How to Achieve Profitability in a Project-Based Firm

From Blog Projects in Motion

How to achieve profitability with project based ERP

Is your current Professional Services business system earning its keep?

In Professional Services, it is difficult to work out the profit margin of your company without looking at the performance of each individual project. Generic enterprise resource planning (ERP) systems only provide approximated data as they are don’t have the project at the core - they aren’t designed to analyse by project, division, team or territory. This leads to an opaque picture of what is happening and in turn doesn’t give a clear picture as to what the costs and profits are in relation to the time and resources spent on the project.

When choosing an ERP system as a project-focused firm, it’s worth considering the pros and cons of generic ERP versus project-based ERP and its impact on your bottom line.

Generic ERP versus project-based ERP

Professional Services businesses are ultimately based on project work, so a specialist project-based approach makes sense. Let’s consider the facts.

  • Too much information: A generic ERP system tends to lead to a crossover of information, whereas a project-based ERP gives a much truer, bigger picture.

  • Too much guesswork: Flat generic systems give flat generic figures which are often approximated. With project-based systems, the financial viability of each of your business components is a known fact.

  • 3D over 2D: Generic ERP is two dimensional and therefore designed to tie costs only to an account and an organisation. Project-based ERP is three dimensional and ties together all transactions to accounts, organisations, and projects.

  • Quality over quantity: Most generic ERP systems provide a wide variety of reports across too many variables. Project-based systems deliver broad and deep reports that match the specific needs of the end user.

  • Flexible finance: Generic ERP typically provides an adjustable invoice format, but with only one true invoice format for all clients. Project-based ERP is much more flexible as each project and client has unique invoice needs regarding billing and how the client sees that information.

  • Unification: A schedule of project activities and interdependencies that ties transactions to project elements typically doesn’t exist in generic systems. A project-based system unifies the project and its elements to the relevant transactions.

  • People-focused: Generic ERP systems are built to track and sell inventory items, whereas project-based ERP systems focus on people in keeping with the Professional Services firms that use them.

The bottom line

All businesses – large and small, global and national, established and new – thrive and survive because of a healthy bottom line. It’s all about profit, as businessman Paul Marsden noted: “Business is all about solving people's problems - at a profit.”

Profitability drives growth, and growth drives success. If your current business system doesn’t enable you to get a clear picture of where your profits are coming from or what your margins should be, perhaps now is the time to consider project-based ERP.

The benefits speak for themselves:

  • Improved win rates
  • Higher revenue
  • Improved profitability
  • Improved resource utilisation
  • More projects delivered on time and on budget
  • Lower costs
  • Faster cash flow
  • Better visibility and decision-making
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