June R. Jewell, CPA, President & CEO, Acuity Business Solutions
Deltek Premier Partner, June Jewell of Acuity Business Solutions shares some ideas from her new book, “Find the Lost Dollars” on how you can find the lost dollars in your firm and increase the overall bottom line.
With the decline of the global economy and increased competition for architecture and engineering services, our clients are struggling to reinvent their strategies and focus in order to remain successful. In consulting with A&E firms for 24 years, I recognized consistent patterns in the mindset and operational practices that undermine their ability to thrive and grow. In my new book, Find the Lost Dollars: 6 Steps to Increase Profits in Architecture, Engineering, and Environmental Firms, I define the challenges that consistently cause our clients to lose money on projects, provide best practices for effective business management, and prescribe a process to make measurable improvement in project profitability.
Most of these detrimental practices are caused by a culture that has carried through generations of firm leadership. Practices such as taking projects that are doomed to lose money, ignoring the scope of the contract, and failure to enforce company policies, directly contribute to project budget overruns, lost opportunities, and poor management of resources. In addition, many firms resist change, and do not leverage the efficiencies provided through technology. There are thousands of A&E firms that are 10 to 15 years behind the rest of the business world, and this causes them to lose revenue, and waste money on inefficient marketing and project management practices.
In looking at the following nine areas, and the potential gains from improving your people, processes and technology, you can start to find lost dollars in your projects, and increase the overall bottom line of your firm:
1. Cost of Lost Opportunities: A great deal of money gets tied up in the pursuit of new projects. Firms that do a poor job of deciding which projects should be pursued, and then managing a sales process that gives them the best chance to win, find that their win rates suffer, and they lack consistency in bringing in hew business.
A good Go/No-Go process must be utilized in deciding which projects to bid on. Opportunities need to be managed to avoid missing deadlines, and ensure your firm has a high probability of winning.
2. Lost Revenue from a Cumbersome Proposal Process: Writing and assembling quality targeted proposals is critical to success in winning work. If data is not managed effectively and proposals are cumbersome to produce, time is wasted, and win rates are poor.
Processes and systems need to be utilized to efficiently manage qualifications data, and avoid cutting and pasting, and turnaround time for developing quality, targeted proposals.
3. Lost Revenue Due to a Flawed Estimating Process: The estimate is critical to ensuring a project will be profitable, yet many firms do not have control over the estimating process. The cost of this inconsistency is poor estimates, which result in poor contracts and budgets, as well as projects that are harder to manage.
Implementing a defined estimating process, using appropriate rates, terminology, and structure can go a long way towards improving overall project success and profits.
4. Lost Revenue and Excess Costs from Scope Creep or Extra Services not Recovered: Scope creep is caused by many factors including the culture traps unveiled in Chapter 1 of my book. Control of extra services is critical to ensuring that the firm is not giving away services for free.
Best practices for managing scope creep include effective communication within the project team, implementing processes around time management and approvals, and appropriate definition of extra services monitoring and approval policies.
5. Cost of Low Utilization and Poor Resource Scheduling: The ineffective scheduling of employees and forecasting labor requirements into the future will make hiring decisions tough, and will cause poor utilization rates.
Ensuring that the right people are available to work on projects, and carefully balancing the demands of projects on a weekly and monthly basis will improve utilization rates and ensure that the right amount of people are employed to meet the demands of backlog and forecasted project labor requirements.
6. Cost of Poor Project Management: Poor project management is caused by flawed budgeting processes, using resources that are not planned, and not planning for changes affecting the cost of the project. These problems can have a substantial effect on project profit margins.
Ensuring that project managers (PMs) have the tools they need to be effective, and holding employees accountable to follow company policies will have a marked impact on project success and profitability.
7. Cost of a Long Invoice Cycle and Poor Cash Flow: Poor cash flow causes the firm to have to borrow money, and can strain client relationships. This weakens a firm’s ability to grow and invest in areas that need improvement.
By improving the entire billing cycle, including time management, and implementing better collections processes, the Accounts Receivable (AR) turnover rate can be reduced.
8. Cost of Non-integrated Systems with Multiple Silos of Redundant Data: Having data in many different places is inefficient and causes employee’s time to be wasted in redundant data entry and manual tasks.
By implementing a fully integrated system, it is faster to find information, improve reporting, and reduce inefficiency caused by the need to create spreadsheets.
9. Cost of Losing a Client: It is critical to keep clients happy and ensure that we do not lose the profitable clients. Establishing processes to ensure outstanding client relationships is critical to firm success, and is ultimately less expensive than finding new clients.
A good client relationship management (CRM) process and system will ensure that you protect your best clients, and reduce the risk of employee turnover.
In Find the Lost Dollars, I go into much more depth about how to improve each of these areas, and outline a 6-Step process for evaluating and improving your business operations. I have also provided some online tools at www.FindTheLostDollars.com that can help you analyze the health of your firm, and develop a plan to find more money in your firm.
Make sure to attend the Find the Lost Dollars Session at Insight 2013!