirements well in advance. The single source of truth of project-related data, the sales team will have all implementation-related information such as project cost estimate, resource availability, the predicted timeline for project completion to keep the client engagement on track.
When a project reaches certain milestones, Polaris PSA can automatically notify the accounting team to raise invoices. Our versatile bill plan modeling accommodates various client/project billing needs like the fixed-bid, time and materials, flat, or any combination that your business might need. Track financial health, understand projects that are at different stages of execution, and improve visibility into cash flows.
Measure Project Profitability in Real Time
Polaris PSA helps project managers assess the profitability of projects in the pipeline, the revenue they will generate, and the true costs associated with delivering projects successfully.
As an industry leader, Polaris PSA has helped several businesses like yours manage projects, capture all billable hours, manage approval and billing workflows, apply relevant rates, and invoice your distributed client base accurately. On average, our customers see up to a 10 percent increase in solved revenue leakage, a 5–10 percent increase in resource utilization, and a 5–10 percent increase in billing.
Want to see how Polaris PSA can fuel your project profitability? Get a live demo.