Skip to main content

The 5 Essential KPIs for Professional Services Companies

By
Running a professional services company is complex. It requires effective selling as well as quality project delivery at the same time. Today, with customer being the king, the challenge is to balance customers, employees, partners and operations. It is also necessary to expand the business while keeping the revenue and costs aligned as well as providing the right tools for consultants to deliver supreme quality products.

With over 200 possible measures for a services organisation, it’s critical to know which key performance indicators (KPIs) are essential for the successful running of a professional services company.
  1. Revenue


    • Annual revenue per billable consultant- This depicts the company's total revenue divided by the number of billable consultants, which indicates the productivity of the consultant. This considered as one of the most important KPIs when measured along with labour cost. Maximize annual revenue per billable consultant.


    • Annual revenue per employee - This is a powerful indicator of the overall profitability of the firm. Revenue per employee is essential in determining the size and financial health of the organization as profit can be estimated using the difference in cost per employee and overall revenue per employee.
    It is important for a professional services company to maximize annual revenue per billable consultant and focus on annual revenue per employee.

  2. Billable utilization

    3. This KPI is necessary to determine the organizational profitability. It indicates opportunity and workload balance thereby signalling whether to expand or contract the workforce. A company should work towards maximizing billable utilization. There are different ways and parameters for measuring billable utilization. Regardless of a specific utilization formula, it is important to develop a standard method and consistently measure it throughout the organization.

  3. Project overrun

    4. This KPI may be expressed in actual time against planned time, actual cost against planned cost, or both. It is the percentage above budgeted cost to actual cost. This indicator helps to check that the company's profit is not affected by time or cost going over budget. A high value of project overrun may limit the company's progress and profitability, hence it should be minimized.

  4. Project Profitability

    5. Most professional services companies undertake projects for their clients, and must therefore pay significant attention to the profitability of each project. The key components of project profitability are:

    • Project revenue
    • the actual effort spent on the project (versus planned effort)
    • the salary cost based on actual effort spent
    • allocated overhead costs
    Project margins post allocation of overhead cost, gives the correct picture and will significantly help organisations invest their money where their mouth is.

  5. Profit margin

    6. Profit margin is measured by the percentage of revenue that remains after paying direct costs. It is relevant to manage all revenue and cost information and work to maximize the profit margin, for a professional services company to be successful in business.
Though there are many levers for improving financial performance, it is recommended to pick the right ones that are essential to optimize the operations and show significant growth. Financial performance excellence can be achieved with the help of these KPIs, integrated business applications and a plan for continual advancement.

                                                             *************

If you need help/advise on automating the processes for monitoring KPI’s for your business, you can contact me here . 

 To know  how Beyond Square Finalyzer provides actionable and affordable business insights for better decision making visit : https://finalyzer.beyondsquare.com 







Labels:

Comments

Post a Comment

Popular posts from this blog

The Mission to Make the CFO's life Easier

By
In today’s business context, life of a CFO is that of the radar as well as the captain of a moving ship. Today’s CFO is expected to contribute well beyond the traditional role of cost management and operational controls. The CFO needs to play a delicate balancing act across multiple dimensions, some of which include: Impact of globalization: having an effective finance function that can account for the increasing complexities of running a global business Regulatory adherence: Global regulatory requirements are constantly changing and continually increasing, and CFOs have a personal stake in regulatory adherence Risk management: the nature of risks that an organization faces keep changing Reporting requirements: managing the ever broadening and often burdensome reporting requirements The CFO needs to do all this, while also keeping a keen eye on rigorous ongoing cost management and operational efficiencies to fuel profitability and strategic reinvestment. All this under...
Post a Comment
Read more

5 Things to Consider Before Investing in a Financial Consolidation Software

By
  In a recent conversation, the Chief Accounting Officer of India’s largest private enterprise mentioned that a good financial consolidation software would be of great service to the accounting community. His statement implying indirectly that in his many years of managing accounting for an extraordinarily large and complex organisation, he has still not come across a suitable enterprise platform for consolidation. It is but natural to assume that organizations would rid themselves of long days of manual financial consolidation and labour-intensive management and statutory reporting. The practice of being strapped to one’s chair and spending long hours into these activities must be shunned. Instead, quality time should be spent on analysis and decision making. Before you dive in to avail the perks of a financial consolidation software, it is crucial to know what to expect from the software. While there are many choices, one must exercise prudence in selecting the one that furth...
Post a Comment
Read more

Getting out of Excel Hell!

By
…and why you should automate your management financial reporting. Excel is one of the world’s greatest desktop tools and many people love it because it is familiar and easy to operate. If you want to analyze a lot of numbers or do some complex modelling on a static dataset, it's hard to beat.I personally am a power user of excel and love the flexibility and ability to model various scenarios easily, and then analyse it. However, running a company involves collaborative, multi-department processes like planning, budgeting, forecasting, and reporting. It involves collating data from multiple source systems and people, curating & transforming it before it is ready for consumption. And that’s where the power of Excel falls short. Weeks are wasted every year, manually consolidating a mass of individual spreadsheets. Errors in cross-linkages, formulae getting converted to hard-coded numbers, manual errors, manual data entry, individuals having to laboriously search their computer...
Post a Comment
Read more