6 crucial questions project-based businesses should ask themselves to achieve project excellence
by Stephanie Salguero / 4/30/2018 11:41:43 AM
One way to drive project success and profitability is to build project excellence across an organisation. Project excellence is achieved by having rigorous, well-defined and easy to follow practices and templates in place across all departments focused on ensuring high quality project delivery. Most estimates, proposals and change requests go through a thorough evaluation in order to ensure proper risk management and margin analysis.
"Organisations with the highest level of service execution maturity produced significantly more net profit (26.3% compared to 16.1%) than average firms Service Performance Insight (SPI) Research – 2018 Professional Services Maturity"
Having total control of projects components is challenging but vital to the financial success and stability of project-based firms.
6 questions you need to answer to achieve project excellence
Projects are in Deltek’s DNA. We have over 30 years of experience helping project-based businesses manage their projects, finances and improve their profitability. We work closely with professional services firms to understand their challenges and help them deliver superior projects through the use of our project-based Enterprise Resource Planning (ERP) solutions.
We recommend businesses to ask themselves the following questions in order to focus on what matters most to achieve project excellence.
Which current projects and clients are successful and profitable?
Are you able to look back into your data to find out the types of clients and projects that are the most profitable for your firm? Accessing your firm's historical data will enable you to build a picture of the most profitable projects and clients so you can focus your efforts on more lucrative work. By doing this, you will save time and resource by directly bidding for projects you know will be profitable.
How many project hours do we need to bill in order to turn a profit?
Keeping a project in profit means billing only for planned hours. You need to know exactly how much time is allocated to each project and the hours your consultants are logging. Track time and hours, establish how much capacity teams have at any given time and then ensure you bill for the hours as planned. This help avoid costly over-servicing and the dreaded scope creep.
What rates should we charge?
With competition increasing at a fast pace, the pressure to generate better margins is intense. Setting prices may seem like a bit of a lottery. Charge too much and your clients may go elsewhere. Charge too little and your margins could be under threat. Visibility into historical project costs, performance and risks/opportunities allows you to set accurate, sustainable and profitable rates.
Who owes me money?
Time from invoice to cash collection plays an important part in the financial health of your firm. It's vital for your cash flow. A structured electronic invoice process will increase the ease and efficiency of invoicing the client and reduce the receiving organisation’s effort to process and validate the invoice, approve it and resolve any queries, increasing the likelihood of it being paid on time.
How can we do more for less?
Time is always of the essence in any busy firm. Finding ways of creating efficiencies across the operation brings productivity and profitability.
The 2018 Professional Services Maturity™ Benchmark states that productivity growth in 2017 has come from the effective use of technology. Project focused employees are working the same number of annual hours (2,040 hours per year) but are working smarter.
The report explains that billable utilisation targets of the best firms average 80% or higher – more than 10% higher than the typical industry utilisation of 70%. This means top performing consultants can bill 200 more hours per year than those at average firms. A key determinant of high productivity is not working more hours but reducing the time spent on administration tasks and other time-wasting activities. You'll therefore want to automate as much of your process as possible.
Are we profitable enough for growth?
Increasing profit is a priority at the top of every company’s agenda. Greater insight into financial matters help you ascertain if you are in a position to invest in the future, or if you should cut back in certain areas.
Growth should only ever be considered when there is strong sales performance; healthy repeat business, and positive cash flow. Without healthy financials in place, investment in business growth is more risky and could jeopardise existing operations. There are three items to check before considering growth:
- Whether employee resources are being used correctly.
- What the risk level of each project is.
- Whether your internal systems are fully aligned and you have the right tools in place to take accurate decisions to successfully and profitably grow your business.
Enterprise resource planning software for project-based businesses
With this in mind, you'll want to get complete visibility into project and financial status. Project-based businesses must evaluate their processes to assess their full financial potential and more closely map their activities and resources to meet business objectives. That requires purpose-built systems to support and remove complexity from key workflows, empower people and drive informed decision-making.
Enterprise Resource Planning (ERP) software help companies to improve their operations and get a clearer vision of the business. Project-based businesses need an ERP system that has been specifically built for them. This essential tool integrates each part of a business to provide a centralised view of multiple activities, budgets and timescales that may run simultaneously.
ERP empowers managers and project teams to predict and illustrate potential consequences of their financial decisions and to act in the best interests of their firms. A project-based ERP system enables you to scrutinise payments, streamline invoicing and provide a real-time picture of your firm’s finances at any given time. It'll take all of the guesswork and assumption out of your strategy.
A study by Service Performance Insight (SPI) Research – the 2018 Professional Services Maturity™ Benchmark identifies that project-based firms using an ERP solution increase their revenue year over year by 49%, attract 16% more clients and improve their pipeline by 22% compared to businesses without an automated solution.
Implementing a project-based ERP system can seem like a daunting challenge but technology should be applied where it can help you add business value. The key is to start out with a clear objective to connect people, processes and technology as an integrated whole. Employees want access to relevant data to do their jobs wherever work takes them, and minimal administrative hassle, such as recording billable hours, invoicing clients and processing expense reports. Leaders want real-time visibility into the business to make day-to-day operational decisions and longer-term strategic ones.
At Deltek, we understand technology and how it can deliver business insight, helping you deliver rapid change, improve operations, increase accountability and achieve greater profitability.
To find out more about project-based ERP software, the benefits of ERP and how ERP works, download the free guide 'Project Based ERP for Dummies'.