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Project Accounting for Professional Services Part 1: Signs Your Current Solution Doesn’t Make the Cut

 

Project Accounting for Professional Services Part 1: Signs Your Current Solution Doesn’t Make the Cut

Professional services firms are constantly fighting to provide top-level service to clients while increasing margins and growing their business. However, as you continue to grow, bring on new clients and add new locations, you begin to realize that you are no longer operating as nimbly as you once did. No longer do you have the same visibility or control. It has become harder and harder to keep up with the questions and concerns that your clients, executives and staff have. 

Today, we would like to explore some of the challenges you may face when you outgrow or outlive your current accounting solution or enterprise resource planning (ERP) tool, and the options you have moving forward.

Answering Client Questions Has Become a Struggle

If you’ve been in this business for more than five minutes, you know that your clients are going to ask for every single detail. “Why am I paying this?” “What is this fee?” “You’re saying this wasn’t included?” Your people need to have the answers for these questions and more, providing them both quickly and accurately.

From contract management to the accounting software, from time and expense tracking to client billing and from billing back to contract management and accounting software, your processes need to align — especially with the reality of revenue recognition. Contracts need to create performance obligations, which need to be tracked in accounting. Project costs need to be allocated accurately to the performance obligations and in turn billed and accounted for. 

The Solution: Alignment and Integration

Everything for the modern professional services firm needs to be in alignment. Unfortunately, outdated or undersized accounting solutions rarely can provide this alignment, requiring staff to rely on spreadsheets or custom code to attempt to create a semblance of integration.

Today’s financial management solutions for the professional services industry is designed to deliver the integration you need — no matter what you need to integrate. Dubbed “Postmodern ERP,” solutions are designed to fit into your business processes and provide information that both you and your clients need.

Answering Executive Questions and Making Timely Decisions Is Even Tougher

Reporting to your clients is one thing, but reporting to your executives is another. For those with outdated or underperforming accounting and ERP solutions, their questions are just as hard to answer. “Do we have the talent to take on a major project?” “How well are we using our staff?” “What percent of projects are we completing on time?” “How profitable is each project?”

Especially as your firm grows, adds locations or increases specialties, these questions become more difficult to answer. Rarely are organizations nimble enough to make decisions on the fly, held back by bureaucracy as they attempt to grow and increase profitability.

As organizations improve the management of personnel, processes and finances, they can move towards accomplishing growth and profitability goals while making smarter investments in the long-term success of the business. However, without a clear picture of where the business currently stands, many opportunities get missed. 

The Solution: Dashboards and Business Intelligence

While integration between applications is one key for the modern professional services business, a solution that can present a clear picture of your business status using a wide range of data points is another. ERP solutions should be able to deliver a range of easy-to-read and present dashboards leveraging the applications you use to answer any questions that executives may have.

Today’s ERP applications simplify the reporting process, speed up the way your company operates and empower your staff and executives to make smarter decisions. For more information, we invite you to download these free guides, Five KPIs for Professional Service Firms and The Questions Every CFO Should Ask the Controller.

Staff Utilization Is Weak, Staff Morale Is Low

For many professional services companies, the goal is to maximize revenue per billable employee. However, you still have a wide range of non-billable employees who are necessary to keep the business running. 

Unfortunately, for those companies using outdated or undersized financial solutions, your highly paid staff isn’t delivering the value they should — and they are looking for the door. 

Non-Billable Utilization

Back office staff plays a very important role in keeping the organization moving forward, but you should focus on maximizing the revenue for these individuals as well. Unfortunately, even if you pay them at or above industry average, if your financial management solution holds them back, what are you getting? 

When your staff has to spend hours working on manual, paper-based processes, you aren’t paying them for the job they are skilled at, you are paying for a glorified spreadsheet jockey and transaction processor.

This of course, correlates directly with another unfortunate reality: You are driving away your staff.

Staff Morale

As the economy continues to improve, it’s becoming harder and harder to retain employees. When paired with the ongoing talent shortage that has plagued finance and accounting since before the recession, companies are upping the ante when it comes to finding employees. 

Knowing how important (and cost effective) it is to retain staff in this environment, ensuring they are well paid is only part of the equation. Employees want to feel like they are doing something for the business, and if they are spending their working lives toiling away in spreadsheets or spending hours or days each week just making sure the bills are paid, it’s unlikely they feel like they are making an impact. 

The Solution: Automation

For companies using entry-level or legacy solutions, the idea of automation may sound like a pipedream. With manual entry and emails being the de facto way of doing business for these organizations, well paid finance employees spend more time paying bills than making or informing decisions. 

By automating the most laborious and headache-inducing processes that plague your project management and finance staff, you can use these individuals more effectively — in turn increasing revenue per employee, one of the top five KPIs you need to deliver.

Bring Your Professional Services Firm Into the Cloud

At Wipfli, we have supported the accounting needs of project-based professional services firms for nearly a century, and we’ve provided accounting and ERP solutions for decades. As one of the largest accounting firms and VARs in the nation, we understand your needs and work with you to implement the solutions you need to drive your business forward. If you feel you have outlived your current accounting or ERP solution, we invite you to learn more about Sage Intacct.

Designed to provide innovative, integrated and intelligent ERP for mid-sized businesses, this true cloud application gives you the power to take control of your projects, deliver more profit to your firm and ultimately improve client relationships. Ready to learn more? Stay tuned to our blog in the coming months as we explore this solution for professional services firms, and if you are ready to move forward, contact us for more information.

Author(s)

Mahoney_Shereen
Shereen Mahoney, CPA
Partner
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