How to Increase Profit with Better Engagement Management

When engagement managers don't have a holistic view of the firm's operations, they lack access to necessary information about past work or resources. When past history of similar engagements is not available for review, managers can only estimate project scope, and are left to cumbersome processes to manually create the phases, tasks, sub-tasks, and deliverables for a given engagement. When resource information is unavailable, they don't have an accurate window into talent or capacity, which can lead to overextended resources and poor quality work.

To fix this, firms should provide planners at all levels a complete view of the entire operation, from front-office to back-office. For an accurate view of resource workload and capacity, make sure they can see current and planned engagements. Finally, ensure information about talent and skills includes area of expertise and experience level, giving managers easy access to information crucial for placing the best, most cost-effective team on the engagement.

Managing the Delivery
Since all plans are not carved in stone, firms need to understand how inevitable changes in scope, resources, or duration can impact expected results like anticipated margin or target billability. However, often the expected end result stays hidden, typically due to poor data flow within the firm—forcing engagement managers to make uninformed or late decisions.

Obtaining this information typically requires non-billable administrative time, adding cost to the engagement that the firm has to absorb at the expense of the profit margin. Also, when expected margin figures aren't available to engagement managers, they cannot adequately track against expectations and can't take action until it's too late.

Steps that engagement managers can take to keep delivery on target include infusing current, constantly-updated financial expectations into work in progress so that expected results can be calculated along the way. Also, triggering alerts when work starts to miss profit expectations gives engagement managers the "early warning" to make necessary adjustments to scope, resources, or billable time—changes that will help keep profit margin within expectations.

Streamlining administrative tasks like time capture and approval enables time to be correctly recorded and immediately billed– and frees resources from cumbersome non-billable minutiae for more meaningful, billable work.

Collecting Payment
Perhaps counterintuitive, client billing is often the most time-consuming and complicated task that consulting firms encounter. Slow billing leads to long order-to-cash cycles and poor cash flow. Inaccurate billing leads to contested invoices that firms cannot easily justify, which risks non-payment that can jeopardize project margin.Part of client service entails creating invoices that fit client needs and specifications.

Some internal systems are not able to automatically reformat per client demands, leaving firms to error-prone, manual steps to produce invoices formatted to the client's preference. In addition, invoices provided too long after the project's end lack details or context to the work provided—leading clients to contest them, and exposing the firm to non-payment. Flexibility is the best way to streamline invoicing inefficiency and avoid collection issues. By using agile processes, firms can produce invoices quickly and easily, even if those demands change for each project.

Preparing for Success
From the planning stage through project delivery to the invoicing process, the key to profitable engagements is appropriate information flow through all phases of the engagement. By empowering all involved with the information they need, each member of the team can confidently execute the activity they own, ensuring choices about scope, resources, client demands and even worked time are best aligned to the financial results the firm expects.

Think about it: Instead of cumbersome and error-prone manual steps and wasted non-billable administrative time gathering or confirming information, each engagement keeps the firm's bottom line is kept at a healthy, profitable level.

[*Assumes average annual billable consultant revenue of $112,000/year]

Claus Thorsgaard is Deltek's EVP and general manager—professional services. He is responsible for managing sales and marketing for Deltek Vision, Deltek Maconomy and Deltek People Planner, enterprise software solutions that power the businesses of accounting firms and other professional services firms around the world.