Maximizing profit with SmartBudget

The purpose of Polaris PSA’s SmartBudget feature is to help Professional Services Organizations (PSOs) achieve optimal profitability.

Why is it often difficult for PSOs to maximize profit?

To achieve maximum profit:

  • Managers must first know what billing rates will result in maximum profit, based on all relevant costs.
  • Second, they must have real-time visibility into current billing rates, and where they’re falling short of the optimal, profit-maximizing rates.
  • Lastly, they must work to adjust rates so they better match the optimal rates.

To make effective adjustments, managers need current billing data, and they need to know they can trust that the goal rates they’re aiming for will yield their targeted profits.

How SmartBudget helps

SmartBudget calculates the billing rates a PSO should be assigning to billable employees, to maximize profit.

Calculations are based on:

  • All of the organization’s business and labor costs, and
  • Their desired margin and utilization rates (both of which can be assigned per role)

Managers can then set those calculated billing rates as the role defaults, with a single click.

All cost data is housed in Polaris PSA – for simplicity and to give SmartBudget full cost visibility.

Benefits of using SmartBudget

  • SmartBudget allows project managers to view the default billing rates they should be assigning to achieve your organization’s desired margin, alongside the rates they’re actually using
  • SmartBudget houses all cost and billing rates and calculations in a single active system, minimizing overhead for managing this data and the risk of errors
  • If the calculated rates aren’t achievable quite yet, you can still use a SmartBudget plan to manage rates you’ve modified, since it gives you easy control over all default rates, accurate cost calculations, and full visibility into the margins you can expect to achieve

How SmartBudget works

  1. Administrator ensures SmartBudget requirements are fully configured in Polaris PSA.
  2. Cost & Billing Administrator creates a SmartBudget plan (sometimes referred to as simply a ‘SmartBudget’), that includes the date range the rates will cover, plus the desired default margin and utilization to achieve.
  3. SmartBudget calculates and displays the optimal (or ‘goal’) billing rate for each role, for that period, based on the cost data housed in Polaris PSA, and the margin and utilization specified.
  4. Cost & Billing Administrator can, optionally, edit the calculated rates.
  5. Cost & Billing Administrator commits the SmartBudget plan.
  6. SmartBudget populates the default billing rate for each billable role with the optimal rate calculated, for the defined plan period. SmartBudget also populates the cost rate for each billable role, using the calculated loaded labor cost for the period.

Note: Cost & Billing Administrator is a default permission set in Polaris PSA based on the Administrator permission type. Users assigned this role can access functionality required to set up and run SmartBudget. You can assign this role to any employee in your organization who manages rates.

FAQs

How does SmartBudget calculate optimal billing rates?

Refer to How SmartBudget rates are calculated for information on that.

Do we have to use the calculated optimal billing rates?

No. You can choose to edit rates in any SmartBudget that is generated, before committing it (that is, populating default rates). Or, you can choose not to commit the plan at all.

How are discounts, special rates for particular customers, and other exceptions handled with SmartBudget?

The SmartBudget rates become the default rates once committed, but managers can override rates on a per project basis if they need to make exceptions. You can also make adjustments at the invoice level. But of course, adjusting rates or billing amounts manually will impact your margin.

Can we calculate rates for one particular group only (e.g. a single location or department)?

You can't calculate rates for a select group; SmartBudget allows you to calculate the rates for your business as a whole.

Can we use SmartBudget as a way of testing the outcome of different margins and utilization rates, without actually applying them?

Yes, you can test what billing rates different margins and utilizations will generate by creating SmartBudgets without committing them.

Does SmartBudget account for time off?

Time off can be accounted for in the utilization percentage.

If we’re using Polaris PSA, do we have to use SmartBudget to set rates?

No, you can set rates manually, if you prefer.