3 Powerful Ways that Professional Services Businesses Can Generate Value With The Help of FP&A Software

More and more businesses are transitioning the way they conduct key planning and forecasting processes. Many are moving processes from legacy tools, to specialised financial planning and analysis (FP&A) platforms. And the market for this technology continues to grow at a fast pace.

One common point of discussion when discussing the purchase of FP&A software is the Return on Investment (ROI) from buying this technology.

"Why should we make the purchase?"

"What benefits will we get from this that make the cost investment worthwhile?"

Questions like this you can expect more and more from CFO's who are signing off on the purchase order. And rightly so, as this is a strategic investment.

In this article, I summarise a few ways in which these questions can be tackled within the context of the professional services industry (think law firms, consulting firms, advertising, wider business services etc.). That being said, many elements of what I discuss can be applied to wider industries.

I have had the opportunity to work with Professional Services businesses for more than 10 years. I have been fortunate to get experience working in a variety of roles and functions in these types of businesses, and have worked in a number of different types of services businesses. I see huge value growth opportunities from utilising this type of technology effectively.

The types of analyses I discuss below have historically been done in legacy tools by many, but with ever increasing complexities in managing planning efforts, more and more are looking to modern planning tools to help them get the job done more effectively.

3 areas where you can have a big impact on business performance:

1. Improvements in Pricing

Making improvements to unit pricing is the most powerful way to grow the profitability of the business.

 By getting full transparency of your revenue pipeline, and having modelling 'levers' that can let you understand potential changes instantaneously, you can start focusing your efforts in the right place that give the highest return.

Putting the technology to work - what can you do?

• Strengthen the visibility of pricing variances across the entire business to spot outliers which can drive discussions with customers, and plan for potential outcomes of discussions in advance, so that you know what you can and can't accept in a negotiation.
• Model the impact of changing different terms within your customer contracts to see the best outcomes on the top line. Build a list of negotiation points and understand which ones can have the highest impact to drive stronger pricing terms.
• Analysing existing revenue streams. Does a switch from retainers to projects provide the opportunity to improve pricing, and what does that mean for the revenue risk profile? What does that look like when you test different pricing scenarios?
• Innovating and building scenarios using new ways of pricing. This is a big opportunity in this industry.

2. Improvements in Customer Profitability

In consulting businesses, profitability can vary significantly from customer to customer. It is also commonly discussed that some of the larger revenue customers can actually be your least profitable, for a variety of reasons. Therefore, having the ability to analyse and model customer profitability projections in an agile way, can be a huge profit driving activity.

Putting the technology to work - what can you do?

•  Build more clear projections of customer profitability in order to understand outliers and identify exactly where you make and lose the most money. By taking historical performance and applying it to future projections, you can get a better view on where you should be focusing your efforts.
• Set targets to achieve improvements in the future and build action plans which break down how these targets will be achieved.
• Build scenarios at speed in order to make assessments of where it is best to focus time and efforts.

3. Improvements in Staff Utilisation Rates

Staff utilisation refers to the proportion of time that consultants spend on customer projects (often measured as a %). It is a measure of productivity of the revenue delivering workforce. In many consulting businesses, it is very difficult to manage, depending on the level of risk in the revenue pipeline for the business, and the constant changing in project scopes and timelines.

For example, if the majority of your revenue is project based, rather than fixed monthly fees, it can be extremely challenging to effectively maintain a 'right-sized' workforce. The demand can peak and trough, which can create utilisation challenges if not managed properly.

When you have a more visible and transparent view of your revenue pipeline, which can be toggled easily for risks and opportunities, you are far better positioned to be able to plan your workforce effectively. Integrated Revenue Demand and Workforce Capacity Planning can be a transformational tool to help you manage a consulting business.

Putting the technology to work - what can you do?

• Understand your revenue risk profiles, so that you know where there could be staff capacity shortfalls.
• Get stronger insight of potential new projects, so that you can ensure resource is positioned well ahead of time.
• Identify opportunities to develop staff training programs well in advance so that long term utilisation challenges are addressed well ahead of time. Can excess capacity by re-allocated elsewhere when demand dictates by re-training those that you already have?
• Manage your recruitment pipeline more effectively and in a more cost-efficient manner.

Ultimately, every business is different. But I suspect the ones listed above are discussed in many different types of services business. And there are huge gains to be had by taking the leap to utilise modern planning platforms to help in tackling these challenges.

Key Takeaway: Planning software is more than just automation of painful manual processes. It provides a platform for improving business performance and scaling up decision making, which in turn can drive both top and bottom line growth. And when you get it right, the ROI can be hugely significant.