A few years ago, Sweden was in the headlines for experimenting with a six-hour workday.
Of all the processes that a business must undertake, forecasting financials is one of the most important. Forecasting allows for informed strategic decisions, so it makes sense that it should be as accurate as possible. However, for an industry like professional services, the challenges in forecasting are numerous. Economic uncertainties, newer business models, rapidly changing client behaviors, and fluctuating market conditions constantly affect the strategies and processes of professional services firms — including their ability to accurately forecast financial performance, much less improve it. In the face of such unpredictability, how can your professional services (PS) firm achieve accurate revenue planning and forecasting?
The Rising Impact of Artificial Intelligence
The good news is that there’s already an AI-enabled tool professional services firms can leverage to achieve accuracy in revenue planning.
A survey by Bain uncovered that 85 percent of global B2B management teams know that they must improve their pricing decisions. According to McKinsey, AI-powered revenue pricing and promotion is capable of delivering up to $500 billion in global market value.
This is particularly relevant for professional services firms for whom pricing is a matter of having a competitive advantage. Professional services firms rely on data for their pricing decisions, but the amount of data available is increasing far too rapidly. Through AI, that data can be fully leveraged to reliably make strategic revenue forecasting and planning decisions while helping assuage the many fears of a rapidly growing and evolving market.
How AI Solves Key Revenue Planning Challenges for PS Firms
In a Forbes Insights survey covering 700 C-level executives, 60 percent stated that AI is going to be a key enabler of their future successes. To successfully plan ahead, professional services firms require not only a lot of historical data but also a way to extract actionable insights from that data. With artificial intelligence, the second step is simplified. AI can be implemented across several key areas to improve revenue forecasting.
Optimizing Prices and Margins
For many professional services firms, it is a challenge to gain visibility into their contract-to-cash processes. Spreadsheets, invoice confusion, and revenue leakages are just a few of the disunited monetization processes that make it harder for firms to analyze historical costs, revenue, and other critical business metrics. An AI-powered revenue forecasting software can help in understanding those metrics and even investigate why.
- Revenue Planning: With AI-based revenue planning software, you can bring together all relevant metrics and analyze them to help optimize revenue forecasting and planning. Getting a complete understanding of these metrics is essential and your estimates will be more accurate, leading to better planning and forecasting.
- Improved Bidding: A recent study by SAP noted that the bidding stage determines 80 percent of project profitability. Using an AI system will help you calculate 100 percent of the costs involved and factor that into your bid. The system can also draw upon historical data to help you plan better bids for all incoming projects.
- Smarter Pricing: Here again, AI leverages historical data and metrics to inform your pricing decisions, resulting in smarter prices. The granular level of data accessible to AI ensures deep visibility into all factors that affect pricing.
- Total Visibility: AI helps you get a 360-degree view of all your costs and billing rates and leverage that visibility to gain actionable insights. You will start to discover and diagnose issues, which can improve your processes significantly.
- Reduce Revenue Leakages: AI allows for a faster and more accurate billing process by taking into account all costs and expenses. It will also ensure that no hours are left unaccounted for, reducing potential revenue leakages. An AI system will tackle data at a granular level, leading to increased transparency of revenue generation.
Tackling Scope Creep
Scope creep is easily one of the most elusive challenges that professional services firms must deal with. It is also one of the leading causes of project failure. Left unchecked, scope creep can derail a project, force it to go over budget or exceed timeframes. To improve forecasting, you must be proactive in controlling scope creep. While there are a few strategies to do so, AI’s data-driven approach offers the most effective solution.
- Collect Project and Work Information in Real Time: To tackle scope creep effectively, you need access to the latest data about hours worked, work status, work remaining, completion dates, etc. A good AI system can keep track of those metrics in real time for each project and provide you an in-depth view. This helps you make the right decisions proactively before scope creep becomes a problem.
- Real-time Budgets vs. Actuals: With access to all data in real time, you can compare budgets to actuals with the latest information available. This makes it easier to spot trends and possible scope creep at any given time during the project life cycle.
Planning Employee Utilization
Ultimately, employees are the lifeblood of any professional services firm. Knowing how many resources you have available with the right set of skills and for how many hours helps you accurately map project timelines and milestones. AI offers a viable solution to these resource management challenges.
- Real-time Resource Availability: With an AI-enabled system, you can track resource availability in real-time, taking into account allocation, time off, and holidays. You can easily determine if resources with the requisite skills will be free to take on new projects and tasks at any given time or if you need to hire more.
- Resource Utilization Mapping: Find out if your resources are being over or underutilized in real-time. Proper resource utilization is key to generating more revenue after all.
- Intelligent Resource Allocation: AI can easily bring together your talent pool, skills, and project requirements to provide suggestions on the right resources for any new project. The system can comb through the entire organization, even if spread across multiple locations, to determine the best fit for specific projects.
Use a Professional Services Automation Tool That Leverages AI
While the benefits of an AI-enabled system are great, adopting artificial intelligence just for its own sake will not help much with revenue planning. Professional services firms must study and understand how they can implement AI within their business strategy, goals, and ambitions. Considering that those goals and strategies can fluctuate with the times, professional services firms need an AI solution that is configurable, scalable, and flexible. Polaris ticks all those boxes and more.
Polaris is a self-driving professional services automation software (PSA), the first of its kind, and is capable of delivering more and better results with fewer hassles. With its underlying artificial intelligence capabilities, Polaris delivers advanced capabilities in analytics, resource management, project management, financial modeling, and business visibility. And yes, it can also support revenue forecasting and planning practices proactively by accurately accounting for every bit of work.
Professional services firms must start considering artificial intelligence sooner rather than later. It is not just about increasing accuracy in revenue planning. It can help firms adapt and overcome the new challenges these firms are facing.
With Polaris, you get a single source of truth for your professional services firm to help you do exactly that. To learn more, deep dive into the world’s first self-driving PSA.