With margins and profitability below strain this 12 months, many consulting companies are searching for to decrease prices and enhance their monetary administration processes. Deltek’s new greatest observe information advises how finance leaders can optimise their technique and enhance revenue.
An setting marked by stiff competitors, altering shopper calls for and spending warning means consultancies are monitoring their bills and financials carefully. Because of this, companies are pursuing a number of avenues to extend and shield their margins, from focusing extra on new enterprise improvement and delaying recruitment to extra rigorous measures resembling downsizing groups. Many are additionally turning to their monetary processes for effectivity features.
Deltek’s newest greatest observe information informs companies how they’ll obtain sound monetary administration:
Pillar One: Invoicing and Assortment
Evaluate the invoicing and assortment course of, which must be streamlined with fee-earning operations and run on par with greatest practices. Money move depends on a agency’s skill to commonly ship out invoices, and a course of must be in place for the gathering of those funds. It additionally requires stringent administration of accounts receivables.
The problem right here is that whereas all consideration goes to finance, a easy invoicing course of is very depending on the enterprise. “It begins with timesheet submissions by consultants and approvals by mission managers. Within the case of expense approvals, an outlined course of between mission managers and different price centre leaders is essential,” advises Deltek.
Pillar Two: Price Management
Price management could be a extremely efficient strategy to positively impression the underside line. Reaching this objective will be finished in a number of methods, for instance by decreasing out-of-pocket bills for consultants, dropping or pausing sure expenditures, or lowering company-wide monetary obligations.
A comparatively easy place to begin on this pillar is to enhance buy processes with approval flows, which gives higher perception and will help drive down pointless spending.
The largest variable price, nonetheless, is more than likely freelance or subcontractor prices for tasks. It’s essential to make sure that buying processes are up to date to mirror price management. And over the long term, with salaries usually the biggest part of complete expenditures, a well-balanced course of for “sensibly managing annual pay rises” is really helpful.
Deltek advises finance groups to use normal sourcing greatest practices to their procurement spend, together with the renegotiation of contracts for workplace area rental, IT gear, and telephones. Companies ought to as an alternative introduce a PO course of to higher monitor spending versus budgeting.
Pillar Three: Order to Money Course of
Conserving tight management of the total order to money course of is the third space of focus, with enhancements offering instant reduction to the working capital place. “Finance should all the time have a grip on working capital and money move. With out this management, the corporate might run brief on capital and never be capable of handle development or day by day execution,” advises the Deltek information.
On the entrance finish of the method, consultancies are urged to minimise the time between mission sign-off and the precise begin of the mission. It’s because the time between the 2 milestones can symbolize a big variety of non-chargeable hours for consultants, whereas they’ve already been assigned to a mission.
Then, all through the mission lifecycle, setting up sturdy governance round timesheet submissions and billing must be ensured. Right here, finance groups are urged to work carefully with mission managers to make sure accuracy and enhance invoicing processes wherever doable.
Pillar 4: Working Capital
To handle the end-to-end working capital course of, finance groups want correct reporting and easy month-end processes. A key objective of the latter course of is to make sure the revenue assertion and stability sheet give a real image of the monetary scenario, so there’s a ‘single supply of reality’ for all stakeholders inside a consulting agency.
For that course of to be correct, cooperation with mission managers is essential: “Venture managers should consider progress on mounted worth tasks and the worth of labor in progress (WIP) on time and supplies (T&M). Venture managers have to be accountable for any write-downs and end the revenue assertion by validating income and publish different prices,” Deltek advises.
Aligning Expertise to Enterprise Objectives
As consulting companies search methods to improve their monetary processes, whereas guaranteeing the supply of their tasks stays on time and inside finances, the information goes on to emphasise the significance of getting the suitable know-how infrastructure.
Venture-based enterprise useful resource planning (ERP) methods can raise monetary operations to greater ranges of maturity. By integrating mission administration with monetary processes, an ERP can allow a unified view of an organisation’s knowledge, which boosts decision-making. ERP methods additionally present clever reviews and dashboards that guarantee leaders have the suitable info to cope with.
Final 12 months round 30% of consulting companies have been reported to have applied a project-based ERP system, however that quantity is anticipated to extend within the coming years, in response to the most recent Skilled Companies Maturity Benchmark Report from SPI.
Automation of economic duties in the meantime helps cut back guide errors and streamline processes, resulting in sooner billing and improved money move. “A project-based ERP system units the inspiration for sound monetary administration for consulting leaders and finance groups,” Deltek concludes.
