What are Professional Services?
Professional services is generally defined as businesses that offer services and expertise to other businesses as opposed to tradesmen.
Some examples of professional services include:
Marketing agencies
PR firms
Creative agencies
Management consultants
Legal services
Logistics
Accounting & tax
Event management
Architecture firms
What Keeps Professional Service Companies Up at Night?
Every business has challenges, but many B2B companies struggle with similar issues due to the nature of their work. In particular, professional services firms routinely come up against problems like:
Hiring and training
Hiring and training is a catch 22 for many Professional Service companies, as you need to hire to offset the project load, but hiring creates more work for you and your team in the short term. Not only do you have to onboard your new hire, which requires a significant amount of non-billable time and resources. And, depending on the new hire’s experience, it can take three or four weeks for them to come up to speed and begin generating revenue for the company.
In a year of the Great Resignation, this is a much bigger problem than it ever has.
Project profitability
Measuring profitability can be a difficult task for a Professional Service company. In an effort to grow quickly, some firms may take on projects with slim profit margins, which can impact the overall financial health of the business. Scope creep, low employee utilization, and other factors can impact the profitability of such a project. Understanding what projects are more profitable than others can help your company focus on more profitable gigs or identify where a project’s profit has gone wrong.
Capturing project costs
The major cost to a service-based business is labor but don’t forget about project costs. Software, materials, travel, and shipping are a few examples of costs you need to track, especially if those costs are to be reimbursed by the client. Tracking these costs and remembering to bill them is critical in preventing lost profit.
Acquiring new clients
Maintaining your existing clientele and searching for new clients is a perpetual challenge most Professional Service Companies face. Even if you have solid ongoing client relationships, it's still necessary to acquire new clients to help boost your revenue. However, many PS companies lack the planning and budget for new marketing initiatives to gain new clientele.
Collecting cash
Collecting on invoices is a challenge for many Professional Service companies, with some waiting up to 90 days to collect payment. In a recent report, late payments affect 43% of the total value of B2B invoices issued in North America this year. What’s even more disturbing is the total value of payments overdue by more than 90 days has doubled to 13%. Cash flow thins out quickly when you’re waiting for receivables, making it tricky to cover operating expenses or plan for growth initiatives such as new equipment or hiring.
Cash planning
Cash planning is a process that requires frequent and consistent attention to detail. You may choose to handle this yourself in the beginning, but you will soon learn that keeping up with regulations can be a daunting task. The most common question we are asked is “can I afford to hire”.
The Solution - Bring in the Experts
For Professional Service companies looking to scale outsourcing your accounting and bookkeeping can help alleviate these pain points, so your business can stay focused on the bigger picture. Instead of absorbing all the costs associated with hiring, businesses can benefit from the expertise of an outsourced accounting team to assist in resolving these pain points along with many others that can develop as your business grows.
Contact the Basis 365 Team today to learn how we can help you outsource your accounting successfully, and set up your business for future success!
