4 Accounting Tips to Run a Profitable Professional Services Company
It doesn't matter if you run a marketing agency or a management consulting firm when it comes to managing a profitable consultancy business. It is only half of the job to provide your consulting services. In addition, your business must send accurate invoices to clients and collect payments promptly.
For a service-based business to be profitable, it is essential to track time and invoicing accurately. Tracking work hours allows you to bill clients accurately but also helps you reduce revenue loss, increase cash collection, and make essential decisions for success.
These four accounting tips will increase your consulting company's profitability.
Make sure you have a time tracking system that is accurate
You and your other contractors or consultants can accurately track time and help you assign time to the correct task, client, or project. All of these are important for many reasons.
Get precise project estimates
With proper time tracking, you can use historical data to accurately estimate the cost of a new project.
Profitability at a Glance
If you compare the billable and non-billable hours of a project to the budgeted time, you can see clearly:
The actual cost for your project
It's profitable
How to increase your billing
Research, client communications, brainstorming, and other tasks can take time and incur expenses. However, they are still non-billable. You can better understand your profitability by combining billable and non-billable hours.
Labor cost control
Without knowing where you are spending your time, you can't understand the profitability of your business. Accurate tracking helps you:
Check out how many hours are spent on specific tasks.
Maximize your time and human resource
Avoid overpaying
Not only will it help you manage labor costs, but it will also help you to gauge the efficiency of your employees and processes so that you can make adjustments if necessary.
Invoicing accuracy
No matter if you charge a flat fee or an hourly rate, you could be liable for inaccurate and unprofitable billing. Don't underestimate your time and not accurately capture it, or you might be wasting money.
QuickBooks Time for time tracking
We recommend QuickBooksTime as a time-tracking tool to help you run a more profitable consulting company. QuickBooks Time offers both a desktop timesheet app and a mobile version. It also has an intelligent GPS tracker that allows you to record your team members' time when they are working from off-site locations.
QuickBooks Time allows you to:
Pre-defined billable rates and job codes can be customized
Track time by customer, service item, or class
You can set notifications to remind team members to submit their timesheets via the app (where they can be reviewed and approved by managers)
Create reports that compare the budgeted and actual hours spent on each project
QuickBooks Time tracks time entries, corrections, and approvals so you can leave your consulting company with a clear audit trail.
Streamline your Billing Process
Integrating your project management tool and your accounting software can streamline your billing. Through third-party connectors such as Zapier and Automate.io, project management tools such as Asana and Monday.com make it possible to integrate your accounting software with these tools, including Smartsheet and Monday.com.
If you are the only employee of a consulting agency, it may be possible to physically enter project details into your accounting software and create invoices. However, manual data entry is not a sustainable solution for a team of 50 consultants.
You can integrate your project management software and your accounting system to:
Create accurate invoices quickly
Quickly bill clients and pay them accordingly
Collect payments faster
It is essential to ensure your business has enough cash flow to pay your staff and complete your consulting projects, which can last for weeks or even months.
Automate your payroll
Staff and contractors must be paid on time and correctly to keep your business running smoothly. Instead of relying on manual, physical time cards to ensure this happens, you can use time-tracking technology to save time and increase profitability.
Automating your Payroll Process is as simple as integrating your Time Tracker with your payroll software.
Keep track of contractor hours
Payroll based on timesheets approved
Reducing errors such as duplicate hours or double timesheet entries
A time tracking system will help you bill your clients quickly and accurately when building and operating a profitable consulting company.
Bookkeepers are available for hire
Every business should have a bookkeeper. If done correctly, bookkeeping will tell you if your business is profitable or if it has enough cash to pay its employees.
Bookkeeping can be time-consuming. Many business owners attempt to cut costs by handling their bookkeeping themselves, only to forget when there are other priorities.
It is possible to outsource your bookkeeping and still have your business profitable. Bookkeepers your company does not employ can manage your day-to-day records, reconcile your bank accounts and provide accurate financial reports at the end of each month.
This will allow you to monitor your company's finances and track your net profit.
We know it's not always easy to manage your bookkeeping while working on your client projects. So we work closely with professional services to implement the right time tracking tools and accelerate their billing and cash collection for all projects and ongoing retainers.
