Mid-Year Review – Top 5 Reports

Did you do a mid-year review?

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In these economic times, professional firms cannot afford to put off review of operations. In case you have not done your review, BQE Software offers 5 suggestions.

Aged A/R, Days Receivables Outstanding

You can run a standard AR Aging report  from the Reports, Aging menu or choose one of the 11 reports in the Aging category on the All Report screen. For faster identification of late payers, run the Days Receivable Outstanding report from the Company category on the All Reports screen.

Knowing the age (in days) of each invoice highlights the risk in your investment in clients (also see the next report). The longer a receivable is outstanding, the greater the probability it not be paid in full (or at all). What is a normal aged pattern depends on your clients, but be cautious not to quickly accept the situation just because it has always been that way. Information from these reports may lead to changes, such as charging late fees, raising fees, or requiring up-front or scheduled payments.

With the Days Receivable report, you should not apply date filters. You want to see everything. However, if project managers are responsible for collections, then filter it by Project Manager. If they need a regular reminder of the age of their project invoices, schedule their A/R reports with the Agent Workflow Automation module.

WIP Reconciliation, WIP + AR by Project

Run the WIP Reconciliation Summary by Project report from the Company category on the All Reports screen. Look at the period from the start of the year to today. As needed, filter it by project manager. Do the same with the WIP + AR by Project report located in the Billing category.

These reports provide managers a view of the flow and investment in projects and clients. Slow billing of work in progress, or put another way, too much WIP inventory, increases the carrying cost. To reduce the risk, bill WIP as soon as possible. Also, using A/R reports keep on top of payment. Time your collection calls in sync with clients’ bill paying cycles to get paid sooner. You might also request up-front or scheduled payments for work.

One last review item: If a small group of clients represents a significant portion of unbilled WIP and receivables, you may face a significant risk. What if they went bankrupt? To reduce this risk, set aside time to develop and execute a “rainmaking” plan to acquire new clients and projects and spread the risk.

Work in Hand

From the Report menus, select Company, Work in Hand. Run the Work in Hand report with no filters. It shows unbilled contract amounts and whether you are over-contract.

To gauge how many months of work are in the pipeline, divide the total unbilled contracts by your typical monthly billing amount. If you are looking at less than 3 months, you need to execute an intensive rainmaking plan. Six months is better, but the more projects you have in the pipeline for more clients (to reduce risk), the better off you are. Once you get the rainmaking engine running, you can maintain a steady stream of new jobs. You may surprise yourself and also make plans to add staff and other resources to handle growth.

Profitability – Billed and Unbilled

From the Reports menu, select Analysis, Gross Margins. For a thorough comparison, run the Client Gross Margin by Project report with no filters. You will see the profitability of each project invoice (billed activity) sent to a client, including the margin amount and percentage. For longer running projects, including older invoices lets you see how margins have held up in the past 6 months. Look for the trends and determine why they occurred. You want to correct the causes as soon as possible.

For projects, go to the Reports menu and select Project, Project Profitability. The Project Profit Summary Billed and Unbilled Activity includes billed and unbilled activity. Senior managers and project managers will quickly see exceptions.

Staff Performance, Staff Profit Report

From the Reports menu, select Company, Staff Performance. Apply date filters for year to date on the Staff Performance report. Consider whether the utilization trends are acceptable. You should also run the Staff Profit Report. It includes billed and unbilled activity.

Some decision-makers may see the billable versus non-billable rates, effective earnings, and realization per hour as indicators of  who should be laid off. If capital reserves are tight, this may be the tough decision you face. But layoffs should be the last resort. You know what it took to hire and develop your people. Do you want to have to do it all over again when the upturn begins to blossom? It could put you at a competitive disadvantage. Instead, invest in your people. While they may not generate as many billable hours as you want, you should make sure they are productive. Use available hours for training and cross-training. This might be BillQuick training, including how to get the most out of the software to fulfill their responsibilities. It might include technical and professional skill development. We encourage you to develop your people’s management skills too. In short, make them ready for the upturn so they can take your firm to a new level.

Tags: Accounts Receivable, Management, Performance, Profit, Reports