PROMISES or PROFITS? Are you executing every project profitably in your Professional Services firm?
Posted by Henk Onstwedder
Projects and services are the cornerstone of every professional services firm. Done right, projects can return double-digit profit margins and make your business. Done wrong, project yields can drop to single digits or even go negative – with disastrous consequences for the bottom line.
Profitability comes from accurate planning and setting a healthy yet competitive project margin at the time of project initiation, followed by excellence in execution. Doing this right requires access to the right data.
Without the right information, the risks to project profitability increase dramatically, when professional services project management teams can’t produce clear, precise forecasts of the efforts and associated costs for delivering each milestone. Yet, it is still common for PMs to operate "blind" – not simply unable to see ahead to where the finances of their project are going, but cut off from vital business insights into where they are right now. Without timely access to actual, current project data, it becomes extremely hard to predict risks in the expected project profitability and to make the necessary changes to project execution, before it is too late.
So how do you improve project control in a professional services firm?
Show me the numbers!
Accessibility of data is essential. When executing your projects you want to have up-to-date information on the status of your project. Are you on track with progress and are you on track with costs. Suppose that a task is taking more time than expected. Wouldn’t you want to know that as it occurs instead of after the fact? That would allow you to analyze the situation and act on it. It could be that execution is less effective than you planned for, and that you need to accept margin erosion. However, that knowledge might allow you to minimize the loss, for example by providing specialist knowledge. It could also be that you are facing scope creep, and that the project manager needs to step in, either by reducing the scope or by raising a change request. Another factor of importance is to have insight into your project forecasts. Is your team expecting that remaining tasks can be completed in the available time, and can they be done at the same cost level? What is your expected profitability at project completion? As a project manager, you want to know this, so you can run an effective project. At managerial level, you want to know this for all projects, so you can run a profitable business.
Unfortunately, many organizations still rely on general legacy ERP systems that offer little to no support for effective project management. These systems can make it difficult to even get the key data in – let alone to get it back out again when it’s most needed. Another issue is that, too often, PMs only have access to retrospective, non-detailed data. Getting access to real-time information is crucial, as this allows PMs to make accurate, fact-based decisions that will positively impact the project result at any phase of the project lifecycle. Unfortunately, many PMs are basing their forecasts on off-system information that is out of date.
Moving towards a technology solution
In today's competitive market, PMs need real-time data at their fingertips. Many are turning to project-focused ERP solutions to gain critical access to the type of accurate, up-to-the-minute information they need to deliver services and projects on time, in scope and within budget.
A unified Professional Services Automation solution that handles the entire project lifecycle gives the information that your project managers need, to run a profitable project from inception to closure. It provides critical insight into planned, actual and forecasted profitability, and allows you to track, analyze and act on changes. It brings together key information, including contracts, change orders, time and expense information, and invoices in one place, so team members can access the information they need on any device, from anywhere – in tune with today's flexible, on-the-go work styles.
Successfully managing a professional services project is about managing a myriad of details. With the right PSA tools in place, you will immediately see when projects lose their way and be able to make smart decisions to get the project back on track. That way, you can ensure your results are always what you expected.
Are your project teams making you promises instead of profits? It’s time to take a fresh look at the way your business works, and the ERP/PSA project and accounting tools that support it. The right solutions can help you increase profitability and secure margins. Find out how to execute profitable projects with 360-degree visibility and control of the project plan, budget, schedule, and actuals.