Full Sail Partners Blog | Professional Services (20)

The business benchmarking process can be a powerful tool to help any organization make better decisions, run a tighter operation, and better position itself in the marketplace. For the best effect, it pays to use an approach that boils down to four key steps. 

1. Learn from others. If you’re new to benchmarking, it may be helpful to explore how other organizations do benchmarking, and see how your organization compares. Fortunately, there are many industry experts and organizations that share information about their benchmarking process. Some of our favorites are:

• Deltek
• Forrester
• Gartner
• Hinge Marketing
• IDC
• Society for Marketing Professional Services
• Vision Edge Marketing

Of course, there are enormous numbers of additional companies and organizations that benchmark as well, so you may want to explore further. 

2. Decide what’s important for you. The first step is to choose meaningful measurements to use as your standards or benchmarks. Key performance indicators (KPIs) in the form of financial and project-related statistics can provide meaningful insights into company performance, beginning with how your own company has performed over time. For most professional services firms, there are a variety of KPIs that can be helpful in giving an accurate reading on the organization’s financial and operational health. Some of the most widely used are:

• Accounts Receivable
• Average Collection Period 
• Chargeable Ratio
• Chargeable Ratio times Net Multiplier
• Current Ratio
• Debt to Equity Ratio
• Employee Realization
• Employee Utilization
• Estimate at Completion (EAC)
• Estimated to Complete (ETC)
• Net Multiplier
• Net Revenue per Technical Staff
• Net Revenue per Total Staff
• Overhead before Discretionary Distributions
• Profit on Net Revenues before Taxes and Distributions
• Return on Owners’ Equity

Consider which of these metrics truly measure success for your organization, and establish corresponding benchmarks. These can be based on your firm’s historical performance, industry surveys, standards specifically designed for the type of work, your firm’s general philosophy, or a combination of factors. When choosing which organizations against which to benchmark your organization, consider such factors as industry, geography, and size; the more similar they are to you, the more relevant and valid their metrics will be. 

3. Track the data. Once you’ve established which metrics to track, and corresponding benchmarks against which to gauge your firm’s performance, the next step is to start tracking. There are a variety of approaches for doing so, from one-off spreadsheets and workarounds (not recommended) to software packages, including accounting solutions that specifically track financial statistics and project management products that specialize in tracking data on individual projects.

A better alternative, however, is a purpose-built ERP such as Deltek Vision, which connects and organizes data from both the front office (i.e., project) function as well as the back office (accounting). This solution can provide a firm with up-to-the minute, comprehensive visibility into all the metrics listed above. Just as importantly, it serves to optimize oversight of the firm’s projects and staff, and automates a wide variety of essentially manual processes — including Customer Relationship Management (CRM), business development and more. 

Whether you use a combination of software programs or a comprehensive solution like Deltek Vision, the key is to collect metrics on an ongoing basis. 

4. Make data-driven decisions. The last part of the business benchmarking process basically closes the loop. It involves making sure the right data is getting to the people who need to see it in a timely fashion, and that there is a management commitment to using data to make decisions. 

For example, schedule-based metrics can help management determine not only if a project is currently on budget, but if it will finish within the overall budget as well. If the EAC is greater than the overall budget, management may choose to either reduce future expenditures or accept that the project will be over budget, and determine where the slippage occurred (such as failure to send out additional services contracts). Of course, this is just one example; management will have a variety of options and decisions to make, based on the specific metric that is underperforming, and how wide the deviation is from the desired benchmark. 

One of the keys to success in this part of the benchmarking process is ensuring that management has access to all the metrics they need at any given time. There are manual ways to gather and present this information to management, but automated KPI dashboards, one of the customizable features in Deltek Vision, are a much more efficient way to do so. 

The time to start is now

Whatever road you take to identifying and tracking your firm’s benchmarking information, the process will pay dividends as your firm gains a more relevant and up-to-date picture of its performance. Just as significantly, it allows the firm to be proactive rather than reactive in addressing underlying issues before they turn into major problems — thus increasing the probability of project and financial success.  

In order to truly gain a holistic view of the organization, there are key financial ratios and indicators that project-based firms should focus upon at regular intervals. Some key project performance metrics need to be monitored on a real-time basis, or at least weekly, while others are more relevant on a monthly basis. Also, because firms must first win projects and engage in other activities that do not directly produce revenue, project-based firms should also regularly monitor firm-wide metrics.

We should not focus on a single metric but rather, should adopt a more comprehensive view and monitor a handful of key metrics. For example, firms might reach the target for their Net Effective Multiplier (NEM) and yet have too few revenue producing projects, too much overhead, and poor utilization rates.

Key Project Performance Metrics for Management

At a minimum, firms should monitor their Net Effective Multiplier (NEM) on a monthly basis. The NEM is calculated by dividing net services revenue by direct labor, which is the cost of labor charged to projects. Net service revenue is total revenue less direct cost (i.e., Direct and Reimbursable Consultants and Expenses).

Most firms would like to see a multiplier that is better than 3 times direct labor. In its recent AE Clarity Report for 2012, Deltek reported an average of 2.9 with top performing firms reporting 3.43.

One way higher performing firms achieve a better NEM is by assigning appropriate resources to their projects. More experienced resources are typically very productive, but their higher labor cost drives the NEM downward. Thus, it is important to assign the resources with the right level of expertise to complete the task at hand.

Some firms prefer to report and monitor the Realization Ratio in lieu of the NEM. The Realization Ratio is calculated by dividing net services revenue by direct labor at billing rates instead of cost rates. A target Realization Ratio would be greater than 1.

On at least a weekly basis, if not real-time, firms should monitor Project Estimate-to-Complete (ETC) and Estimate-at-Completion (EAC) values. ETC amounts are how much additional money must be spent from tomorrow through the end of the project to complete the work. EAC amounts are how much total money you expect to have spent at the end of the project. This is calculated as the job-to-date costs plus the estimate-to-complete costs. ETC amounts can be calculated simply by maintaining schedules. With a timeline defined, ETC amounts are simply future scheduled amounts at either cost or billing rates.

Best Practices Tips: To monitor ETC and EAC amounts in real-time, it’s a best practice to complete timesheets on a daily basis. Additionally, to establish a proper Project Work Breakdown Structure, subdivide a project into smaller more manageable components (e.g., phases and tasks) to maintain schedules and monitor these amounts. Ideally, EAC amounts will not exceed budgets but by monitoring these calculations weekly, firms are better able to keep projects on track and the work within scope. 

Key Firm-Wide Management Metrics

Firms should monitor their utilization and overhead rates on a monthly basis, at a minimum. The Utilization Rate is calculated by dividing the cost of labor charged to projects by the total labor cost of the firm. In the early referenced Deltek's 2012 AE Clarity Report, the average employee utilization rate was reported as 59.8%. Excluding vacation, holiday, and sick time it was 65.4%.

Firms can improve employee utilization by setting realistic utilization targets, properly allocating resources, managing client expectations, and having employees monitor their performance against their target, real-time, while completing timesheets each day. The Overhead Rate is calculated by dividing total overhead (before distributions) by total direct labor expense. Typically, bonuses are excluded from overhead for this calculation.

An interesting finding from Deltek’s AE Clarity Report was the average overhead rate for 2012 which was 161.6% with bonuses excluded and 175.7% with bonuses. Rates were not significantly different for higher performing firms suggesting they had achieved higher project profitability with better NEMs and better utilization rates.

The bottom line is that there is no magic bullet but rather a handful of key project performance metrics firms should monitor at regular intervals to maintain profitability. Does your firm have a global view of your firm metrics? Schedule a demo today to see how Deltek Vision is an ERP specifically designed to provide access to these key metrics and many more. 

There are shelves and shelves full of books — actually, entire libraries — that offer insights into business process management. There is a simple reason for this: it’s one of the most fundamental and effective ways to improve firm growth. 

So what areas are involved in a business process evaluation? At a very high level, it’s about answering the big questions needed to effectively guide your firm, such as: 

• Are business objectives appropriate?
• Are key policies and plans effective?
• Do results validate business strategy?

At a more granular level, this type of inquiry involves examining existing business processes to find pain points, bottlenecks and inefficiencies that could be improved. In this regard, it’s a process that every business can benefit from — but especially firms that are project-based, such as professional services firms. For these types of companies, the exercise can point to solutions for: 

• Streamlining business processes, minimizing redundancy and saving money
• Gaining insight into operational metrics you can’t currently see — such as work backlog, etc.
• Making better decisions on uses of internal resources, based on up-to-the-minute data

Choices in Approach

How you conduct this type of self-examination depends on your goals, resources and desired return on expense/effort. For example, it could be highly focused, with internal staff looking at one particular process in one section of your organization. Or it could involve examining complex processes spanning several separate parts of the organization, which might require using an external consultant. 

When Full Sail Partners begins any new engagement with a client, we typically start with a business process evaluation. Generally this involves understanding our client’s various front and back office processes — potentially, all processes along the project lifecycle, including: 

• Business development tracking
• Estimating and business capture
• Project management and project profitability
• Employee utilization and realization
• Billing, A/R and firm financial reporting
• TQM

To appreciate the impact of a business process evaluation, consider the case of one of our clients, Wiss, Janney, Elstner Associates (WJE), a 500-person firm based in Northbrook, Illinois. Along with the client’s initial concerns, our evaluation identified an inefficient paper-based process for initiating new projects that required anywhere from several hours to several days per project. Following our business process evaluation and implementation of a paperless process, (among other improvements), the client was able to reduce the required time to a few minutes per project. That efficiency gain, multiplied by the approximately 7,000 projects that WJE handles each year, resulted in $1.8 million annual savings, according to WJE’s Controller. 

There are other potential gains of a business process evaluation that are not directly tied to process efficiencies. For example, it can provide visibility to timely and accurate data that helps leadership make better business decisions. This was an additional gain from the project at WJE; principals were able to see clearly the potential conflicts of servicing a new client, allowing them to forego business development expenses and effort on a client that could not be serviced. 

Another example is gaining visibility into an organization’s work backlog — knowing exactly how much work is in the pipeline, and even more importantly, whether one has the staff on hand to do the work (and if not, specifically what type of staff are needed to fill the gaps). As a result, a firm can make better decisions about whom to hire (and when), and which projects to pursue. 

Evaluating ways to improve efficiency and effectiveness is an essential part of guiding an enterprise. Whether it’s performed internally in a very focused way, on a broader level by an external firm, or somewhere in between, it has the potential of allowing you to reexamine and reengineer your standard operating procedures and in turn, drive greater efficiency and visibility. Both capabilities are critical to consistently delivering value to your clients — and increasing profitability and firm growth.

Interested in a business process evaluation? Contact us to begin the process.

One of the most essential tools in project management is a Work Breakdown Structure, or WBS. The primary function of a WBS is to subdivide a project into more manageable components in terms of size, duration, and responsibility. By breaking a project down into smaller pieces it’s also easier to:

• Set measurable milestones for the project, and identify deliverables at the end of each phase that match up to the scope
• Allocate resources, complete scheduling and budgeting, manage procurement, maintain quality control, and manage risk
• Increase accountability by assigning individual responsibilities for each phase and task
• Know where you stand in terms of the total project (for example, are you 10% through the whole project, but 50% through the first phase?)

In short, the Work Breakdown Structure defines how you estimate, manage, and bill the project — and as a result, creating one should be priority one for every project.

Key design principles for an effective WBS

1. Account for 100% (no more, no less). One of the most important principles is that the WBS must include 100% of the work as defined by the project scope. It must also capture all internal, external, and interim deliverables, including project management, among the work to be completed. The rule applies at all levels within the hierarchy: the sum of the work at the most detailed level must equal 100% of the work represented by the combined total of the categories at the highest level. Another aspect of the rule is that the WBS should not include any work that is outside the actual scope of the project. 

2. Be mutually exclusive. There should be no overlap between two elements of a WBS in scope definition. Such an overlap could not only result in duplicated work or misunderstanding about responsibility and/or authority, but could also cause confusion in project cost accounting. One technique for avoiding this problem is to develop a WBS dictionary to clarify the differences between WBS elements and describe each in terms of milestones, deliverables, activities, scope, and other factors. 

3. Focus on outcomes, not actions. The best way to stick to the 100% rule is to define Work Breakdown Structure elements in terms of outcomes, as opposed to actions. This strategy ensures that the WBS is not overly prescriptive in terms of method, and therefore allows for more flexibility and creative thinking on the part of team members. In addition, a WBS that subdivides work by project phases (e.g. preliminary design phase, critical design phase, etc.) must clearly separate the phases by deliverables that define the entry and exit criteria (e.g. an approved preliminary or critical design review). 

4. Be detailed, but not too detailed. As useful as it is to divide work into smaller and more manageable elements, you also need to know when to stop. There are several ‘rules of thumb’ for determining appropriate activities or group of activities needed to produce a specific deliverable as defined by the WBS. The first is the “80 hour rule,” which cautions that no one activity or group of activities to produce a single deliverable should require more than 80 hours of effort. A second guideline is that no single activity or series of activities should take longer to complete than a reporting period. So, if your project team reports on its progress monthly, then no single activity or series of activities should be longer than one month long. 

5. Keep it simple. Creating three levels in your WBS hierarchy (e.g., Project, Phase and Task) should be enough. Avoid identifying labor or activity codes as WBS elements, even if you use them to describe labor detail on billing invoices or backup reports. In addition, it’s not necessary to make every phase balanced; just because one phase has a task doesn’t mean that all should.

Work Breakdown Structure: a blueprint for project management

When finished, a well-organized WBS resembles a flowchart in which every element is logically connected to another. The primary requirement or objective appears at the top, with increasingly specific elements appearing beneath it. The elements at the bottom of the diagram represent tasks and activities small enough to be easily understood and carried out. An effective WBS avoids redundancy, but at the same time, leaves out no critical elements. 

The bottom line is that a Work Breakdown Structure divides your project into distinct, manageable work elements. A WBS is useful to various groups within a company, including marketing, business development, accounting, and project management. A well-planned WBS is integral to successful project proposals, planning, scheduling, budgeting, and reporting.

Ready to learn more? Discover how an ERP system can benefit your firm by downloading our whitepaper.

Photo credit: http://virtualpminabox.com/

In today’s day and age of fast changing technology, firms must stay abreast of all available solutions to better compete with competition, and win work. Since the ‘great recession’ of 2009, competition on winning work has increased exponentially. Successful firms have combated this increased competition by staying current with technology, and using well thought out techniques to win projects. Included below are five tips that will help your firm better impress clients, and ultimately win more work.

1. Collaboratively share information with your project team. When responding to a client request / RFP, sharing data can become a cumbersome task in itself when working with remote teaming partners or staff. Often, the ability to seamlessly coordinate tasks/assignments, or share large files amongst your team can be the difference in winning or losing the work. To avoid these types of hiccups, leverage collaborative sharing tools such as Deltek Kona to keep your project team on the same page. Deltek Kona allows users to share files, and schedule important dates, seamlessly as though the users were all working in the same centralized office. You will be amazed at how Kona will empower your project team!
    
2. Hasten your proposals process through the use of templates. Unfortunately, many times firms will find out a about a project that they are a perfect fit for days before the due date. These time restrictions can ensnare the proposal process and make it difficult to respond sufficiently. Empower your marketing/business development department by creating templates that will allow you to export your information from Deltek Vision CRM to Microsoft Word or InDesign. This will allow you to streamline the proposal process, and concentrate on the areas of the proposal that require custom attention.
    
3. Avoid boring old PowerPoint presentation. Many firms make it to the short-list process only to utterly disappoint the client through the use of a boring, stale PowerPoint presentation. If you are unable to separate yourself from your competition, you are not doing your best to win projects. PowerPoint has been around since the late 1990’s, and sadly a large majority of presentations look like they came out of that same era. By using presentation software such as Prezi or PreZentit, your firm can immediately stand apart from your competition. With that said, don’t forget the importance of impressing the client by being personable and demonstrating your understanding the project. Overly relying on the use of presentation software is one of the quickest ways to lose a client’s attention.
    
4. Use a CRM solution to track relationships. We have all heard the saying, “It’s not what you know, but who you know!” This begs the question; does your firm know who it knows? If you are not tracking your relationships through CRM software such as Deltek Vision, then you are simply throwing darts at a board, blindfolded. A CRM solution will allow you to track who you know, recent conversations, and other important relationship data such as birthdays or anniversaries. This type of knowledge insight is important for creating meaningful relationships between your company, and your clients.
    
5. Optimize information for smart devices. If you own a smart device, and you have not optimized your marketing contact the device, you are not working smart! You never know when, or where, you might bump in to a perspective client. If you are unable to demonstrate your firms expertise at the drop of a hat, expect to lose out on a lot of potential work. Your firms website should be optimized for smart devices (iPhones, Androids, Tablets, Everything!) allowing you to be ready to show off how great your firm is, at a moment’s notice! In addition to optimizing your website for these smart devices, take the initiative to pre-load content on to your smart phone, in case you are unable to get internet service! By doing this, you will not only impress the client with all of your great works, but you will also demonstrate your ability to think ahead and be ready for the unexpected.
   
   If your firm is utilizing Deltek Vision CRM, make sure to check out Vision Unleashed. Vision Unleashed will allow you to access your full Vision system on teh go, from a mobile device. It also allows MAC users to access Vision without the need for running parallels or bootcamp. This allows MAC users to utilize their workstation to it maximum potential without dedicating resources to addition process just to access Vision!

I hope you learned something from this blog. Some of these technologies or techniques might seem obvious, but unfortunately many times it’s the obvious omissions that cause us to lose out on winning new work. If you use any of the concepts highlighted in this blog, make sure to comment below and let us know. We love to hear success stories!

Once you win your next project, make sure to review these project management concepts.

If your business designs and produces projects for external clients, you’re in what is referred to as a project-based firm. This category can include architecture, engineering and construction companies, consulting firms, advertising agencies and many others.

As different as these industries may be from one another, they share a core challenge of completing projects in ways that meet the client’s goals within existing constraints, while at the same time, delivering the desired profitability to their organizations.

There are many tools and methodologies that can help project managers at project-based firms track how successfully they deliver projects. But before managers can benefit from such tools and methodologies, it’s essential for them to understand four basic project management concepts, and how they interrelate.

1. Resources – The most critical resources that your organization manages are its human capital, which, depending on your needs and preferences, you might track as individuals, teams or both. Resources can also include equipment, services, supplies, and funds. A central goal in managing resources is ensuring the suitability of the specific resources, as well as availability, internal costs, etc.

2. Time – Managing time involves organizing and tracking tasks, activities, and schedules. It’s critical in helping to establish a workable plan and schedule, monitoring and reporting on progress, and ultimately, ensuring the profitability of the project. Key aspects include defining and sequencing activities, estimating needed resources and time requirements, and developing and managing to a defined schedule.

3. Cost – Effective cost management begins before the project even gets underway, by planning a budget with as much accuracy and specificity as possible. Cost management also requires developing contingencies for costs that are anticipated, but cannot yet be quantified with certainty. As the project moves forward, the manager tracks estimated vs. actual costs and the overall profitability of the project.

4. Scope – Managing a project’s scope begins with assessing its size, complexity, goals, and requirements. By having a clear understanding of the scope, the project manager is better able to create a viable estimate and schedule, assemble the appropriate resources, and ensure that the team meets its deadlines. Without a good handle on scope, the project can experience scope creep, which can lead to missed deadlines, cost overruns, and decreased profitability.

Taking a holistic view

It’s important to appreciate how each of these project management concepts affects, and is affected by, the others. The skillful project manager addresses them holistically, and makes adjustments in each as the project moves forward. To manage risk and ensure a quality project, managers need to not only understand these concepts, but also have in place the right tools and processes to control them — along with great organization and communication skills. 

Of course, it’s the rare project that goes exactly according to plan… which is why understanding these four project management concepts is so essential. When variances or setbacks arise in any one area, the effective project manager has mechanisms in place to recognize problems in time to make adjustments, and yet still meet the project goals for both the client and the firm.

Checkout more Project Management related articles.

A successful project doesn’t come easy, but it isn’t exactly rocket surgery. Below we’ve outlined six keys to project success to help your staff know where to focus their energy.

1. Plan

Clearly identify and confirm the objectives of the project with your client before you start. A plan will keep you from veering off track and save you from many problems if and when scope creep occurs.  Effective planning enables you to meet the client’s schedule and budget requirements, or work through them together for a win-win outcome.

2. Engage

Both staff and clients have to be engaged in the process in order maximize project success. According to Ed Boyle, Global Practice Leader at Gallup, engagement increases performance-related business outcomes by 240%.

3. Measure

The concept of measuring in order to improve is not just a management catch phrase, it’s scientifically validated. The only way you’ll know how a project is going (or know how to make it go better) is to measure. We’re not suggesting you measure EVERYTHING, but do review your goals and start looking at metrics that can help you meet those goals.  Measuring your clients perception of the project success, during the project, is critical to promoting their goals.

4. Adapt

To adapt means to make things fit, usually by modifying a process or way of thinking. Great project teams are skilled at adapting – having the ability to alter the way they practice or the way they think to increase the likelihood of project success. And these don’t have to be large or dramatic changes; they can be subtle changes, like checking voice mails more often. These small changes can affect the outcome of our projects in a big way, but require understanding the client in order to adapt appropriately.

5. Evaluate

Measuring throughout the project is crucial, just as important as creating a comprehensive evaluation at the end of the project. Taking time to evaluate may seem secondary compared to the primary efforts of executing the project, but don’t get too busy chopping wood that you never sharpen the ax.  Talk to your clients - every project can teach us valuable lessons about how to improve both now and on the next project.

6. Recognize

Our basic human need for meaning applies to work life.  We all feel our contributions are most meaningful when recognized for a job well done. If your staff feels they have a means to be recognized, they will work even more effectively, further contributing to project success. 

Achieving predicable outcomes can be easy if you take a moment to find out from the project team what’s working, what isn’t, and respond accordingly.  Obtaining feedback directly from clients is one of the easiest ways to assure project success.

Checkout more about the benefits of feedback.

Do you lose sleep at night wondering if you have the capacity to handle work coming in or even worse if you have too many people?  As a manager of a professional service firm, managing your human capital is a daily necessity to achieve firm growth and the anticipated performance expected from your employees.  As the market changes, your firm needs information readily available to make quick decisions about acquiring, training, and scheduling your talent.  Many firms rely on resource forecasting tools to handle the management of their employees.  Let’s take a further look at some of the challenges firms have with managing their resources: 

Challenge #1: What are my employees currently doing?  In the past, to see what an employee was working on, managers would go to the desk of their employees to check on the progress of their projects.  However, now resources aren’t always in the same office, state or even country.  Managers are finding they need to easily identify on a daily basis how their employees’ time is being used so they can plan for future work.

Solution - Collect and Measure Time.  As a professional service company – time is what we sell.  Sometimes there is a product that we deliver, but we still internally measure how valuable that product is based upon how much time we have spent creating it.  By capturing an employee’s actual time against a project your firm can now measure that time against what was forecasted to determine the variance. That variance provides you with data to use when projecting future projects.

Challenge #2: How do I match skills with available work?  Some firms are small enough that managers know everyone. However, for a larger firm or as a small firm grows, you don’t necessarily know the skills available within your firm.  Being able to match skills to the work you pursue and win becomes a juggling act.  Not all firms have the critical information available to predict when they need to hire an employee with specific skill sets.

Solution - Identify the Right Resource.  In an ERP, your firm identifies skills, training, role, and experience.  Having this information available allows project managers to identify the right resource based on real-time information.  An integrated solution provides your firm with the ability to search for similar past projects and determine how much experience (time data) they have working on this type of project.  The availability of this employee data allows project managers to make decisions about their collective skills and come up with a plan to increase / diversify their skills needed for the project.

Challenge #3: What predictions can I make about future work?  In order to make a well-informed decision on how to handle the future work, a firm needs historical data.  Without this information, you might as well turn over your resource forecasting to a psychic because your firm is just guessing.  Many firms don’t have the data available to make these decisions.

Solution - Availability.   Project schedules require managing all types of commitments – planned and unplanned. In addition to project commitments, employees take vacation, are on holiday leave, and have internal meetings and activities.  Developing a comprehensive plan for each employee provides accurate resource forecasting to handle future demands.  This helps identify capacity excess or shortage gaps.

The ultimate goal for any project is to end up with a loyal client that will use your firm again.  In order to do that, firms must finish the project on time and on budget.  Choosing a solution that integrates all of these data points allows your firm to report real-time information to make well-informed decisions about resource forecasting needs.  By optimizing your resources, project managers can shorten the decision cycle, increase profitability, and better plan for the future.  

Learn more about Resource Management?  

I was talking recently with a prospective client who observed that his firm had outgrown QuickBooks (QB). The conversation eventually led to a discussion of the advantages of ERP systems over back office accounting systems — which include not only efficiency gains, but strategic improvements as well. 

Being in the ERP implementation business, we hear a lot of customers express frustration over outgrowing QB, so I asked my prospect what it meant specifically for his firm. Off the top of his head, he named several pain points:

• First, their QB systems were disconnected, so there was no particular place where management could view financial performance overall, let alone broken out by project manager or client. 
• QB could display AR for a specific client, but offered little in the way of project information regarding specific services or deliverables. 
• Last but not least, correspondence for each client was buried in various public folders on the firm’s file server. To make matters worse, the correspondence trail was incomplete due to users’ not following the correspondence logging protocol. 

After hearing these insights, plenty of examples came to mind of ways that even a small- to mid-size firm like his could benefit from an ERP system. I mentioned a few of the most basic advantages of ERP systems over back office accounting: the value of integrated data, open architecture and user customizations.  

I also pointed out that thanks to the evolution of niche ERP systems, small firms CAN get the type of functionality that used to be available only to firms with deep pockets. In fact, it’s now quite easy to implement an ERP system that not only addresses the accounting function, but also facilitates the firm’s core processes and way of doing business. 

The Need For Visibility

My colleague next mentioned how his firm actually had strong AR, and good visibility into its cash and cash management. The problem, he said, was that the organization lacked the visibility needed to help back office management play a more significant role in decisions affecting the firm as a whole. By the same token, it was difficult to get project managers more involved in the fiscal responsibility that goes with managing client expectations. 

I pointed out that there were several other major advantages of ERP systems over basic accounting packages. The ERP concept excels at addressing the front end of the project life cycle, by facilitating tracking of projects and providing visibility. Specific examples include:

• Managing data obtained through the business development process
• Generating opportunity notifications and creating process flow through workflows and alerts to improve efficiencies and win rate
• Forecasting for opportunities and already-awarded projects regarding not only revenue, but staffing requirements as well
• Providing for audit trails of communication with clients, contacts and opportunities and supporting technical staff in the delivery of services under specific projects
• Facilitating communication with accounting early in the business development phase regarding terms, rates, related documents and specific contract requirements
• Integrating with desktop tools like Outlook, Word and PowerPoint to facilitate email communication and automate creation of proposal, estimating and contracting documents 

I then suggested we establish a value proposition for the level of investment that would be needed at this critical juncture in the firm’s transition from QuickBooks. This is where my prospect’s eyes started to get big, as he saw how much time, factored by associated hourly costs, was being spent on efforts that an ERP system could automate. 

We assessed values for each of the existing manual processes, and compared them with the reduced time and effort involved using the ERP approach. The resulting savings would go right to the firm’s bottom line. But as significant as those savings would be, I added, the real impact would come from the improved quality of the work environment, better communication with clients, and most importantly, increased opportunities for success. 

See how today’s success-minded firms require a laser-like focus on strong project and financial management practices by downloading the whitepaper on Growth and Transition Strategies.

Recognizing the need for an ERP system and searching out the correct solution can be a daunting task for any size firm.  Those investing in an ERP realize it takes significant time and money and is a decision that will impact your firm for many years. However, the following five mistakes made during an ERP search might be less obvious:

1.    Not evaluating your company’s overall processes. 

Ideally, ERP will have a positive impact on every aspect of your firm, from business development to project tracking to forecasting to billing.  Ask yourself these questions:

• How many disparate systems do you have? 
• Do you have a CRM system? 
• If not, how are you currently tracking leads, creating proposals, forecasting sales and winning new business?
• Does your time keeping system talk to your payroll system or your billing system? 
• How do all your disparate systems create your current overall process?
• Where do you need improvement? 
• What results are you looking for from those improvements? 

Your firm needs to understand how all of your current processes operate as a whole and the results you’re after.

2.    Not matching an ERP system to your business.

If your firm is project-oriented, make sure your ERP is also project-oriented.  Many ERP systems are generic, meaning they are not purpose-built. Recently, I had a prospect circle back with me. They went with the lower cost system.  Less than a year later, they realized the mistake they had made. They knew they had to bite the bullet and do now what they knew they should have done the first go around. Just like when purchasing a car, you have to look under the hood and understand the capabilities or lack thereof with an ERP.

Make sure the ERP match your business needs now and will it continue to grow with you.

3.    Not having executive support.

In our previous article, 8 Reasons an ERP System Implementation Succeeds, we discussed the importance of having executive support during an implementation. This role must understand the benefits the ERP will bring to the company and be an advocate supporting the implementation team.  In addition to being the cheerleader for the implementation, the C-level executive needs to be involved in the search and selection of the ERP.

If the C-Suite lends their strategic vision and expectations at the beginning, it will set the tone for the rest of the implementation.

4.  Not understanding the time and resource commitment. 

When conducting an ERP search, have in mind who will be the champions of the implementation. Identify a strong Project Coordinator and an individual that will be the super user.  Depending upon the size of your firm and the number of disparate systems you’re replacing, the Project Coordinator could ultimately spend a great deal of their time on the implementation project.  In addition, the super user will need to coordinate training for employees. Training doesn’t end when you go-live.  You need to anticipate some on-going training and periodic refreshing. 

The goal of any implementation of an ERP system is to increase efficiencies, so make sure you dedicate strong resources and allow adequate time for training to ensure the implementation is a success.
 

5.    Not investing in ERP for the long term.

In addition to choosing an ERP with a high return on investment as well as a suitable total cost of ownership, you need to consider your ERP system and your ERP vendor as a long-term partner.  ERP is a significant investment that you will live with for years, if not decades.  Make sure the ERP will grow with your firm and you have established a strong relationship with the firm and consultants that will implement your software. 

• How long has the ERP provider been in business?
• Is ERP their primary focus?  
• Does your vendor understand your business?
• Does the firm have references?
• Are their user groups to obtain and unvarnished opinion of the system and the provider? 

If something sounds too good to be true, it probably is.  If you hear “we’re just as good as X, but cheaper”, steer clear.

By avoiding these common ERP search mistakes, your choice will result in a comprehensive firm management solution specifically designed for the unique needs of your firm.  Let us know if you have any other tips, by leaving a comment. Thinking about migrating to an ERP system today? Make sure to familiarize yourself with these six data migration considerations.