Five hacks for boosting EBITDA by focusing on billable staff utilization
Posted by Unit4 Communications
As a CFO of a project-based organization, you need to know exactly how overall company performance is trending. Because people are the most significant cost on every project, to boost net profit you need to trace all expenses related to them while tracking all income generated by them through billable hours. Here are five ways to do exactly that.
“To improve margins, PS executives must continually focus on increasing employee billable utilization, as well as increasing the percentage of billable employees. The primary gain from increased utilization is a significant increase in net profit.”
These are the words of industry analyst, Service Performance Insight (SPI) in its 2020 benchmarking research. To boost net profit, or EBITDA (earnings before interest, tax, depreciation and amortization), the need to focus on billable resource utilization is paramount.
In a professional services organization (PSO), the key to doing that lies in the right technology to better manage your most valuable resource.
1. Better match work with skills
Better matching work with employee skills improves the chance of getting a higher rate for the work done by each fee-earner, which equates to a higher margin.
To do this, you need the right people planning & analytics solution; one that delivers enterprise-wide data visibility and features a modern, people-centric, customizable interface. This enables staff to drill-down into billable staff data, including their location, availability, seniority, certification, skills or languages, or any other perspectives users choose.
This solution needs to be supported by other automated, people-centric, time-saving features, such as mobile timesheets, to provide an accurate record of billable hours. When you have the right person with the right skills assigned to the right task at the right time, average billing rate can be increased, which means higher revenues and improved net profit.
2. Reduce bench time
Another way to increase revenue and margins is by distributing work more efficiently and minimizing your use of subcontractors, thereby maximizing the time that staff generate income through billed hours. To achieve this, you need instant, live visibility over all fee-earner activity — both billable assignments and non-billable time — and the ability to quickly evaluate the proportion of work delivered by contractors.
By analysing consolidated information you can react in the short term and predict, plan and execute in the medium and long term. Having all data in a single ERP solution provides the ability to reschedule on the fly, manage change, identify people that need re-skilling so you are better prepared to meet future demand and keep staff off the bench.
The end result is higher utilization rates, increased revenue, better gross margins and higher net profits.
3. Spot project under-performance early
This is one area where a ‘single version of the truth’ is absolutely critical. Real-time visibility of actual performance compared to budget, identifying trends and hot spots through easy to understand data across projects and programs provides the insight needed to act quickly.
With these capabilities at your disposal, project under-performance is instantly visible at the earliest possible stage by comparing the budget for the work with the expected time at completion (EAC). If the EAC is increasing, there is a problem that needs to be addressed.
4. Automate tedious administration with AI
By automating repetitive, manual admin processes which add no value to the organization, you reduce people costs, increase revenue, raise employee productivity, maximize billable utilization, and improve data accuracy.
Let’s take the example of fee-earners recording time and expenses (T&E). By using natural language digital assistants (like Wanda), staff fill timesheets via mobiles using a conversational interface. Using pattern recognition, predictive analytics and sentiment analysis, Wanda learns preferences and context, even the way users talk. It can also suggest actions or provide contextually relevant insight.
The drastic reduction in time spent on non-billable administration minimises leakage of billable time, effectively creating additional hours that can be billed to the client.
5. Your people come first
So, automating administrative processes is part of the puzzle — it improves the people experience, while freeing consulting staff to focus on meaningful work that adds value to the organization, and its bottom line.
But technology alone is not the answer. It’s about how it helps people work better to make a greater impact. Because people are your biggest cost, the key to improving net profit lies in not only in tracing all people-related costs and income but also in developing them through learning, development and career progression.
This is why it’s crucial to get the utilization balance right.
To find out more about improving EBITDA by focusing on billable utilization, visit the Unit4 Put Your People First page.