As the CFO of a professional services organization, you keep a sharp eye on key metrics like net income, ratios, working capital, cash balance, days sales outstanding (DSO), gross margins, and more. However, the most critical metric for sustainable growth is project profitability.
This is true regardless of project type, duration, or billing terms. Once you sign a contract, you own the project outcome. For the best profitability, you need to equip your team with the right tools for collaboration and visibility.
Here are five steps your professional services organization can take to achieve, preserve, and improve project profitability.
Track the Right Metrics
You can collect a ton of information about your projects, but don’t lose sight of the big picture. According to Service Performance Insight (SPI), a global research and consulting firm that helps professional services organizations improve productivity and profit, these are the top KPIs to focus on:
- Billable utilization
- Project overruns
- Project margins
- Annual revenue per billable consultant
- Annual revenue per employee
Make Time for Analysis
As a CFO, you don’t just oversee finance and accounting—you’re a strategic advisor. In addition to having the right data, you need to analyze it, make confident decisions and recommendations, and course-correct when necessary. A recent survey says top-performing organizations spend 20% more time on analysis than data gathering.
Empower Your Project Managers With Real-Time Information
Your project managers should have fast, easy access to project statuses, milestones, resource availability, and metrics. Dashboards offer timely, targeted data at the project level, such as project profit, budget vs. actual, earned value, and transactions over a certain threshold. The easier it is to access this critical information, the easier it is to make confident decisions.
Understand the True Nature of Fixed-Fee Project Costs
Fixed-fee projects and value-based pricing are ongoing trends in the professional services industry. If your organization bills based on time and materials, you already have a process to track your labor costs through time and expense entry. If you bill based on a fixed fee and long-term contracts, it’s crucial to understand the details of your cost.
Become More Data-Driven
A leading global market research company found 74% of firms want to be data-driven, but only 29% are good at connecting analytics to action. CFOs can implement data-driven decision-making throughout their organizations by providing consistent, trusted data in financial and operational reporting. And since decisions are only as good as the information available, it’s imperative to use best-in-class technology.
To adopt these best practices and boost project profitability, CFOs should consider a powerful, born-in-the-cloud financial management solution like Sage Intacct. To learn more, download the whitepaper below.