Posted by Marlon Arevian, Senior Solution Consultant, PSA NetSuite
Many professional services firms have endured nightmare projects that spiral out of control. A budget is set and resources allocated, but as the project unfolds, scope creep, unexpected twists and client demands blow your budget out of the water.
The root causes can be many. Your organization might have relied on guesswork in building its budget because your budget and planning software(opens in new tab) doesn’t deliver insights into how similar projects played out in the past. Or you didn’t have timely, holistic visibility of cost escalation as the project progressed, or didn’t allocate the resources best suited for the project.
Regardless of the cause, it might be weeks into the project before you get a handle on cost and scope escalation, leaving you in the uncomfortable position of bearing unanticipated costs or seeking a renegotiation with the client — putting margin and client satisfaction at risk.
Ripple Effects of Weak Budgeting
Budgeting weaknesses can undermine performance across a services organization. Without sound budgeting and monitoring, firms jeopardize on-time delivery and project quality. Backlogs can grow if resources are spending more time than anticipated on a problematic project, which might tempt the use of costly external resources to fill the gap.
Lack of visibility into financials often results in interruptions in the quote-to-cash cycle that affect sales, service delivery and finance team. If you have a rear-view mirror view of project financials that’s outdated by a week or more, it becomes extremely difficult to make needed adjustments to preserve profitability.
SPI Research, the leading research consultancy in the professional services industry, has documented significant gaps between the handful of services firms that excel at key performance metrics, and the 90+ percent of all others. Based on a survey of 549 firms, SPI found that the best services organizations enjoy 47 percent greater project margins than their peers. (opens in new tab)
“The leaders in this survey continually monitor and measure financial metrics,” SPI Research said in its study. “They have the ability to make adjustments as necessary, and don't wait too long before implementing changes. The importance of real-time financial information cannot be overstated.”
On-Demand Webinar: Reining in Project Costs
Sound budgeting and flexible, real-time financial management is a key distinction of top services performers. If your budgeting and monitoring practices involve standalone tools, time and expense paperwork and Excel spreadsheets, please take the time to watch our on-demand webinar, “Reining in Project Costs with Advanced Project Management(opens in new tab)” that explores leading practices used by top professional services firms to forecast and control project costs and improve profitability. During the webinar you’ll learn how best practices in advanced budget management can help you:
- Calculate project costs based on past experience
- Review and secure approval for budget proposals
- Monitor budget vs. actuals in real time
- Better manage time and expense submissions
- Improve budgeting accuracy with resource optimization
- Gain insights to improve budget accuracy and margin
You’ll also see a live demo of how NetSuite OpenAir(opens in new tab), the industry’s leading cloud-based professional services automation(opens in new tab) (PSA) solution, equips more than 1,500 services teams with the flexible, robust budgeting functionality that’s needed to strengthen control over project costs and drive profitability. Watch the webinar now(opens in new tab).