In business for people.

Promises or Profits?How to execute profitable projects

E-GUIDE

Professional Services Organizations

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In an increasingly competitive services market, project excellence is key for running the business at a healthy margin.

This requires your firm to have the tools in place to give you visibility and control over the Bid Management

Process – which is where you define your planned margin – and the Project Execution Process – where

your effectiveness in execution and project management determine the final project profitability.

Excellence focuses on the core activities of planning, costing, pricing, selling, delivering and invoicing the

client. As such, it requires the involvement of many different teams in your organization, including sales,

delivery and administration, for winning the work, performing the work, and invoicing the client.

Using a PSA solution, you will have visibility on project profitability from start to finish. Does it mean you will

only have successful projects? No, it doesn’t. But what it does mean is that you will know if your project is

running as planned, or if you need to take action. And, you will know while you are still in a position to act.

Competition intensifies in the Professional Services sector

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The effect of improving service execution

Unlock valuable insights

Download your free copy of the 2016 Professional Services Maturity™ Benchmark, and discover how you compare with your peers and the market at large.

Source: 2016 PS Maturity ™ Benchmark

KPI Best Rest

Employee billable utilization 78.3% 70.2% 12%

Average project staffing time (days) 9.48 10.45 9%

Concurrent projects managed by PM 6.00 5.76 4%

Average project staff (people) 5.90 4.64 27%

Average project duration (months) 6.92 6.17 12%

Projects delivered on-time 86.7% 75.6% 15%

Projects canceled 1.9% 2.6% 28%

Average project overrun 7.3% 10.1% 28%

A standardized delivery methodology is used 72.6% 64.2% 13%

Effect. of resource mgmt. processes 4.29 3.56 20%

Effect. of estimating processes and reviews 3.96 3.53 12%

Effect. of change control processes 3.96 3.42 16%

Effect. of project quality processes 4.17 3.55 17%

Effect. of knowledge management processes 3.75 3.34 12%

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Planning for excellence throughout the project lifecycle In the bid stage, you plan for profit; in the execution stage, you deliver the results. Since projects are the main driver of company profitability, project-based businesses must have a constant focus on excellence in all stages of the project lifecycle.

Firms want to closely manage their flagship projects, while at the same time securing the margins in

the bread-and-butter projects. If you lose track of profitability in the smaller projects, you will be

stung many times. But if you get it badly wrong on a flagship project, you will see a one-off big hit

to your results.

Project-based organizations are striving for excellence from initiation through to closure, and industry

research shows that when firms use a Professional Services Automation solution, profit (EBITDA)

is 25% higher than in firms that do not. PSOs can manage the front- and back-office with lower

administrative overhead and deliver more projects on time, driving better financial performance.

The bottom line is that organizations that use a PSA solution grow faster, are much more profitable,

and simply operate far more efficiently.REPORTING

REP

ORT

ING REPO

RTING

CLIENTS

OPPORTUNITYMANAGEMENT

Pr oj ectPlanning & Budgeting

BILLING

PROJECT360

TIMESHEETSEXPENSES

PURCHASES

RESOURCEPLANNING

Pr oj ectForec as ting

CASHCOLLECTION

WIN

EXECUTEEXECUTE

BILL

Unlock valuable insights

Download your free copy of our guide to achieving operational efficiency with a 360-degree overview of projects.

5 Unit4 | E-GUIDE – THE KEYS TO PROFITABLE PROJECT EXECUTION

Set the project plan and budget

The first step towards excellence is knowing where to compete to win more business. The second step

is to get the project plan and budget in place. From the outset, it is key to fully understand the costs of

people, materials, expenses, and subcontractors that will be needed to complete the project. By comparing

cost levels with billing prices, you will get direct insight into the planned profitability of your project. Since

project profitability is the main driver of company profitability, this is an essential piece of information for

your business. This also allows you to monitor actual and forecasted project profitability throughout project

execution. You can identify margin leakage at an early stage, and act to bring the project back on track at

the expected level of profitability.

Request and schedule people resources

The next step towards excellence is the ability to request and schedule the right resource categories,

with the right skills, at the right costs, and when you need them.

Having the right resource management tools in place supports more efficient planning and scheduling

of work, especially in environments where consultants often work on several projects simultaneously.

By more tightly scheduling tasks with interconnected project deliverables and minimizing ‘bench time’,

effective resource scheduling can lead to vastly improved resource utilization and overall profitability.

From a scheduling perspective, it is advantageous to have the ability to assess skills, forecast staffing

needs, schedule resources and evaluate profitability by individual, client and project type. This enables

the organization to improve sales and hiring activities to more efficiently balance the supply and demand

for the right talents.

Plan for profit

Bench or Billable?

Discover how to make the most of your organization’s talents in these videos

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Deliver on your promises

1. Value of Sales Pipeline – insight into future utilization and planned revenues

2. Project profitability per project (baseline, actual and forecast)

3. Project Leakage, as won/lost profitability compared to baseline

4. WIP, as a measure of the work that has been done but not yet invoiced

5. Project write-offs, an indication of the work that is done but can’t be invoiced

5 Project KPIs that every COO needs:Manage the project

During the course of a project, the plan and budget must be expertly managed, to close on time and within

budget. It is also likely that the original baseline will need to be revised in line with scope changes, which

you may or may not recover from the client. But, still, all measures must be taken to keep the project on

track to reach margin and profitability targets. With all data in the system and role-based dashboards at their

fingertips, your Operations and Finance teams can keep tabs on all project Key Performance Indicators:

EAC, Calculated POC, CPI, SPI, as well as planned revenue and profit.

Capture time, expenses and purchases

In project-based businesses, people are the most important assets; they deliver your projects, which means

they’re the main cost of completing the project. So, in order to understand the profitability of the project,

you need to know the actual costs, including the all-important people costs. Consultants must be able

to easily log how much actual time was spent against a specific project or task, as well as any expenses.

Project-related purchases should also be captured directly against the project.

Produce accurate forecasts

It’s critical to evaluate the progress of the project at regular intervals, while the project is underway and

project teams still have the opportunity to make adjustments. With forecasts based on actual costs and

hours, it is possible to assess and analyze a project’s financial performance relative to the baseline, to

predict potential project risks and make changes in governance or methodology before it is too late.

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Project Forecasting

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Stay on track for successBilling and cash collection

Regardless of whether you are delivering projects for a fixed fee or on a time & material basis, you’ll still

benefit from capturing time and expenses. Doing so will tell you what the true costs of delivering the project

are — otherwise, you’ll never know whether the fee you are charging is sufficient to turn a decent profit.

The final step towards excellence is to get all data into the system, so that Operations teams can keep tabs

on the project portfolio; while Finance teams can monitor portfolio KPIs and overall cash flow position.

Reporting and analytics

The best performing organizations have moved from reactive to proactive planning. Real-time visibility and

analysis – based on one source of the truth – has transformed decision-making from tactical to strategic.

With the assistance of powerful BI tools, reporting and analysis has become a fluid, collaborative process

that facilitates input and cooperation across all functions and levels. With the right tools, managers at all

levels are empowered to analyze business performance, conduct their own root-cause analysis and take

immediate action before it is too late.

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Measure the right project KPIs

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The case for Professional Services Automation

Implementing and rolling out a new PSA solution can be a challenge to any PSO. Our e-guide provides guidance on what to look for in the right system.

How to select a new PSA solution

Download your FREE copy

A Professional Services Automation (PSA) solution provides the basis for initiation, planning, resource management, scheduling, execution, close and control of projects and services.

A PSA solution helps manage service delivery by overseeing opportunities, staffing, project management,

and collaboration. PSA is typically the system of record for resource skills, competencies and preferences

with integration to the employee and contractor database.

It is used to capture time and expense and purchases by project and resource down to the task level,

and it is the system of record for resource utilization and project cost and estimating.

The right PSA solution for services firms integrates with billing capabilities with different levels of

revenue recognition by type of billing method – time and materials, work in process or fixed price.

A unified ERP and PSA solution allows you to effectively unify Finance teams in the back-office with

front-office Operations teams.

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Once you have determined where you should be competing, the keys to profitable project execution are:

1. Building the right proposals. Determine the right level of effort, the required resources, and

determine the appropriate cost level. Have the project profitability in mind when determining the sales

price for the project.

2. Excellence in execution. Ensure that all information is made available for accurate tracking of costs

and effective client billing. Information on actuals allows you to track progress and monitor for deviations

between planned and actual values.

3. Use a Project-based ERP solution to capture this information and provide you with a seamless

integration between project execution and project accounting.

Summary: The keys to profitable project execution

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In business for people.

The right ERP solution can help you to accurately collect, bill, and report financial transactions for projects. Find out how, in: “Risks or results? The keys to billing with precision”.

Download your FREEe-Guide now

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