I will be to be speaking at an A&E industry focused networking event in Boston sponsored by Axium. This is a great opportunity to meet other firms in the area as well as hear me speak on a panel of industry experts discussing how firms can align themselves to finish 2013 strong and position themselves for a great 2014. You can use this link to register: http://info.axium.com/LiveBoston-Register.html. Hope to see you there.
Professional service firms are seeing new business pick up.
This is good news. However, coming out of several lean years, many companies may find their internal infrastructure is not as strong or tight as it was 5 to 10 years ago. During this time period accounting and financial systems have had dramatic and dynamic upgrades.
Research by Service Performance Insight suggests that many PSFs have business and information systems that are outdated and stretched thin. Streamlining business operations and providing up to date financial systems is a top priority to support firm growth.
Signs that your financial system needs a review:
- Monthly financial reports are late & inaccurate.
- Getting billing out & closing the books is a painstaking process that never seems to end.
- The quarter is over and the first month’s reports have just been issued.
- People forget key tasks and make errors.
- Data is out of date before you see it.
- Service delivery demands real time data.
- Budgets, Actual and Estimates need to be updated real time.
- Waiting for the project to end to learn what happened is bad risk management
- The old centralized entry of time sheets and expense reports is out.
- You don’t understand what these reports mean or what data to look at.
- Do you know who your most profitable clients are?
- Do you know who your most profitable employees are?
- Is your business development forecasting integrated with your budgeting system
- Top line Revenue Growth but no bottom line improvement
- Client billings are increasing, but the bottom line is not.
- Delays in completing reports and inaccuracies make it difficult to understand the relationship between Net Fees and Net Income.
- Real time data is needed to take action in a timely manner.
- Consultants are used while internal staff is underutilized.
Are your systems and procedures capable of supporting your firm’s growth plans?
The WinterView Group “100,000 Mile Service for Business Operations” can help you answer, YES!
Professional Liability Insurance company data indicates there is strong evidence that keeping projects on budget and on time and reduces client claims.
Budget & scheduling problems trigger 12% to 14% of Architecture & MEP claims.
Total claim costs include deductibles and claim settlements as well as management time dealing with claims related issues. Hours managing claims has increased by 200% in the last several years.
Every dollar of claim costs requires $10 of revenue to replace the lost profit.
Steps to improve your risk management for your firm:
- Build your project plans by phase and task
- Give each phase a Fee and a Cost Budget
- Update the percentage of completion (actual work completed) by task at least weekly
- Update the cost to complete continuously
- Calculate Earned Value Analysis(EVA) on all project with a schedule of two weeks or longer
What is Earned Value Analysis (EVA)?
EV Analysis can help identify projects that are falling behind schedule with the potential to overrun budgets, even though the planned vs. actual expenditures comparison looks like the project is tracking well.
In the traditional analysis comparing actual dollar spending versus budget, many projects appear to be performing well until they reach the last 10% to 15% of the project life. Often it is too late to take corrective action to get the project budget and the schedule back on track to prevent a negative event.
EVA compares how much of the work is actually complete vs. how much money has been spent to date against the project budget and work plan. When displayed as a graph, there are three lines: Plan, Actual and Earned Value.
The state of the art Project & Accounting systems available today have an EVA tool built in.
Does yours? If not, WinterView Group can help you explore your options.
Partners & Principals in Profitable Professional Service and Consulting firms know these rules and metrics:
- 2080 Baseline
- 3x+ multiple
- Utilization rate
- Realization rate
Every month these firms update the answers to the following questions:
- What is the revenue generating capacity of our current team?
- How do we know when we can add staff and maintain profit margin goals?
- How do we know when we should reduce staff to avoid losses?