All professional services businesses will have various cost requirements that ultimately deduct from their bottom line. As a company experiences growth, it often becomes harder to attempt cost reduction while improving organizational efficiency. Any business, however, can always limit or curb unnecessary costs and reduce wastage.
By enhancing processes and encouraging creative thinking, services delivery leaders can reduce costs significantly and relieve pressures surrounding cash flow. This exercise sounds daunting, but it doesn’t necessarily have to be a painful process, but it will require smart thinking. Let’s look at how to reduce costs for your professional services organization.
STRATEGY 1. ASSESS AND MANAGE YOUR EXPENSES
It’s a given that there are a multitude of professional services organizations out there that are spending money on things they don’t actually need. Naturally over time, businesses grow and evolve, which in turn means cost reduction also has to evolve to keep up with the accelerating pace of the business. The moment a business begins growing, owners should be looking into low-cost spending strategies with the goal of increasing the bottom line.
It’s extremely important to keep close to project spending over time, and there are three key items to keep in mind:
Any customer requests that go beyond the initial project scope need to be documented and billed for, no matter the length of the additional time.
Real-time metric tracking is crucial if you want to ensure projects are kept in line with the statement of work (SoW) and there’s no risk of exceeding the budgeted costs.
Standardized processes need to be created to help your teams save time, and there needs to be clear direction on what needs to be done and how they can achieve it.
If there are any unused products or outdated services you’ve identified in your organization, you should eliminate them immediately so you can redirect these spare resources to serve other purposes throughout the business. Some key areas to focus on are training staff, optimizing workflows, and growing your services. If you have higher cash flow, allocating it for business growth can help to maximize organizational efficiency.
There is one caveat to this, and that’s that it can be misleading if overdone. Unneeded expenses are all extremely worthwhile to eliminate, but a significant number of growing businesses become transfixed on this method of cost reduction. They are often heavily constricted and spend miniscule amounts from expense budgets rather than looking into other reliable methods of cost reduction.
STRATEGY 2. INVEST IN TECHNOLOGY
No matter what area of a business you’re trying to improve, there will always be a new software solution on the market that can help. This is no different when looking to reduce costs. Whether it’s social media or an array of different integrations, any organization aiming to reduce costs will need to automate and integrate their systems, or cut archaic legacy systems, so they can provide the best possible service to their customers.
With Precursive, we provide a convenient, easy-to-use solution which helps to reduce costs as well as inefficiencies. Precursive’s project management solution gives you more visibility over the status of each and every project and allows you to make real-time, data-driven decisions. You can preview the project progress, the leading team, the status, and budget allocated to the project. This enables you to calculate the profitability based on your projected and current figures.
Precursive’s customizable project templates also allow you to automate task creation, saving a great deal of time each week. This means you can standardize your operation and recover billable hours that are otherwise wasted on manual tasks.
STRATEGY 3. HIRE CONTRACTORS
Due to the events in the last few years, more people are now working remotely than ever before. The best business owners try to see the opportunity in every situation, and taking advantage of this remote working environment can be a very important strategy in terms of cost reduction.
Not only can an organization save money by not having to rent out as much office space or purchase more supplies, but the list of benefits is drastically reduced for freelancers because they are self-employed. Furthermore, unlike professionals working in-house, studies suggest that remote workers are actually happier with their style of work, thereby boosting productivity.
For many professional services firms, hiring consultants can be a costly exercise, but their expertise often far exceeds their initial costs in terms of value. They can establish best practices and bring cross-industry knowledge into your business strategy to give you a competitive edge.
Contractors and freelancers are independent and work only part-time compared to their in-house compatriots. One of the big benefits of contractors is that they work to their schedule and often produce the desired results to businesses at discounted pricing.
Bench management remains a constant struggle for professional services firms. In short, bench time is the term any hours that are spent on non-revenue-generating tasks, such as an employee having a call with a client about a project. The biggest worry for many organizations is having too many employees on the bench, especially the expensive ones.
To overcome this, you need the right tools to forecast, plan, execute and analyze. To create such visibility, you need to link company-wide data across all departments through a real-time centralized system like Precursive. Our system allows you to monitor the collective hours so you can deploy your team efficiently and ensure your bench time is reduced.
STRATEGY 4. ENCOURAGE WORKPLACE TRANSPARENCY
Not enough businesses understand the huge risks associated with data silos. In short, they can ruin your company. You could lose important data while being exposed with no detailed strategy of growing your organization. The more silos a business has, the more blindspots there will likely be, encouraging theft, fraud, and selfish spenders to your business.
The shortfall of many companies is working with siloed systems. Things can easily get lost between systems and poor visibility runs rampant. The key to perfecting workplace transparency is to have one single source of truth, a centralized system like Salesforce, which can be accessed by all teams, whether they’re on-site or at home. Acting as a singular point for receiving and storing, and monitoring important business data around the business as well as to customers. If you’re looking for more than just words then you’re in luck. Companies that utilize Salesforce see a 35% increase in customer satisfaction and on the other side, customer service agents using the platform themselves experience a 34% boost in productivity.
When working with just one client, a variety of different departments will need to collaborate from the beginning of the customer journey to the end. From customer success to the project management team, having access to real-time data on one single system is crucial in eliminating any data silos and ensuring everything is communicated in the right way from top to bottom.
Incorporating cost reduction strategies into your business means it will become more difficult to hide waste, as they can give you a much clearer view of the growing business and pinpoints where the budget goes. Increased transparency leads to a better understanding of your business and how lower-cost strategies can work for you. Looking at the long-term, this can boost revenue and open up many exciting opportunities.
STRATEGY 5. SEEK RENEWABLE ALTERNATIVES
If you have a sizable office space to house all your staff, chances are it’s using up a lot of energy, and you could benefit by choosing some greener options to cut your electricity bill significantly. There are loads of energy-efficient appliances out there such as smart thermostats and LED lighting can help bring your bills down.
As well as energy-efficient equipment, it pays to educate staff on the ways of optimizing energy use. This not only helps to lower the carbon footprint of the company, but also inspires a positive workplace culture focused on utilizing cost reduction strategies. A company that sets objectives on caring for the bottom line will encourage employees to care more about their own work to grow the business, and as such will make them more motivated and productive in the office space.
This is not just an imperative for smaller companies, Salesforce have recently reached net zero residual emissions across its entire value chain and has achieved 100% renewable energy for all its operations. Salesforce achieved this impressive feat with the help of Sustainability Cloud 2.0 which helps companies get to Net Zero much quicker, enabling Salesforce to reduce its carbon accounting process from over six months to six weeks.
HOW PROFESSIONAL SERVICES COMPANIES CAN USE PRECURSIVE TO CUT COSTS
Accurate Time Tracking
Precursive allows you to keep track of the time you spend on each task and log it against them on your board. The logged time for each task can then be checked to see if it matches the estimated hours you planned for them.
Improves Resource Management
Precursive lets you see the availability of all your teams, allowing you to assign tasks and move deadlines if necessary. Work can be distributed efficiently, which will help to avoid saturation of talent.
Project Management
Precursive’s impressive project management solution gives you greater visibility of the status of each and every project, and empowers you to make decisions in real-time. We’ve mentioned this earlier in the guide, so take a look at what Precursive’s Project Management functionalities can do for you:
Break down a project and assign tasks to your team
Plan, schedule and track the project’s progress in real time
Share tasks, documents and project plans with your team and customer
Identify Non-Profitable Services
Precursive can also help professional services companies to reduce costs by identifying profitable projects. Our software can help to determine the cost of hours and aid businesses in improving their operations by increasing efficiency using our project and resource management solutions.
Precursive helps you assess which types of services are not profitable for your organization.
THE BENEFITS OF COST-CUTTING STRATEGIES
Improved profitability
Cost-cutting provides a foundation for more dividends to the shareholders and increased retention of profit for business expansion which in turn will create more opportunities for employment and further industrial prospects.
Increased cash flow
As well as increasing profits, improved cash flow can be a beneficial by-product of cost reduction. Spending less on supplies leaves more cash readily available to reinvest in the business or repay debts. Improving cash flow can be a source of great success for an organization, especially during times of economic turbulence.
Enhanced competitive position
If an organization can minimize expenses, they can keep prices low and attract more customers. If a company can be more cost-effective than its competitors without compromising quality, then it makes it that little bit easier to retain customers and limit churn.
Improved efficiency
Cost-cutting can also help to improve efficiency by identifying and eliminating waste. This can lead to faster turnaround times, lower costs, and happier customers.
Increased employee morale
Cost-cutting can also lead to increased employee morale by showing employees that the firm is committed to their success. This can lead to increased productivity and loyalty. Increased profitability often means employee bonuses are more viable. Monetary incentive, as well as clear business goals is the perfect formula for happy and productive employees who are committed to the organization and its vision.
START COST-CUTTING WITH PRECURSIVE TODAY
No matter your awareness and knowledge of cost reduction going into this guide, it’s very likely that you know a little bit more coming out of it. As you can see, there’s a wide range of cost reduction strategies business owners can choose from to help increase profits. It’s worth mentioning that not every strategy will work for every business, so you should consider your company and specific goals. Then, it’s about looking into cost-cutting measures so that you don’t have to take out sizable loans to get by. Instead, you can put your business on the path of growth and profitability.
Are you looking for help on cutting costs within your professional services delivery? Precursive can help. Our software can help you identify where you have any services that aren’t profitable. With real-time data on budgets, PS profit and client billings, we can help you maximize your profitability and get more control over your delivery. Take a look at our professional services automation today.
