If your project service management (PSM) system doesn’t automatically adjust billing based on contract terms, you’re probably under-billing and losing money. To remedy this situation, you need to end your reliance on multiple, manual inputs and optimize your contract management processes.
This post explains how to maximize services dollars with a simple tweak to your PSM and CRM systems.
Understanding the Finer Points of Maximum Allowable Rates
It’s a well-established fact that professional service organizations (PSOs) increase billable hours by 4% when they automate project-tracking processes and minimize manual data entry; they can further boost revenue when they use automation to correctly bill the ‘maximum allowable rate’ for all project work.
PSOs’ customer contracts normally have provisions for the maximum allowable rate defined in the contract terms, but you may not always recognize in which contracts you’re not billing at that rate. Since customers are rarely eager to pay the highest rates, the burden is on your team to identify where your project deliverables call for changes to the normal rate.
‘Premium-rate work,’ for example, is commonly under-billed by PSOs. Even though a contract allows for premium billing in exchange for things like unique skill sets, weekend and holiday work, and quick-turn items, PSOs fail to capture and calculate 100% of these occurrences in their invoices.
Many customer contracts also include performance-based incentives that allow higher billing rates when milestones are met within specified timeframes and/or at specified quality levels. Again, PSOs can forget to “get paid” for such high-value delivery, and in both situations, the under-billing happens when the PSO has no way to automatically capture each project situation in a timely and accurate manner. When billings rely on manual project-tracking or manual application of billing rates, the errors that occur typically favor the customer, not the PSO.
How to Maximize Your Service Revenue
Fortunately, recognizing, calculating, and billing for the maximum allowable rate on specific projects can be done without any new work for your PSO teams. All you need to do is connect your PSM system with your CRM – or, even better, have a CRM-based PSM. This provides automatic and customer-specific “premium rate” and contractual revenue calculations that maximize billing while adhering to the terms of the contracts.
Here’s how it works:
The integrated CRM-PSM provides a customer-based infrastructure that accounts for the specifics of each contract when making billing calculations. With the two systems combined, you have data regarding variable billing rates per the contract, demographics (i.e., location, status, category, etc.), and other applicable parameters.
These billing rates are automatically fed into the timekeeping system, which performs invoice calculations based on the establishment of maximum rate parameters per the contract, and your team only has to input the parameters once – the integrated CRM-PSM system handles the rest. The payoff is even bigger when a customer hires you to perform multiple projects; in this scenario, a project manager defines the rate parameters in advance and can set the system to replicate them across all projects for that customer (assuming there’s a master service agreement). This way, you can bill for the maximum allowable rates to optimize your firm’s revenue.
Remember, it’s your responsibility to recognize and calculate the maximum allowable rate for work performed. Are you getting paid what you’re worth? Don’t you want to be?
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TimeLinx delivers innovative project & service management software as a complete solution that perfects the sell-track-manage-support-bill cycle that services organizations must have to delight their customers; TimeLinx brings the cycle together in a single application that offers less frustration, better project management, complete reporting, and improved profitability – all specially designed for Infor and Sage.