Achieving service-led business profitability
The service industry is the largest driver of the UK economy. At the last count, it accounted for almost 80 per cent. As anyone leading finance teams for an organisation in this sector knows, ensuring profitability for each and every client project is key. It is also incredibly hard.
Even if an operation has its account planning down to a tee, and deploys only and exactly the amount of resource required for a project (a number of services financial directors will spit out their coffee laughing at this point), there are administrative issues that can create serious costs, either in client profitability or in finance team time chasing them through.
After a decade working with service-led businesses to improve their profitability, I can tell you these core issues are the same, no matter whether an organisation provides management consultancy, installs air conditioning units, fixes office printers or manages public relations.
The good news is that the same tactics can be used to overcome them…
Struggling to source status updates – When you’re not the day-to-day lead on a project, it can be notoriously difficult to understand how the project is progressing. All too often finance teams spend hours chasing down project managers to find out if a piece of work is working to time and allocated resources. This information is of course key to understanding whether it’s profitable or not. The best businesses invest in platforms and processes which support a holistic, transparent view of each and every project. The best platforms enable finance teams to see everything from supply chain, distribution, payroll, customer relationship management, service and asset and job cost details at the click of a button.
Back-calculating late expenses – Most services businesses have a frustrated accounts assistant who’s sick of sending out chaser emails for expense submissions “to all”. They do this because factoring both agreed and “surprise” expenses into profitability calculations is essential. But because these expenses are often nominal - for taxis, lunch or ad-hoc printing costs – the employees responsible for them often forget their overall significance. Finance teams must educate them about why accurate expense information is crucial for the sustainability of the business and their jobs. They should also make it as easy as possible for them to submit this information. There is now a wealth of mobile solutions which allow busy customer-facing employees to simply take a photo of an expenses receipt and upload it via an app, to automatically add it to the back-end finance system. While employing a system which automates reminder notifications to those who haven’t yet submitted data can save a finance team’s sanity; not to mention valuable man hours.
Missing timesheets – Similarly the much-maligned time-sheet is the foundation for any services operation. Unless employees accurately log the hours they are spending on the tasks they’ve been assigned to for a particular client, there is no way to calculate whether a project is working to budget; and ultimately contributing to overall business profitability. The key again to success here is to clearly communicate to employees why this is important and make them care. For example, if everyone is working overtime on a stressful client which isn’t proving profitable – having the information to prove this could support a decision to let the client go and improve everyone’s working lives. Again, ensuring it’s as easy as possible for them to do is the secret to success. Allowing employees to update their time sheets on the go on their mobile (say during their commute) can help the finance team get the data they need to do their job.
Inputting details from invoices – An essential but traditionally incredibly time-consuming task, inputting details from invoices which are either taking money in or out of the business are key to understanding cash flow and the bigger financial picture. The entire process involves several different routes depending on whether the information is correct and can eat up significant resources. Adcock Refrigeration and Air Conditioning is a multi-million pound operation that’s been using automated invoice technology to significantly speed up this process. Using the latest in screen scraping and Artificial Intelligence the company is able to automatically scan, sort and process its invoices in an instant. Simple changes to core processes like this will not only save precious man hours but also reduce human error.
With the service sector still being one of the few parts of the economy still growing, there is everything for those operating in this sector to play for – providing they can ensure they are playing profitably. Small changes to core financial administration processes like status updates, expenses, timesheets and invoicing can help businesses make significant improvements.