Should your firm consider cloud-based project accounting?
Real-time data can increase profits & growth.
It’s no secret that many architects excel at providing stellar service to clients, yet struggle when it comes to managing their own practices. As the old saying goes, you can’t manage what you don’t measure, which means that without real-time reporting, you have no way of knowing the true outlook for your projects—and are therefore unable to maximize profitability.
Everyone in your firm deserves to have processes in place that are as good as what is provided to your clients. For that to happen, however, you need to apply the same type of care in managing your firm as you do toward managing your projects.
Why the cloud?
What many people think about when they think of the cloud is virtual meetings, file storage, and possibly even some basic project management.
But in reality, by using the cloud for time and billing, you could start consolidating all of your business processes, while simultaneously making your firm more resilient. Accounting could then be a catalyst to firm success by providing real-time data with which to measure performance against expectations.
What project accounting in the cloud gives you the ability to do is break everything down to the project level. Every project manager essentially becomes a “business manager,” and is effectively the CEO of their own little business within the larger firm. Responsibly leading their projects to success requires the right tools to identify profitability.
Access to real-time data will help you identify where your firm makes or loses money. In addition, you’ll learn which partners, project managers, and employees—as well as the types of projects and activities—generate the most profit.
Having access to this type of data will also help you better define your business strategy and make more informed decisions, from staffing requirements and bonuses to where to spend your marketing dollars.
The only way to accomplish any of this is by having a system in place that takes every expense and effort expended by your staff and then associates it with each respective project. In essence, this is project accounting.
The power of time
For project accounting to work properly, you need a comprehensive and accurate understanding of time spent. Unfortunately, typically by the time a project manager receives all of the information related to the staff’s hours on a project, weeks may have passed and there’s little that can be done with the data to make any real impact on profitability.
Real-time metrics are key. The cloud gives you the ability to centralize all of your information so that it is easier to ensure it stays current. You can then rely on a dashboard that provides information that is actionable in the present, as opposed to historical data from the past.
For example, by using a smart timecard system, staff members can receive allocated hours feedback in real-time, as well as track billable and non-billable time. Because everything is connected in the cloud, a manager can dig even deeper, from time passed on to clients, true cost to the firm, start and stop times, and a range of custom datapoints. This allows for quick identification—and remediation—of inefficiencies and/or a reallocation of resources.
This type of analysis and turn-on-a-dime response isn’t realistic if using spreadsheet reports to analyze time, which is pretty much the equivalent to drafting by hand. Spreadsheets are inefficient, prone to inaccuracies and errors, and require you to dig through the numbers to create reports manually.
Just as important, real-time information provides key performance indicators (KPIs), which give you the means to establish proper goals to target and measure against.
For example, operational KPIs may include:
- Revenue per full-time employee
- Fee remaining per phase
- Company runway (backlog of work under contract)
- Effective multiplier
Risk analysis KPIs may include:
- Projects at risk
- Clients at risk
- Employees at risk
- Project performance
These KPIs can help identify problem areas, provide target metrics and performance goals, and, ultimately, help firms increase profitability through improvements over time. Plus, they allow for adjustments to projects and staffing while the projects are still in progress, as opposed to just an analysis after the fact.
If the pandemic has taught us anything, it’s that many firms are unprepared for the next technological challenge. Don’t wait until you have a major problem before making the effort to improve the management of your in-house systems so that they are as effective as how you manage your clients.
Ready to dig deeper? Learn more about these KPIs and reporting, including areas such as employee impact, employee utilization rate, employee realization, and budget expectations vs. reality comparisons, along with using project templates and customizable dashboards in the cloud: watch “Exploiting the Cloud to Optimize Firm Profitability” >