3/1/2018

Tracking Time & Expenses for Professional Services Firms

Time and Expense, Professional Services

If history sets a precedent, perhaps the most significant profit drains of project profitability are unbilled time and expenses. For decades, outdated and inefficient methods for tracking labor and expense data have cost professionals, employers, and industries billions in uncaptured profits, sometimes at the cost of the enterprise itself.

For professionals, the losses can be greater because so much of their input – consulting, collaborating, etc. - is often invisible, despite its significance. In the coming decade, companies that invest in time and expense tracking programming are expected not just to capture those wayward dollars, but also to generate additional customer loyalty in the process.

Common Causes of Business Failures

Businesses of every size rise and fall based in part on their cash flow and financial management skills, regardless of the services they offer or the products they sell. In fact, figures show that more than half of all businesses don't survive past five years, and financial management errors are often the cause of their demise.

For professionals who offer their services on a project basis, the statistics are equally grim:

  • Less than one-third of all projects are completed successfully on time and on budget;
  • For every $1 billion invested in the U.S., $122 million is wasted because of poor project performance;
  • Fifty percent of all project management offices close within three years, and
  • Businesses highlighted “capturing time and costs against contracts” as the most challenging project concern.

In many cases of loss and failure in both professional services and standard businesses, two factors combine to produce a perfect scenario for enterprise extinction: poor financial management and a lack of communication.

Poor Financial Management

Poor financial management can encompass all aspects of the company, from forecasting and planning, to inventory investment and controls, and cost management capacities that erode revenues and multiply expenses. Internally, any number of errors or lapses across the financial management spectrum can cause potentially fatal damage. Externally, poor financial management can erode supply chains, put off contractors and third-party vendors, and negatively impact customers and clients.

Experts conclude that a few commonly experienced financial management errors contribute to a significant proportion of most corporate failures, whether those corporations employ thousands, or are sole proprietors providing professional services:

Lack of a Sound Business Plan.

Companies that work without a business plan often lose sight of their revenues and costs, if they understand them at all. Gaps in tracking these critical financial activities can lead to reduced profits and increased creditor calls. Professionals often overlook the mundane details of business planning as they focus more on the services they offer.

Poor Cash Management Control

Not managing cash well is also a leading cause of business collapse. Cash flow for professional services organizations is dependent on 1.) ensuring all time is captured for a particular project and then billing for that time as soon as the project is completed, and 2.) the ability to balance debt over time to ensure sufficient cash is available for increment payments. These details often get lost in a professional's busy day.

Inefficient Accounting Practices

In business, knowing the corporate numbers and tracking those daily digits in conjunction with mid- and long-term plans is crucial to the company's success. When one element in the financial chain of events goes awry, it can have a devastating effect on the system as a whole. However, comprehensive, accurate accounting practices give every business the capacity to capture anomalies as they happen and facilitate the nimbleness that supports informed decision-making.

The Lack of Communication

The communication challenge for professionals is magnified when they are juggling several projects or clients at once. Like corporations with many workers, professionals, too, need dedicated communications systems to ensure a clear understanding of happenings from the client. When breakdowns occur, problems arise, as these notable cases reveal:

  • Electronics giant Nokia lost its global edge in the mobile phone sector because its habit of communicating corporate plans in unstructured discussions left too many key decision-makers out of the loop.
  • The Airbus A380 debacle was caused, in part, when the German engineers designing the wiring for the wings failed to communicate with the French engineers, who were designing the wing structure. The wiring didn't fit the structure, causing a two-year, six-billion-dollar delay.
  • Perhaps the worst example of failed communications happened in 1999 when a two-part team of British and American rocket engineers used different metrics in their separate components of NASA's Mars Climate Orbiter. While the thrust needed to land safely on Mars was measured in British pounds of force, the correlated controller computed the number in metric newtons, causing the $125 million satellite to plunge through Mars’ atmosphere at breakneck speed and crashing it into the planet’s surface.

Note that the exemplary level of the talent of professionals involved in these three examples could not overcome the disaster of failed or ineffective communication. Note also, failed communications almost always have financial consequences, and the challenges they pose can overwhelm even the savviest business leaders.

Professional Services Project Time and Expense Tracking Failures

Separately and together, failing to track both time and expenses contributes significantly to professional services business failures.

Time is Money

A 2015 study by AffinityLive sought input from a cadre of professionals - lawyers, engineers, architects, etc. - about how they tracked their time. The results indicated that despite their education and experience, many were poor time trackers. If the study surveyors extrapolated across these market sectors the professional's failure to accurately capture all their lost billable opportunities, it would cost the American economy over $7 billion in lost productivity annually.

Here's where those professionals fell down on tracking their billables:

Processing email

For many professionals, email is often a critical connection between them and their clients and contractors. However, the study revealed that, while on average, professional attention to email consumed 1.5 days per week, over one-third of the survey respondents didn't track their email time in any way. Another 30 percent tracked it only rarely or sometimes. The aggregate loss per year per professional who didn't capture email time averaged over $50,000 in uncaptured revenues.

Attending Meetings

Meetings were another financial drain for professionals. While almost half (44 percent) always recorded their meeting time, one in five never tracked that data, and 17 percent tracked it only sometimes or rarely. Average loss revenues per year: $32,000.

Recording Billables

When they recorded their time and expense events also showed a negative impact on profitability. Professionals who recorded their work activities as they happen reported as much as an additional $52,000 per year over those who made their records less frequently. Professionals who recorded their actions once a week or less experienced the most lost revenue of the survey respondents.

Expensive Expenses

There are many ways professional businesses lose money by not tracking their actual expenses accurately:

Insufficient budgeting

Just starting a project often incurs expenses that project owners might not contemplate, such as the cost of laying out the site, fees for setting up services, security deposits and the like. When those expenses aren't anticipated and included in the budget, getting to "open" may erode the capacity to "be in business."

Working without cash flow projections

A few months of project activity should reveal the regular expenses required to keep it running, so even companies that start out without a plan can establish one soon after opening. After that point in time, working without a plan leaves both professionals and project owners blind to the extra cash they need for special purchases or emergencies. Without a plan and consequent budget, unexpected expenses can quickly drain the cash flow into negative territory.

Not Capturing Daily Expense Events

Even with an accurate budget and attention to the monthly ebb and flow of regular budget items, daily activities frequently generate expense opportunities but are lost because they aren't recorded contemporaneously at the time they happen. Lunch meetings with clients, travel to and from job sites, and the supplies needed to do the work on the go can and should be billed off to the proper customer. Too many professional services companies absorb the costs of these "silent" expenses because they don't have a system in place to track each event as it occurs.

Finally, the AffinityLive study also noted that a big causal factor of both lost time and expenses was the inability of the respondents to accurately recall the billable events of the day, week, or month. The survey revealed that those who entered their time and expense data less than once a week were only 35 percent accurate with their accounting, while those who recorded their data weekly were only 47 percent accurate. Even once daily entries achieved only a 66 percent accuracy rate. The takeaway from their experience: to improve revenues, professionals should capture both their time and expense events as those occur throughout the day. To accomplish this goal, most professionals turn to technology.

Beyond Software Offers a Dedicated Mobile T&E App

Considering the factors set out above, it looks like the Beyond Software Mobile Time & Expense App has arrived just in time. Combining both time and expense capture in a single, easy-to-use mobile application means that all workers have the tools needed to track and record their every move, every day, whether they're interacting with clients or purchasing project-specific items.

Improves Financial Management

The product includes several features that further streamline the recording, billing, and accounting processes:

  • It is available on all devices, including phones, tablets, and desktop computers, so no employee or professional need be away from their time and expense tracking capacity.
  • The app travels with the worker and connects to the project wherever there is an Internet connection. “Remote” projects are as easy to track as those next door.
  • Time tracking captures every action right down to the task, so no effort is too small to be recorded and subsequently billed out.
  • Approvals flow through the app, too. Single or double approvals are submitted and granted through the app, and errors are easily corrected even after approvals are given.
  • Entries are sorted by category, giving every professional the ability to design the exact right reports and dashboards they prefer.

 

Improves Customer Loyalty

And, not inconsequently, Beyond Software improves customer and client relations, as well. While the technology streamlines and enhances corporate productivity, it also enhances customer satisfaction by improving communications between the professional, the project and the client, and reducing or eliminating billing errors and confusion.

Improved communications also improve the client's experience:

  • Powerful consoles & reports provide all the information you need about an individual project or an entire portfolio, so when a customer inquires about a project's status, these details can be easily relayed.
  • Built-in to-do and task lists keep all project personnel on track of both their activities and those of the project as a whole. Project managers can easily stay on top of project progress in real time.

Less errors mean less dissatisfaction:

  • Accurate, documented time and expense capture and billing practices eliminate confusion about who did what for whom, and when, and where.
  • Data entered directly to a project/task keeps each project separate from the others, which clarifies billing requirements.
  • Accurate invoices lead to faster, easier payments for both the professional and the customer.

Enhancing customer loyalty is rapidly becoming a priority of many companies because, through the Internet, the competition is just one click away. The Beyond Software app contributes to customer satisfaction with each app click and entry.

Embracing the Digital Future

These days, all professionals are facing growing competition as services markets grow with the expanding Internet. Consequently, every opportunity to reduce costs while increasing profits should be embraced as quickly and comprehensively as possible.

At Beyond Software, we take our digital mastery beyond the expected and into the previously unimaginable. The Beyond Software mobile app is just one example of our proven tools designed to increase your project and corporate productivity and profitability while also enhancing and retaining the loyalty of your valued customers. Click here to get in touch with us today.

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For additional information on Beyond Software please contact:

Nicole Holliday
nholliday@beyondsoftware.com
866-510-7839

Topics: Time and Expense, Professional Services

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