Why do organisations struggle to achieve professional services nirvana?
Andy Campbell, global solution evangelist at FinancialForce, explores the scope for an organisation’s cash-management processes
imply put, professional services nirvana can be defined as the point at which organisations drive the maximum amount of revenue at the highest possible margin, all while managing the quote-to-cash cycle in a seamless and effective manner.
Such automated processes will enable a project to be instantly generated from an opportunity and all of the subsequent project activities managed effectively. This in turn will drive improved project delivery, error-free billing, tighter control over costs and margins, increased customer satisfaction and optimised utilisation of your valuable resources.
However, very few businesses are in a position to attain this nirvana. Companies struggle to achieve it for the following reasons:
Andy Campbell, global solution evangelist, FinancialForce
Disconnected quote-to-cash process
Numerous companies are having to deal with an inadequate quote-to-cash process. The vast swathes of data obtained across this lifecycle is vital in terms of effective revenue management, but it can be complex to handle.
Many businesses operate using fragmented systems, which leads to a disjointed technology landscape that is difficult and costly to maintain as well as causing siloing of information. A common example is the divide between traditional front and back-office applications where inefficiencies can cause a substantial risk of revenue loss, margin leakage and even result in organisations falling behind their competitors.
In contrast, if organisations approach the quote-to-cash process by automatically generating a project from a template right at the start of the opportunity, they can immediately source the best resources and exert tight control over activities. This includes managing scope creep, risks, costs, and margins, and implementing smooth and effortless billing and compliance with revenue received and other compliance and audit issues registered.
The risks of duplication, rekeying, errors, misunderstandings and time delays all but vanish when organisations use this automated approach.
Time delay between process steps
A common issue with manual processing is that it takes a long time. So, in the case of converting a sale to an order and then to a project, every stage of the process relies on a combination of disjointed systems. Add contrasting priorities to this and the delays can be quite substantial.
Therefore, for most businesses, project initiation and the sourcing and assignment of the best project resources may not take place until several days after the deal has been closed. By reducing these time delays and removing the lag that exists between these stages, businesses can reduce the negative financial consequences. This is a point of friction that automation could quite easily solve.
After all, utilisation rates are the key to success in professional services organisations so automating processes to reduce the amount of time an employee spends doing admin will increase their billable hours. Indeed, recent industry research suggests that having a tightly integrated applications landscape typically results in 3% improvements in utilisation rates, therefore, having a measurable impact on revenue in the long run.
Impact of the master data challenge
To gain full insight into project status and profitability, many organisations need to collate data from multiple disparate systems and feed them into a separate analytics tool. The problem with this is that it leads to additional time delays, while at the same time introducing the potential for errors to occur as data is pulled from multiple different systems, which compromises the integrity of the information produced.
For example, a general ledger account code associated with an area and a practice may be stored in a company’s financial system, but project data may be created in a different professional services automation (PSA) tool without referring to these codes. This makes it difficult to connect the dots once all of the summary hours are transferred into the analytics engine.
Ultimately, it comes down to a master data issue. If a business is having to concern itself with different rate and times cards for employees from around the world, then confusion is inevitable.
Challenging technology hurdles
However, when it comes to integrating these disparate systems, it can be a challenging task.
Generally, organisations use multiple different tools and platforms from multiple different providers which makes it difficult to manage them internally as each tool will come with its own requirements. Indeed, even for those companies that can afford to employ people specifically for this task, the integration process still proves challenging, especially when considering the ongoing costs of integration testing every time that there is a system change.
Having multiple separate platforms is a common result of rapid digitalisation as organisations typically look to solve problems as they come up with a tactical solution rather than taking a more strategic overarching view.
This is understandable in the busy and stressful times that these problems usually reveal themselves, however, it is important that organisations take a step back and review their tools to make sensible changes towards easing processes.
Regardless of the systems that companies have in place, they all follow the same basic processes when it comes to delivering professional services.
It begins with the creation of an order, usually for a project, and ends with financials posting to the general ledger. In between these two stages, employees execute the services work, bills are raised, and revenue is recognised.
In order for the quote-to-cash process to happen in a smooth and efficient manner, companies should use a common cloud platform based on a common dataset. This ensures that processes are seamless and automated, putting an end to duplications, rekeying, errors, misunderstandings and time delays.
With all this in one place, all the transactions in the customer journey are linked. This provides end-to-end visibility across all project activity, bill rates, revenue recognition and both revenue and cash forecasts, among other things.
One additional factor to consider is your talent, since as a professional services company this is your most important resource. In an increasingly competitive employment landscape, your employees not only want interesting projects to work on, but they demand the right tools and information to be able to do their jobs easily and effectively.
Outdated tools and management by spreadsheet will no longer meet their needs and do not provide the working environment where individuals can excel. A modern digital cloud platform provides your employees with what they require to work productively and collaborate effectively with their peers, partners and customers.
Operating in a unified way with one office rather than separate front and back offices, enables organisations to avoid problems that would otherwise result in revenue leakage and margin erosion.
Achieving nirvana in professional services may require some retraining and breaking down of traditional silos, but the resulting business benefits are likely to be considerable.