How to Speed up the time between Quote and Money in the Bank

By Jeanne Urich, Managing Director, Service Performance Insight

Drive profitability for your professional service firm

This is the second of a two-part series. Part one of this two-part series explores breakdowns in the quote-to-cash process for service organizations. This article provides recommendations for integrated business applications to streamline and automate the quote-to-cash process.

moneyIn today’s economy, cash flow rules. Every organization must focus on cash flow to maintain a solid financial position and maximize profitability and liquidity. In professional service organizations, this process begins with a client quote and ends when payment is received and the money is in the bank. This macro process of converting sales opportunities into paying customers is often referred to as quote-to-cash. Its optimization is essential for financial well-being.

Application integration improves cash flow
To improve the quote-to-cash process, PS executives turn to core business application integration to provide visibility, transparency and control. The three primary business applications used to improve and automate the quote-to-cash process include the following:

• Client relationship management supports the management of client relationships with improved visibility to lead generation, contact management, deal capture and pipeline management with the goal of enhancing sales and marketing effectiveness. CRM allows PSOs to track clients throughout the sales lifecycle, and to specifically target customer segments and offers by understanding details of the relationship.

• Professional service automation solutions provide the systems basis for initiation, planning, execution, close and control of projects, resources and services. PSA improves service delivery, resource management, project management and collaboration. It ensures accurate and timely time and expense capture. Over the past decade, PSA solutions have become more popular as a means for improving resource management and service delivery effectiveness, while the applications have matured to become easy to use and implement.

• Financial management is the primary solution required to accurately capture, bill and report financial transactions. It collects and manages all financial information — time and expense, invoices, procurement, etc. — to provide visibility and determine service cost and profitability. Every firm surveyed uses some financial management solution.

Benefits of integrated service resource planning

All three primary business applications improve financial performance. Although each individual application is critical to organizational success, it is their integration that offers the greatest benefit.

Figure 1: System Integration Improves Visibility, Productivity and Profits
Figure 1

Source: Service Performance Insight, October 2014

Services delivery and the front office

With this integration, sales and service delivery are aligned, and a smooth hand-off is assured as opportunities are closed and projects are initiated. Trust and cooperation are enhanced when all functions — sales, service delivery and finance — have access to the same single source of customer information.
PS executives can better plan and staff projects within PSA based on a detailed understanding of the time and costs involved, and can accurately forecast resource requirements based on up-to-date sales pipeline information. Cost and revenue data is brought together to show project, resource and client profitability. Visibility, transparency and control are all enhanced through management reporting and real-time dashboards.

The important workflow elements of CRM applications track the progress of leads into prospects, into proposals and into orders, ensuring timely reviews, approvals and hand-offs. CRM applications are typically set up as a single source of the truth for all client-related correspondence, proposals and contracts. Tight integration between PSA, where the project is managed, and CRM, where the client is managed, is critical for keeping the sales and service delivery teams in alignment.

Once a bid is accepted, the order is passed to the PSA solution to build the project and resource plan. Staffing and hiring decisions are expedited while ensuring the best available resources are assigned. The integration of CRM and PSA provides the PSO with visibility into the sales process and client contracts and commitments and allows the PSO to forecast resource and project requirements based on expected deal close dates.

Once work is initiated, PSA provides the necessary visibility to assure schedule and cost compliance. In the event of project changes, the combination of PSA and CRM facilitates sales and services delivery collaboration to generate and secure change orders.

Services delivery and the back office
Tight integration between PSA and the ERP application ensures accurate and timely invoices are generated and sent to the client containing all the necessary detail to expedite payment. Integration between PSA and ERP ensures employee details and costs are continually updated and reflected in the resource management application to guarantee the best, most cost-effective resources are assigned.

PSA and ERP integration virtually eliminates manual data re-entry and associated costly manual errors. Integrated systems provide a better understanding of and visibility into a PSO’s actual costs, project margins and revenues. And as with any automation, administrative overhead is decreased and accuracy is increased across the board. Table 1 depicts the reported 2014 PS Maturity Benchmark level of integration between the core applications used by PSOs and the financial system.

Table 1: Business Applications Integrated with Core Financials
Table 1

Source: Service Performance Insight, October 2014
More than 78 percent of the 238 organizations surveyed use a commercial PSA solution, 89 percent use a commercial CRM solution, and 90 percent use a commercial financial application. CRM and PSA have become increasingly important for success in the professional services sector, and many PS executives now realize that integration adds to potential benefits.

Table 2 highlights the benefits of services resource planning based on integrating PSA and CRM with the core financial application. These results show that in every phase of the quote-to-cash process both operational and financial performance improve because information flows seamlessly from one application to another, empowering executives to make faster and more accurate decisions that ultimately improve project profitability, increase personal productivity and increase bottom-line profit and cash flow.

Table 2: The Benefits of PSA and CRM Integrated with Financials
Table 2

Source: Service Performance Insight, October 2014

Ensure your professional services firm’s highest profitability
To drive profitability levels higher, PS executives are taking a more holistic approach to the quote-to-cash process, perhaps the most critical of all PS processes. Delivering services efficiently and effectively is just one area of importance in improving profit margins. Ensuring the organization is focused from the beginning on selling, delivering and collecting from the best clients who buy and use the most profitable services is paramount to success.

While there are many collaborative tools organizations can use to inform and educate their employees on which clients to target, what services to sell and at what level of expected return, the use of client relationship management in conjunction with professional services automation, each integrated with the core financial solution, offers the best chance of improving profitability.
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About Service Performance Insight
Over the past seven years, more than 10,000 PSOs have used the concepts and KPIs from SPI’s PS Maturity Model to pinpoint their organizations’ current maturity and develop improvement plans to advance in lagging areas.
SPI Research works with PS firms to create a maturity scorecard to compare to the benchmark maturity definitions. It analyzes current performance and helps prioritize future improvement initiatives. At the end of the project, leaders not only understand the maturity model, but also have the tools to identify, frame and prioritize strategic improvement priorities required to accelerate performance.

To learn more about SPI Research services and how SPI can help your company, please contact Jeanne Urich at jeanne.urich@spiresearch.com or phone (650) 342-4690.