Professional services enterprises need to focus on optimizing project financials to scale up successfully and to continue delivering value to clients. Companies within the industry need the right strategies to overcome some of the leading challenges being faced within the financial management domain.
It is also important to prioritize these project finance management challenges, enabling managers to strengthen competency across critical domains. The lack of visibility, poor collaboration, and reliance on traditional metrics can lead professional services firms towards inefficient management practices.
Let us explore the top 5 project financial challenges within the professional services industry in 2022–
1. Lack of visibility into utilization optimization and billing
There are direct project cost implications for underutilized resources and assets. Professional services firms need deep visibility into daily monitoring tools to ensure that billable hours are being tracked. The cost cycle from invoicing to payment should be digitized to streamline the challenge of poor visibility, especially if professional services firms want to scale up operations.
Greater visibility into billing also provides better performance metrics, which impact secondary functions. Not only can strengthening visibility help in holistic project cost control, but also it can empower managers with better on-ground decision making ability. The right project financial management software can also expand financial data access for ease of referencing for all stakeholders.
2. Inefficient cashflow tracking solutions
Managing daily outflows is vital to project success, which is why project finance management protocols are necessary for firms. Having the right infrastructure to track the outflow process, while documenting and validating it, is challenging for firms that are scaling up.
There is an additional layer of complexity added when managing outflows across multiple projects, making accounting and reconciliation more challenging for enterprises. Having a project management software onboarded can help resolve this daily tracking challenge.
3. Weakening focus on margin control and profitability
A chief area of concern for several professional services firms is around margin control. Profitability becomes a greater challenge for projects that are larger in scale, thereby requiring significantly more time and resources. There can be a weakening of cost control, which leads to lower margins and ultimately impacting profitability.
For firms to succeed long-term, they need the right project finance management software to acquire regular profitability calculations automatically. This will help maintain oversight over profitability, allowing managers to make decisions on expanding resources, improving training, and exploring new opportunities.
4. Budgeting & forecasting accuracy challenges
Predictability and improving accuracy in forecasting is a key project financials challenge in the professional services industry. Having the right set of data management tools, AI-driven analytics framework, and data integration capabilities is both a cost and resource challenge.
This can emerge as a critical issue when budgeting for new projects and preparing proposals for client acquisition. Historical project data may not be able to predict new cost items, if there isn’t a dedicated project financial management software embedded into the firm.
5. Inability to set cost controls for projects
Outside of spreadsheets and email notifications, there are no set strategies to enforce controls on project costs. Managers may also receive alerts too late, as there isn’t a set process workflow to ensure risk identification from a project cost perspective.
Approvals and limitations may also not be scalable across the portfolio, which can introduce new sets of challenges for professional services firms. Managing billing, indirect costs, overheads, and unforeseen expenses can become less transparent, and emerge as a key challenge area that firms focus on in 2022.
In conclusion
Project finance management is a robust domain, requiring the strategic integration of people, technology, and processes. To drive efficiency within the function, it is important to identify the underlying challenges, while charting ways to resolve them efficiently. Scaling a professional services business relies on better visibility and accountability of project financials.
Learn more about how ProductDossier’s TouchBase can transform how your professional services enterprise manages project financials. Click here – https://www.productdossier.com/industries/professional-services/
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