Looking For a Professional Services Management System?

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I’ve posted several blogs in the last few weeks about measurement in Professional Services Organisations (PSOs), but in a sense they’ve also been about systems, since it is rare that a PSO can obtain all the measurements it needs without systems of some kind of another.

By systems, I mean all the means of recording, communicating, aggregating, calculating and reporting that together constitute the technical and human aspects of the task. I don’t necessarily mean that computer-based software systems sit somewhere inside this network of media, but for all practical purposes we might as well assume that.

which way to go

So, what kind of software systems support the kinds of measurement that I have recommended?

Well, before I can answer that question I must confess bias. As the designer of a software system expressly devised to enable the measurements I’ve described, I’m bound to be describing characteristics of time@work, the system I’ve designed. However, I’ll try to do so in ways that are partially neutral, in that other software systems (and there are many competitors for time@work) may very well share some of these characteristics.

For more about time@work see www.systemsatwork.com.

I should also point out that to my mind, at least, there is a distinction to be made between a financial system, which provides statutory and management accounting information for companies and groups of companies, and Professional Services Management systems, which provide tools for the management of professional staff.

First, I’ll begin by introducing some more general requirements of a Professional Services Management system.

General Requirements

Analysis

Some PSOs are very simple, but many, indeed perhaps most, are not. Sometimes even the smallest PSOs are complex. In my experience complexity is a more commonly found feature of PSOs than of comparably sized manufacturing or distribution companies, for whom products, prices, and methods of delivery are relatively standard.

If even a moderately complex PSO encounters financial performance problems and it becomes useful to analyse the organisation using such measures as those I’ve described in my posts, then it may well be useful to analyse them by a number of different criteria, chasing down problems by looking at these measures from a variety of different angles, slicing and dicing the data to get to the underlying problems.

For example, issues such as utilisation don’t always affect all business streams or geographies equally. In addition, issues such as realisation don’t always affect all your clients, or client types, or client sectors equally. The same goes for all the other measures.

Because of this it is essential that your system should be capable of analysing data (time, expenses, invoice values, forecasts, etc.) using a number of user-definable criteria. What could these be?

Time-based:

  • Date
  • Day of the Week
  • Week
  • Timesheet Period (usually a week)
  • Month
  • Accounting Period
  • Quarter
  • Year

Activity-based:

  • Activity (e.g. Meeting, Researching, Consulting, etc
  • Location (e.g. At Home, At the Client, At the Office, etc.)
  • Role

Employee-based:

  • Employee
  • Employee Department/Cost Centre
  • Employee Business Stream
  • Employee Company
  • Employee Grade
  • Employee Position
  • Employee Type (Internal/External/etc.)

Client-based

  • Client
  • Client Department/Cost Centre
  • Client Business Stream
  • Client Sector
  • Client Type
  • Client Duration

Project-based

  • Client
  • Project
  • Project Department/Cost Centre
  • Project Business Stream
  • Project Company
  • Project Location
  • Project Type
  • Project Duration
  • Project Sector

Task-based

  • Task
  • Task Type

These are just some of the ways you may want to analyse data. In reality, every PSO is different and it is likely you can imagine dozens of other ways you might want to analyse your organisation’s performance. Your system must allow you to define these dimensions for yourself.

Multi Company

If your PSO isn’t already a multi-company organisation, consider very carefully whether it might become so. If it does, you would probably want to treat your entire team of professional staff as one group, one pool of resources. And if so, then the system you use should enable this in ways that are completely transparent to your staff, who should record time in their timesheets without being aware of any separation of companies, employees and projects.

This surface simplicity must in fact conceal some complexity. Multi-company means:

  • That each employee must belong to one and only one company, so that appropriate accounting transactions (for example, expenses for reimbursement) can be sent to the right accounting ledger
  • That each project must belong to one and only one company, so that appropriate accounting transactions (for example, invoices) can be sent to the right accounting ledger
  • That the system must be capable of holding multiple charts of accounts, one for each company whose data are held in the system
  • That the system must be capable of managing more than one base currency, potentially a different base currency for each company whose data are held in the system
  • That the system must be capable of detecting inter-company transactions (such as when an employee of one company records time on a project belonging to another), and of generating the appropriate accounting entriesMulti Currency

Even if your organisation is comprised of a single legal entity you will probably need to manage multiple currencies:

  • You will need to calculate values in the your company’s base accounting currency
  • You may need to calculate or record values in a separate transaction currency, such as fee currency if your fees are stated in a foreign currency, or expense currency if you incur expenses in a foreign currency
  • You may need to calculate values in your client’s invoice currency. For example, your client may wish always to be invoiced in EUR, and you may need to convert your fee values or the expenses you have incurred into EUR.
  • You may need to calculate values in your own corporate currency, which may differ from your accounting currency. Especially when your organisation comprises two or more companies with two or more different accounting currencies, you will probably want to report all values together in a common reporting currency.

Multi Language & Flexible Terminology

Consider whether you will want to deploy your system in more than one language. Not all systems do this easily. It is important that if they are capable of this they hold all linguistic terms (messages, labels, and other textual items) outside program code, so that they can be modified easily. Ideally, all terms should be available to you for editing so that you can make your own substitutions for Client, Project, Task, Employee, etc.

Flexibility

In my experience, PSOs are more likely to break their own rules than most kinds of company. Whether the motives for this are laudable – the need to be commercially creative – or whether they reflect disinclination in general to be bound by rules – more flexibility is needed in software for PSOs than for most other kinds of organisation. Your software, therefore, must be very flexible. This means that it must adapt itself to new procedures, or new analytical requirements (as well as changing statutory regulations) without too much difficulty.

There is no software in the world which will do this automatically, but you must make sure that yours is at least capable of change. It may do exactly what it says in the manual, and this may be exactly what you need and all that you need it to do now, but beware of the commercial creativity to come.

What kinds of flexibility should you look for?

  • The possibility of multiple workflows
  • The possibility of multiple document types with differing characteristics: timesheets, expense forms and other forms, and different types of each form
  • The possibility of additional analysis
  • The possibility of multiple rules for fee rates and costs in any number of currencies
  • The possibility of terminological change
  • The possibility of calculating new values and measures
  • The possibility of creating new reports easily
  • The possibility of designing multiple invoice and other document formats easily

No system is unlimited in what it can do. In fact, systems are implemented precisely in order to impose discipline and control, and to restrict creativity. They are sometimes as much about limiting freedom as offering it. The most flexible invoicing medium in the world is a blank sheet of paper, but this is no strong recommendation for Word as an invoicing system.

Bear in mind also that flexibility should not be achieved through program change, since this will make it hard for you to keep up with new versions of a system (and we are assuming throughout that any system you choose is a commercially available packaged software system). It is important that flexibility be achieved through configuration or parameterisation. 

Specific Requirements

Timesheets

Every PSO is different. Even PSOs within the same sector (be they lawyers, engineers, accountants, consultants, etc.) differ, sometimes markedly, from each another. They differ in the way in which they record time, the structures (clients, projects, tasks, activities) against which they record time, and they differ in the rules they apply when validating time entries and in the periods they divide their calendars into.

What sort of flexibility should you look for?

  • The possibility of specifying your own ‘unit’ of time entry. Lawyers traditionally divide time into six-minute units. Others report by quarter hours, or hours or even days.
  • The possibility of specifying your own timesheet periods. Some PSOs demand daily timesheets (though these are hard to chase), some weekly, some fortnightly and some monthly. Best practice for most PSOs is weekly, but whether you choose to start the week on a Monday or any other day must be within your realm of control. You also need to be sure that you can close an accounting period or month rapidly, splitting the final week of the month appropriately.
  • The possibility of recording time at Project level, or at Project and Task level, as required by the Project.
  • The possibility of defining (and switching on or off at least by Project) additional fields for free form or selective data entry. These might be used for any number of purposes such as Activity, or Location. It is an extra bonus if the values associated with these can also be limited by Employee or Project.
  • The possibility of including or excluding a field allowing staff and their line managers to specify whether work is chargeable or not.
  • The possibility of multiple calendars, defining, if necessary for each employee, the length of the working day so that the entry of standard working hours can be enforced, if this is a requirement.
  • The possibility of entering unlimited free form notes against time entries with selective enforcement of notes.
  • The possibility of validating time entries using various rules, to prevent incorrect entries or the entry of time beyond specified limits.
  • The possibility of limiting projects available to an employee so that he or she may select only from an approved list.
  • The provision of easy to use project search tools so that an employee can find his or her most recent projects and any other specific project easily.
  • The possibility of pre-filling a timesheet with confirmed diary entries.
  • Flexible workflow possibilities so that timesheets can be routed to line managers or other managers (conditionally) for authorisation.
  • The option to calculate multiple values for each entered timesheet cell. These might include Standard Fees, Actual Fees (local and/or foreign currency), Standard Working Cost, Standard Availability Cost, Standard Project Cost, Cross Charges, etc.
  • The option to approve time by Project view rather than Timesheet view, so that Project Managers can see all timesheet records that have been entered against their projects, irrespective of who has recorded the time.

Expense Forms may be simple, or complex, according to the activity of the PSO. A simple domestically oriented PSO needs far less complexity than a multi-national internationally oriented one.

Some will need some, and some will need all of the following features:

Expense Forms

  • The option to create a number of different forms with different characteristics, these including, different static data entry fields (Project, Task, Activity, etc.), and different value entry fields.
  • The option to specify validation rules for data entry, to enforce expense policy.
  • The option to specify different authorisation workflows for each form.
  • The option to make workflow conditional on aggregated or specific row values in a form.
  • The possibility of managing multiple tax rates (differing VAT rates, for example, for multi-national PSOs).
  • The possibility of specifying values in many currencies, whilst converting these into local currencies for reimbursement, and potentially further currencies for re-invoicing.
  • The possibility of automating, and overriding, the provision of an exchange rate.
  • The possibility of deriving account codes from static data fields without an employee having to be concerned with these.
  • The possibility of arranging pre-approval for travel expenses.
  • The option to specify whether an expense is rechargeable to a client or not.
  • The option to manage value-based expenses, per-diem (daily allowance) expenses and mileage-type expenses separately or on one form.
  • The option to import credit card statements in a variety of formats and present these as expense forms for completion by employees.
  • The option to import recharges to clients such as photocopier expenses, telephone expenses, etc.
  • The option to record supplier-invoiced expenses such as travel tickets.
  • The option to import expense data from suppliers such as travel agencies, online retailers, etc.
  • The option to attach scanned images and documents to expense forms
  • The option to calculate values such as ‘carbon footprint’ in respect of specific expense types

PSOs differ enormously from one to another in the way they handle invoicing. For some it is a simple matter of invoicing work in progress at full value, for others there is a need to record discounts and write-offs. Others invoice in advance, or based on milestones, or percentage completion, or invoice regular values every month or quarter or year. Some combine expense and time invoicing. Others don’t.

Your needs may also change from time to time. You may at some stage need some, if not all, of these options and possibilities.

Invoicing

  • The option to create time and materials invoices based on work in progress, with specified deferrals, additions, discounts and write offs.
  • The option to track discounts and write offs against original values for the purposes of management (realisation) reporting.
  • The option to combine time and expenses on a single invoice or to keep time and expense invoices separate.
  • The option to invoice in advance, and afterwards allocate work in progress to advance invoices.
  • The option to invoice based on percentage completion.
  • The option to invoice scheduled values periodically.
  • The option to reverse invoices of any kind, fully or partially.
  • The possibility of generating all accounting entries from the invoicing process.
  • The option to separate the booking of revenue from the booking of invoices.
  • The option to format invoices in a number of different ways, at a detailed or summary level.
  • The option to produce ad-hoc invoices and credit notes of any kind, without reference to time or expenses.
  • The option, in all invoice types, to amend any textual item.
  • The option, at invoicing time, to recalculate accounting or fee values based on latest specific exchange rates.
  • The possibility of invoice authorisation workflow.
  • The option for project managers (and sometimes customers) to approve time and expenses prior to invoicing.

I assume that full financial budgeting, including total forecast revenue, total budgeted staff and overhead cost, is managed in your Financial System.

Planning and Budgeting have both an active and a passive aspect. They can be used actively to achieve optimal utilisation through the intelligent scheduling of project work, using skills, availability, cost, and preferences as inputs to the process. In addition, they can be used passively for reporting actuals against plans, and for the determination of recognisable revenue.

These are some of the planning and budgeting options you might look for in a Professional Services Management system:

Planning & Budgeting

  • The option to hold anticipated time, expense, fees and costs for a project, optionally at project, task, activity, role and employee level, so that actual values may be compared with plan.
  • The option to import a plan from an external project management tool such as MS Project.
  • The option to hold multiple plans and revisions.
  • The option to hold skills, preferences, and other attributes, against employees so that staff may be scheduled appropriately for specific work.
  • The option also to review staff availability during scheduling.
  • The option to plan at possible as well as firm level.
  • The option to integrate planning with diary systems such as MS Outlook.
  • The possibility of publishing scheduled work and availability across the entire PSO.
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