By Lakshmi Raj, co-founder and co-CEO at Replicon | February 28, 2019

Momentum is increasing in professional services firms, and with it comes a continuously evolving landscape that can be difficult to keep up with. Whether it’s evolving workforce dynamics, an increasingly remote workforce, the changing cost structure of services, or heightened competition between firms, shifting dynamics — both internally and externally — make for a challenging market. Without careful supervision, it’s easy to make mistakes that can impact profit.

Knowing what to look out for can be a game-changer. Here are some of the most common missteps that threaten profitability in your professional services organization:

Neglecting to plan for profitability from the start

If a professional services organization doesn’t plan for profitability from the outset, it won’t be profitable. An exceedingly obvious concept, perhaps — so obvious, that many organizations move full steam ahead without putting profitability first. PSOs can easily fall into this trap when there isn’t an early and deliberate collaboration between the sales and delivery teams. And as we are well-aware, while Sales makes the initial commitment, Project Management actually delivers the results.

Are resources currently tied up in other projects? Is the timeline realistic? A joint effort between these teams involves Delivery’s input every step of the way to confirm the anticipated timeline and availability of resources. Otherwise, Sales risks making empty promises to clients and setting the stage for the entire organization mismanaging profitability from the outset.

Overlooking the broadening role of project manager

Until recently, the role of project managers was fairly clear-cut: they were responsible for completion of the project, ensuring it hit all deadlines, and then passing it along to the client. There was little in the way of tracking financial metrics or costs, or really taking into account the effect on overall company profit — everything started and ended with the project’s delivery.

Now, all that has changed. Project managers are expected to regularly observe financial metrics and collaborate with the finance team on why and how these metrics are defined, working in tandem to avoid going over budget or miscalculating project margins, and simply ensuring they stay on the same page. Wearing all of these hats is now simply expected for project managers, and understanding the added complexities of the role is a must.

Relying too heavily on the billable hour

Once the most common pricing model, use of the billable hour is beginning to dwindle — and for good reason. Without 100 percent visibility into an organization’s project resource time and work, accurately determining the actual number of billable hours is next to impossible. How do professional services firms operating across multiple locations account for bench time, differing holiday calendars or vacation time? Without a standardized definition of the billable hour, it snowballs into confusion fairly quickly.

An increased focus on value-based models demands that services organizations move away from the billable hour so they can more effectively optimize revenue, resource utilization and other metrics necessary for a PSO’s profitability.

Not standardizing processes as contract customization surges

Today’s customers look for progress and deliverables blending in seamlessly with their own existing workflows. This results in a greatly different process for every client that professional services businesses take on. At the same time, businesses juggling these heavily customized contracts look to expand both their workforce and customer base by seeking them out in other locations, but fail to acknowledge the complexity this introduces when contracts are already so diverse.

Despite paving the way for new opportunities, globalization disperses both the workforce and customer base, introducing further complexities. This can get messy very easily. Professional services firms need one reliable platform to help standardize these numerous workflows so it can avoid quickly descending into chaos.

Making it work for you and your organization

Equipped with the knowledge of what pitfalls most commonly threaten an organization’s profitability, you can begin to take measures toward shielding your organization from them. Whether it’s learning from past mistakes or avoiding potentially detrimental decisions in the future, each decision you make plays an important part in shaping your professional services organization. Let these decisions serve as unique opportunities to grow your business and find a solution that supports the process as you develop with the evolving landscape.

Original Source: accountingToday
Author: Lakshmi Raj

Get started today.
Set up a free trial based on your business needs. Start Free Trial

Why On-Demand Pay is In Demand

Human Resource Executive | August 09, 2019 By Julie Cook Ramirez Some employers are turning to on-demand-pay apps to help employees living paycheck to paycheck. Quick-service restaurants have never been…Read More

Global Compliance Desk – United Kingdom

Increase in Holiday Reference Period The definition of a ‘week’ for the purpose of the holiday pay reference period: A week is defined as starting on a Sunday and ending…Read More

Global Compliance Desk – Connecticut

New Paid Family Leave Law Enacted Connecticut has introduced a paid family leave program after Governor Ned Lamont signed the Paid Family and Medical Leave ("CPFML") Act. CPFML contribution collection…Read More

Employee time tracking is dead

iBeacons, Bluetooth Low Energy, Proximity sensing and the obsolescence of time tracking as we know it. Businesses have to track the time their employees work for a variety of reasons,…Read More

How Sarbanes-Oxley Impacts HR Departments

Ever since the Sarbanes-Oxley Act (SOX) was passed in 2002, following a spate of high-profile corporate scandals, companies have had to take a wide range of precautions to ensure that…Read More

Reducing Absenteeism with Effective Time Management and Absence Tracking

Workplace absenteeism is a major concern for American companies. According to the US Bureau of Labor Statistics, unplanned absences cost American businesses an average of 2.8 million workdays every year,…Read More
  • Cloud
  • In The News
  • Corporate
  • Professional Services Management
  • Project and Program Management
  • Shared Services Management
  • Time and Attendance Management
  • Workforce Management
  • Customer Feature
  • Feature Update
  • Time Intelligence
  • Industry News
  • Webinar Recap
  • Global Compliance Updates
  • Chat with us
    How can we help you?