How to maximize your Professional Services Automation (PSA) software investment

Research shows that adopting a Professional Services Automation (PSA) tool is one of the best ways to boost performance and growth within your consulting firm.

A 2024 independent study by The Consultancy BenchPress found that consulting firms using a PSA had 19% higher gross margins than those using spreadsheets, as well as a 40% higher operating profit.

These firms also grow revenues faster, can expect a much higher revenue portfolio under the wing of each of its partners, and are more tuned into measuring KPIs regularly.

Other research shared in the 2023 Professional Services Maturity Benchmark conducted by Service Performance Insight (SPI) indicates that increased operational maturity in consulting firms has a positive impact on other KPIs. 

This includes year on year revenue growth, % bids won, projects delivered on time, project profitability, annual revenue per consultant, and company profit (EBITDA %).

The benefits of having an integrated (eco)system are significant both in terms of operational efficiency and time & cost saving, as well as key insights into the performance of a consulting business, automating core processes, and supporting faster and better decision making that is crucial to be successful in a highly competitive market.  

Benefits of using Professional Services Automation software

Some of the major benefits of using a dedicated operations platform for consulting firms include:  

• Harmonization of the work environment: removing the mess and connecting & automating core processes; managing data in a consistent format that is readily accessible in real-time
• More timely and accurate reporting: information is easily presented in customizable dashboards and reports, with drill down functionality to interrogate information and support deeper analysis, thereby eliminating time-consuming effort of exporting and manipulating into spreadsheets
• Removing duplication of effort in manual processes: putting an end to the arduous task of copying or rekeying data between systems, the management of multiple cumbersome spreadsheets, and reduction of data errors caused by manual processing
• Providing different user groups with the tools to support them in their respective roles through the whole project life cycle: from proposal through to invoicing, including sales pipeline, timesheets and expenses, project financial management, resource management, forecasting, and reporting
• Driving greater accountability for project performance: promoting a proactive, action-oriented mindset by providing data-driven or automated prompts when action needs to be taken, and directly to the person who needs to take the action
• Providing strong business focus: highlighting exceptions and key insights to support impactful decision-making and action at both a macro and micro level

Now, that all sounds great, but how does a PSA help you do that?  

If you wanted to put a measurement framework in place to really show where the positive impacts on the business can be seen and felt, what would you need to measure?

As a PSA supports the core consulting processes across the areas of sales and pipeline, revenue and margin, project financial performance, invoicing and WIP, and people and resourcing, it makes sense to develop a measurement framework that demonstrates the positive impact on each of those operational areas.  

Let's outline some of the metrics that you might consider measuring (but remember, you don’t need to measure every single one—this is just a high-level overview of what you could be measuring):

Sales and pipeline - full guide

• Pipeline health: the volume and value (weighted and unweighted) of opportunities at each stage of your sales pipeline
• Proposals sent per month: the number of proposals sent to clients ‍
• Deal conversion rates: the number of projects won in relation to the total number of opportunities identified (this may vary between new clients and existing clients) ‍
• Deal cycle times: the time it takes for an opportunity to progress through the pipeline to win (this could be from lead or a specific stage in the sales pipeline i.e. when the opportunity is qualified) ‍
• Average deal size: the average total value of projects that have been won ‍
• % of new business vs existing clients: the proportion of new business that originates from new clients vs existing clients ‍
• Number of customer referrals: the number of new referrals that come from your existing customers ‍
• Deals won/lost by reason: a breakdown of the deals that you have won and lost by reason type, to highlight your winning formula ‍
• % time spent on sales activities (won or lost): the proportion of time the team are spending on winning new projects

Revenue and margin - full guide

• Monthly recognized revenue: the revenue that has been delivered each month
• Monthly revenue forecast: revenue from won opportunities still to recognize (forward order book) plus weighted/unweighted sales pipeline and gap to target
• Monthly recognized revenue vs revenue forecast: validating the accuracy of your monthly revenue forecast
• Average charge rate per consultant: the average charge rate to client for your consultants (and compared to target rate card)
• Average revenue per consultant: the average recognized revenue for your consultants
• Average cost per consultant: the average cost of your consultants
• Average gross margin per consultant: the average gross margin (revenue less costs) of your consultants
• Revenue growth rate: the rate at which your revenue is growing from one period to the next
• Margin growth rate: the rate at which your gross margin is growing from one period to the next
• Revenue performance by customer, sector, service type, business unit, geography etc: analyzing revenue performance through various relevant lens

Project financial performance - full guide

• Budget v actual: the actual performance of the project in terms of total time or fees and costs delivered and incurred compared to budget ‍
• Project recovery rate: the projected project financial performance in terms of billable time (and fees) compared to the original budget (actual to date plus expected effort to deliver to identify potential over/under run) ‍
• % complete compared to % time used: the comparison of the % progress through the project compared to the % of budgeted time used on the project ‍
• % revenue recognized compared to % complete: the comparison of the % revenue recognized on the project compared to the % progress through the project ‍
• Project profitability (current and projected): the current profit margin (revenue minus costs) and projected profit margin to deliver the project ‍
• Effort/rate variance analysis: the analysis of project over or under-runs caused by either a variance in actual effort compared to budget, or in a variance in actual charge rates compared to target charge rates for the individual consultants on the project

Invoicing and WIP (work in progress) - full guide

• Timesheet completion: the timeliness and accuracy of timesheet submission and approval
• Time to bill: the time taken from the date work is done (timesheets) to the time it is billed (invoice date)
• Debtor days: the average time it takes to receive payment of invoices from customers
• Work in progress: the value of time worked that is yet to be billed
• % expenses recharged: the % of project expenses incurred that have been invoiced to customers
• Invoice schedule forecast: forecast of all invoices scheduled for live projects to the total value of the projects

People and resourcing - full guide

• Chargeable utilization: the % of consultant available time worked that is chargeable to customer engagements
• Productive utilization: the % of consultant available time worked that is chargeable to customer engagements and/or spent on value generating activities (e.g. sales and marketing, IP development)
• Available capacity v forecast demand: the total time consultant available compared to estimated demand (forward order book plus weighted sales pipeline)
• Planned v actual analysis: a respective comparison of chargeable time that was forecast to be delivered against actual approved timesheets

Final thoughts

Hopefully, you now have a deeper understanding of the areas in which Professional Services Automation software can truly positively impact your consulting firm. With this framework to hand, you’ll be able to measure every key metric of your core operational processes.

In my next series of blogs, we'll be stepping through each area in more detail to explain how and why these measures are important in understanding the underlying performance of the business, and what you can do to continue to improve if you’re under-performing.  

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