Order-To-Cash Optimisation, The Key To Boosting Profits
If a roomful of executives were offered the opportunity to save their company millions of pounds each year, you’d expect most of them to jump at the chance. Others, more cautious than the rest, might ask, ‘what’s the catch?’ There is of course a catch, for in a world where there is a relentless pressure on margins, how you improve efficiency and eliminate waste in a bid to squeeze the very last drop of profit will require a certain amount of adjustment in performance.
The way that these significant sums can be generated is by optimising order-to-cash processes, so that professional services companies can make a positive impact on their bottom line.
According to research conducted by Deltek, a one-hour increase in ‘realised’ revenue per consultant per month can add £120,000 to the bottom line per 100 staff (based at an average billing rate of £120 per hour). That works out at more than £1m per year for every 1000 fee-earners in the business. So, for a large firm that employs 10,000 fee-earners, it’s easy to see how the numbers add up.
Therefore the only obstacle to unlocking this extra money is ensuring that a business has an order-to-cash process that is extremely well optimised.
It’s especially true when you consider that two thirds of the UK’s 50 largest professional services firms recently surveyed (Millward Brown research commissioned by Deltek, April 2014) conceded that they are only ‘fairly well optimised’ or ‘not optimised at all’ for profitability in their order to cash process. It suggests that firms have the opportunity to increase profit, not by growing sales, cutting costs or tightening belts – but by doing something they already do, only doing it better.
The same research – which included some of the largest and best-known professional services firms in the UK – found that 78% of these firms have already adopted a single ERP strategy. Inconceivably, only 32% feel their order-to-cash process is extremely well optimised, causing an unfavourable impact on margins for the remaining 68%.
It is clear that for optimal results to be achieved, the key for Professional service firms is a) the right control environment for their business, and b) the right system in place, one that is project-based and built to support their specific workflows and business objectives. Process optimisation can not happen with a generic solution which takes a one-size fits all approach. The marketplace for PS firms is highly competitive and one essential strategy to staying ahead of the game is to have your order to cash process highly optimised.