Is Your Revenue Leaking?

BQE Guest Blogger: Bob Wolff is an accountant-turned-Channel Manager at BQE Software who helps to offer consulting and software solutions for BQE customers. He likes to share his business expertise here on the blog whenever he can.

Leaking revenue, both short-term and long-term, is caused by managers and staff reporting their time and expenses from within a dense fog bank.

Huh?

The back-office situation

Back-office staff are frustrated and stressed. They beg and threaten managers and staff for timesheets (and expense reports, to a less extent). This might be right before payroll is run. More likely, it is a last-minute race to get invoices out to clients.

Making it worse, senior management will not demand timely reporting. Laudably, they want to maximize billable hours (Related: How to Increase Your Billable Hours). But this is a cover for shoot-from-the-hip management. One or two people in the firm have the experience to intuit what’s going on. Unfortunately, no one else does. So, everyone develops bad habits.

In many firms, senior management simply does not want to upset and loose key professionals.

The common process for time & expense

Essentially, firms are in a Catch 22: Employees avoid time and expense reporting because it is time-consuming, and it is time-consuming because they must rebuild information by zigzagging through documents and files.

Who wants to spend a tedious, boring hour or two every week or month rifling through notes, reminders, calendar entries, and weeks-old memories to pin down hours spent on Project A, Project B and so on?

What happens when memory fades

When memory fades – and lots of research says it does after a day or two, an employee has time holes. You’ve spent a couple of hours scrambling for information. Stress is growing. The office manager emailed for the 8th time demanding your timesheet . . . and she’s shouting in UPPER CASE (Related: 5 Ways to Help Employees Stay Current with Timesheets).

You have no choice. You fill in the time-holes with guesses. Some hours for Activity A and Project C.

You remember working on the project two weeks ago. You probably did that activity. More of the time hole is filled with Activity B and Project G. You don’t remember working on Project G, but it’s the biggest one the firm has and can absorb a little of your time. The time hole is still not filled.

You throw in non-billable hours for education and research. Not a bad timesheet. You just had to enter bulk hours for a few projects for the entire week (two weeks, month).

The Consequence

Managers and staff think of tracking hours as payroll. Most employees in a professional services firm are salaried. Senior management won’t enforce a solid time and expense policy. Likely, management doesn’t pay attention to metrics and KPIs as projects progress. At least, not until the project is complete.

Inaccurate time & expense information

The common situation and process above results in inaccurate time and expense information.

It’s information from within a fog bank full of fading memories and incomplete notes, reminders, and calendar entries. The consequence is unreliable and out-of-date metrics and KPIs (Related: The Ugly Truth About Project Management KPIs).

You don’t know whether the remaining budget is enough to complete the project. Is there a cost overrun? Is the planned profit still holding? Because of the fuzzy information, you might be in great shape or be two seconds from smacking into a solid wall.

Billing delays

Information from the fog bank will impact billing too. Without timely and accurate information – or as accurate as possible, you may delay billing. Can your firm handle delays of 2 weeks, 4 weeks, or 10 weeks? These are real and common delays shared by BQE CORE customers.

Slower cash flow

Of course, late billing means slower cash flow.

Across thousands of BQE CORE customers, a payment cycle is 30 to 90 days after the invoice is delivered. (The length varies by industry and local norms.) A delay of even two weeks may push out receipt of payment by another 30 days or more. Remember, customers have their own bill-pay cycles. You want to deliver your invoice right before it.

Clients refuse to pay

So, let’s say reported time and expenses are timely. Invoices go out on time. But there are errors. Clients refuse to pay and demand corrections.

For example, those hours charged to Project G were challenged because no one in your client’s office remembers the employee. That’s a little bit of a black eye for your firm, but you quickly correct it and resubmit the invoice. It will be another 6 to 10 weeks before you get paid because of the error.

The employee says he lost his records or maybe it was a keystroke error. He doesn’t remember the projects he worked on that week. Hmm? The only thing you can do is write it off. Goodbye, thousands of dollars.

Subtle, harmful effects

Uh-oh, another client is unhappy. They don’t like weekly totals for work on invoices. The contract requires daily details to cross-check with their internal reports.

You backtrack the hours to the employees. Again, they put in weekly totals rather than daily hours for the projects. The owner won’t push it. You tell the employees to stop what they are doing and rebuild their timesheets from 4 weeks ago! Yes, there will be a few imaginative time sheets returns in a week or two.

There’s another consequence that arises from fuzzy information. It is insidious!

It’s your future firm slowly sliding into oblivion. Your quotes for new jobs are based on fuzzy information. You massage an old project’s budget to account for variations in a new project. Multiply this by dozens or hundreds. Did the old budgets accurately reflect overruns or efficiencies that were real? With time and expenses oozing out fog banks, can you rely on the information?

How do you plug the leak?

You need to live and breathe in real-time. Information should be as close to real-time as possible – daily in most cases. And that information needs to feed an all-in-one solution that provides timely project and firm information.

To plug the revenue leak, you must capture billable and non-billable time and expenses daily by project. That information flows into the project metrics. As an added enhancement, review and approve the items once or twice a week. This catches errors quickly and the employee will typically remember details to ensure accurate information.

Nice plan but you also want minimum administrative time spent by managers and staff.

KISS is the answer. KISS is an acronym for “keep it simple, stupid” or “keep it stupid simple.” The KISS principle states that most systems work best if they are kept simple rather than made complicated.

You want the process to be simple and as automatic as possible. You want maximum billable hours. Here’s how to do it in BQE CORE.

1. Access CORE anywhere anytime

This includes your PC, laptop, tablet, or mobile phone. Use a stopwatch timer when you bounce between jobs. Multiple timers can be open at one time, making it simple to switch between them. You can also track the total time for the day as you go along.

2. Assign activity and expense codes

Assign these codes to a project or to an employee(s). This reduces the dropdown list a user selects from 100+ codes to 5 or 10 items. For a specific type of project, you can assign the same shortlist of codes to each new project. Same for employees. If they work on a limited list of activities or incur only a few types of expenses, reuse the shortlist.

3. Select or assign bill rates

Select the standard employee bill rate, assign a rate for everyone on a project, or assign a rate for selected employees working on a project. In BQE CORE, every employee has a standard bill rate. When necessary, you can assign a fee schedule to a project. It might contain a special bill rate for everyone working on the project or a rate based on the person’s title. Of course, you can assign a special rate to any employee too. In short, you don’t need to mess with this later.

4. Automatically insert entry explanations

Automatically insert standard explanations for time and expense entries. There are two ways to do this. First, a standard note can be saved for each activity and expense code. When you select the code, the note fills in the time or expense entry memo.

Second, define shorthand codes and accompanying notes using the AutoComplete feature. The user enters the shorthand code and BQE CORE inserts the text. With both options, an employee can edit the text. Many firms put in placeholders to prompt the user to enter project-specific information.

5. Snapshot expense receipts

This has two big benefits. First, the expense receipt saves with the expense entry. Also, it can be included with an invoice when you send it to the client. Second, CORE Mobile is smart. It examines your receipt snapshot and turns it into an expense entry. (It also attaches the snapshot to the entry.) A couple of taps and you’re done.

6. Immediately submit expenses

Submit time and expenses right after saving and reviewing them. Most commonly, who reviews and approves the entries is already set up. Employees can simply click-click or tap-tap. If anything is questionable, the reviewer will reject the entry and BQE CORE will let the employee know immediately.

Avoid post-project surprises

With Steps 1 to 4, a time entry takes 8 seconds. Step 5 might take 10 seconds. Even for a hectic day, an employee might spend 1 minute per day. The review time in Step 6, typically done by project managers (they are closest to the work), will take 1 to 2 minutes per project.

With data from these KISS steps, the firm has reliable and timely data. Project managers have a budget, gross margin, realization, utilization, and cost information readily at hand. Similarly, senior managers see the same information in aggregate, by client, and by project.

As soon as a red flag begins to rise, you can change course. Managers at all levels avoid post-project surprises. Owners and project managers escape “cost increase” and other uncomfortable conversations with clients. Clients receive invoices with the level of details they want. Billing is not delayed. Cash flows smoothly. In short, clients are happy, and your firm is successful.

Who knows, BQE CORE might help boost bonuses for everyone.

Want more tips to improve your bottom line? Click below to download a free eBook on 5 billing practices you should always avoid.