5 ways professional services firms can identify revenue leaks
Paul Rees is Director of Professional Services at FinancialForce. His mission is to help customers implement SaaS solutions so they start realizing business value swiftly and have a great experience throughout the process. Get his insights here on ways professional services organizations can spot revenue leakage and boost efficiencies.
Revenue leakage is the unintentional and unnoticed loss of revenue, and typically comes from unbilled or underbilled service hours or products. Essentially, your organization is doing the work and not getting fairly compensated.
In today’s uncertain economy, no business can afford to lose revenue. Yet, the average professional services organizations see almost a 5% gap between revenue sold and revenue earned – potentially representing millions in revenue leakage.
While revenue leakage can occur for a variety of reasons, the most important thing you can do is identify whether it’s happening and take steps to stop it. Answer these questions to determine where you stand.
1. Are we relying on too many manual processes?
Manual processes—such as using spreadsheets, whiteboards, or paper forms for data entry and tracking—introduce problems when it comes to managing revenue and billing. Manual processes take time and effort, which can result in delays or a complete failure to record anything. Plus, they can lead to inaccuracies and oversight. Errors occur when data is entered by hand, leading to inconsistencies between work performed and work recorded for billing.
2. Are we properly enforcing our pricing policies?
Someone in your organization might not properly bill for services provided, may offer discounts or reduced prices when they shouldn’t, or sell subscriptions at the wrong rate. With the right solution, you can track customer contracts and invoicing at each stage – and bill accurately.
3. Are we tracking our customer lifecycles and how changes impact revenue?
During their lifecycle with your organization, your customers might purchase new products, upgrade or add on to their service, or change their subscriptions, among other activities. If you’re not accurately tracking upgrades, downgrades, etc. in the customer lifecycle, you could be leaving money on the table.
4. Are we keeping up with more complex processes and growing demands?
If your organization isn’t adopting solutions like workflow automation, professional services automation, or ERP systems, you’re likely making things much harder than necessary. In turn, as you work to keep up with the faster pace of business and the increasingly complex processes, you’ll struggle to estimate project costs, and budget and bill accurately for the work you’re doing.
5. Are we spending too much time on administrative tasks?
If you haven’t automated operational processes like bookkeeping, scheduling, and planning, your administrative professionals can spend far too much time on daily administrative tasks than is accounted for in client billing. These tasks are necessary to keep projects on track – but it can be hard to identify revenue leakage buried in them if they’re handled manually.
How did you score? If you don’t like your answers it’s time to take action. For a deeper dive on the subject, take a look at this ebook: Put an End to Revenue Leakage and Margin Erosion.