Maximizing Profits: Cost Optimization Strategies for Professional Services Organizations With Accurate Time Tracking
For Resilience and Digital Transformation: Optimize your costs.
The global market is volatile these days. Professional services organizations (PSOs) pursuing growth face significant cost headwinds in 2023 due to input price inflation, recession, foreign exchange (FX), interest rates, supply chain challenges, cost of capital, geopolitical risks, talent availability, and policy uncertainty. These factors make it even more important to optimize costs without compromising growth.
A cost-effective strategy raises a company’s total profitability. That applies to all businesses. Going over scope, over schedule, and over budget are simple occurrences when managing interrelated and unpredictable client projects.
A report by Project Management Institute shows that 73% of global organizations met their goals, but only 62% were within budget, and 55% were on time. Another report published by SPI for 2023 shows that typically, time and materials-based projects often yield the best margins. According to SPI, PSOs produced time and materials margins of 35.2%, compared to 35.0% for fixed-price models.
Hence, any revenue loss for a business is problematic, but revenue leakage is particularly a huge concern.
Unfortunately, these little losses frequently go unrecognized and unreported but ultimately end up costing a lot of money to professional services firms. The time & material model is less hazardous than a set price commitment since it assumes that a project’s cost is based on real-time spending and an hourly rate.
To start, large services organizations need a complete picture of all essential metrics such as time data and project details, project tasks, and resources allocated – all in one single platform. Then, at the enterprise level, they must quantify the revenue opportunities lost and evaluate the effect on profitability. Next, in order to ascertain where and why leaks are occurring, a comprehensive examination of those opportunities is required.
They need complete visibility into the full project lifecycle and billing lifecycle to accomplish this, in addition to powerful analytical capabilities to produce crucial actionable insights. Time monitoring is a top technological enabler for best-in-class businesses because of this.
Professional services organizations can better estimate, monitor, and control costs when they have real-time visibility into their time data. Not having 100% accurate time data can result in assigning the wrong resources to projects, incorrect project budget estimates, scope creep, revenue leakages, higher costs, operational inefficiencies, compliance issues, and low insight into how much time resources spend on projects.
Understanding and addressing these problems will be key to determining how you can optimize costs.
What Are the Pressure Drivers for Professional Services Organizations?
Given the economic instability over the past few years, the most significant business constraint that professional services organizations face is changing client expectations, often driven by their customers’ customers. Changing expectations have led to the need to transform existing business models. This adds to market volatility supported by professional business services organizations.
This volatility necessitates accurate and on-time estimations.
When quoting fixed-price projects, trust in their data is crucial. The data foundation for these estimates comes from time tracking. Re-establishing collaboration with customers and suppliers, which has been limited over the last year, is necessary, and the pent-up demand increases the pressure to prioritize the business being sought. The business world is moving ever-increasingly faster, demanding these drivers to be flexible and agile.
As per a report published by Aberdeen, the increased competition is by far the top project management pressure for professional services firms at 36%. Price pressure and technological innovation are two ways that competition can manifest itself. It stresses the importance of professional services organizations providing their staff with modern tools to stay competitive.
Resource allocation in a timely manner can minimize the delay in starting a project, and balancing resources up front is critical to productivity. Costs vary throughout all businesses, but not every company controls this unpredictability well.
Time tracking is helpful in this situation because it provides the earliest information that can be evaluated if a course correction is necessary due to an out-of-tolerance problem. Changing customer expectations and market volatility are two pressures that greatly impact making estimates and managing costs. A strong resource allocation process helps maximize resource utilization on a project with minimum idle time.
How Unified Time Tracking Helps Reduce Costs
Professional services organizations struggle to implement operational agility because of manual or fragmented time capture platforms, delays in pricing and billing caused by a lack of real-time connectivity throughout an organization’s ecosystem, and limited visibility into business data.
Have you ever found yourself managing a global project in which half of your consultants are still filling their project timesheets manually, while the other half is using a variety of legacy or in-house platforms to fill their timesheets?
As a result, you spend longer than you’d like to, trying to make sense of the data available at your disposal, while trying to acquire real-time visibility on project status, allocate resources, and correctly bill the customer. Right?
Assuming that a company with 10,000 employees has about 20 million working hours available each year, how would you accurately track and calculate the billable hours for all the employees around the world?
Yet, are you able to track the billable hours for all of your employees around the world?
And do you know?
The billable hours decreased in 2022 to 1,404 from 1,418 in 2021, according to SPI.
Instead of tracking project time across a fragmented ecosystem, you need a platform that gives you visibility into where your global employees spend their billable time.
With this, organizations may:
- Reclaim hidden billable time
- Reduce administrative duties associated with timesheets by up to 75%
- Accurately manage the time spent on client billing and resource use
Powered by a single system, real-time analytics, and deeper insights, businesses can fulfill dynamic needs and speed up business operations to boost profitability via:
- Real-time tracking of estimates and actuals
- Improving billable hours
- Making realistic forecasts for agile projects
- Achieving global governance and compliance
Real-time Tracking of Estimates and Actuals
To keep projects on track and proactively ensure course correction before overruns happen when working on several projects, you must regularly monitor the hours and costs every day. One of the biggest problems that your business leaders face with their teams is understanding which projects are delivered. The usual questions they ask are:
Are we on track and within budget?
What is the estimated time to complete it?
This is where time-tracking software can help by allowing managers to establish goal hours and expected costs for each project to compare estimates and actuals.
It’s necessary to have a project dashboard in place that not only provides a centralized view of your projects and early warning indicators, but also minimizes project overruns and reduces income leakage. A linked enterprise’s real-time data will provide a complete picture of project time, costs, resources, and billing, allowing managers to make proactive, data-driven decisions to minimize project overheads and optimize revenues.
Improve Billable Hours
Accurate costing and billing are frequently the first things that come to mind when thinking about project time tracking. Each billing error instantly undermines your client’s trust. More time and resources are needed for a project in order to redo all calculations, identify and verify any problems, and convey the errors to the client.
A cloud-first time tracking platform ensures you bill your clients accurately, by the hour. It enables you to measure the exact time an employee spends on a particular project, thus reducing the chances of underbilling or overbilling. You can not only determine the completion time and amount spent on your ongoing projects but also estimate the expected time and budget of your projects that are still in the pipeline.
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. With this, you can track financial health, understand projects at different stages of execution, and improve visibility into cash flows. All this will free up more time to devote to tasks that move the needle of the business.
Realistic Forecasts for Agile Projects
Accurate project time data is the fuel that drives near-reality project forecasting and budgeting. Organizations may precisely track time using a global time-tracking solution to obtain reliable data for improved project forecasts. Also, full visibility into the project pipeline, available resources, and skills requirements ensures you can more accurately anticipate resource requirements when submitting project bids.
Even better, you can research the availability of resources by skill set and proactively hire or retain personnel to complete projects on schedule.
As the project advances, managers can use the project time-tracking tools to plan and monitor delivery in the here and now. The ability to observe how much time was spent on a billable activity, how much work is still to be done, and how long it’ll take to do it all helps to prevent resource over- or under-allocation. This, in turn, helps execute projects within the designated time and budget restrictions.
Achieve Global Governance and Compliance
In the pursuit of key financial metrics – revenues, profits, margins & more – many services organizations fail to recognize the fact that enforcing governance rules and workflows while making it simple to carry out and report on projects, tasks, and engagements, is the key to managing global delivery teams.
With the development of remote, hybrid, and work-from-anywhere (WFA) project workers, this is even more important. Additionally, to make any sense of all the project, work and time data, teams must adhere to guidelines so that these can be easily consolidated and reported on without adding overheads.
If you have a global business, then compliance with global and local labor laws, and working time directives, can be tricky. To ensure proper compliance with global labor laws, businesses should opt for a solution that offers:
- An in-house legal team
- Enforcement of working time directives at the time capture itself
- Built-in compliance library, dashboards to manage specific regional regulations and tax requirements, without worrying about employee location
How Time Tracking Software Can Help You Keep Your Costs in Check
The usual challenge while implementing cost reduction is to have a single source of truth for all your project time data. That’s why, as a first step, it’s essential to integrate all disparate time-tracking systems into one and unify the data needed to drive insight-based decisions. This will keep your business running smoothly and help it gain a competitive edge. Your stakeholders will gain access to an ecosystem that’s prepared for the future.
A report by Gartner reveals that among CFOs polled in 2022, 66% said they planned to increase investment in digital technology in the ensuing 12 months, and another 32% said they would maintain such spending.
Monitoring all project tracking parameters is made simpler with Replicon’s cloud-based and mobile-ready platform, which offers a single source of truth for time, costs, and pay. It can help you keep track of all project costs, reduce manual labor, eliminate errors, identify potential risks, monitor resource utilization, and improve the overall project performance and profitability.
Here are a few reasons why Replicon’s time-tracking platform can be the ideal solution for your organization.
Advanced Time Tracking with Configuration
You can configure and personalize timesheets using Replicon’s unified time-tracking platform to record the precise information that you need for your project accounting requirements. Real-time tracking of all information guarantees that you always have the most recent data to conclude from. You may track billable and non-billable hours by project and task, allocate them to many or a single client, and improve billing accuracy.
Improved Accuracy
When calculating project budgets, accuracy is crucial, and Replicon’s time-tracking platform ensures the accuracy of the data captured. You can establish advanced validation rules to eliminate billing errors. For accurate processing, real-time notifications ensure all users submit their timesheets on schedule.
Moreover, you can create multi-level approval workflows to guarantee that all supervisors approve submitted timesheets before the information is used for accounting. These timesheets are dynamically routed using real-time intelligent approval workflows to avoid bottlenecks and delays.
Track Budgets vs. Actuals
For better visibility, Replicon’s time-tracking platform lets you create time and expense budgets at the project and task levels. It’s also possible to wrap up this data to generate estimates in the timesheets for simple visibility of the progress done.
All resource expenses can be recorded and compared with budgets to make informed financial decisions proactively. You get access to historical data as well, which helps you predict future projects more accurately. Cost optimization is made simpler by real-time tracking of budgets vs. actuals.
Robust Analytics and Reporting
Replicon offers built-in reporting features to provide real-time visibility into projects, resources, time, and expenses, whenever you need it. Because of the reporting capabilities’ flexibility, you can design unique reports to satisfy the specific requirements of your company and stakeholders.
Moreover, Replicon offers dynamic dashboards that give complete project visibility in a single place, making it simpler to keep track of KPIs like margins, usage, and costs. Nothing can make proactive decision-making simpler.
Seamless Cloud-based Integrations
Replicon’s AI-powered time-tracking platform is designed to seamlessly integrate with any organization’s current ecosystem. With just a few clicks, you can quickly and easily communicate project financial information with pertinent applications like invoicing and payroll, cutting down administrative costs, and expediting downstream procedures.
To facilitate quicker deployment, integration, and upgrade, Replicon offers cloud-based integrations to SAP S4/HANA and Workday HCM. Also, all of the main solution providers have pre-built connectors available. To address issues with data sharing throughout the organization’s ecosystem, Replicon can provide custom connectors for customers with outdated systems.
Enable Cost Optimization With An Unified Time-Tracking Platform
Replicon’s unified, secure, scalable, cloud-first technology has given large service businesses access to a single source of truth for time, projects costing, and pay. Intelligent automation uses AI and ML to automate operations, increase operational effectiveness and efficiency, shorten billing cycles, stop revenue leakage, and ensure project completion on schedule and within budget.
For the best results, managing the data-driven journey requires proper planning and strategy. A trusted partner like Replicon can help you do this.
