IT consultants have to complete jobs on deadline and within budget. Your fundamental role is to listen to the client, accept responsibility for completing the required tasks, and then see it through to completion. It sounds easy, but the details of the work are not simple and it’s easy to get off track, especially in terms of managing both time and money.
Even consultancies that run a pretty tight ship can find areas of improvement. One path for boosting performance is to track metrics that provide insights about tasks, budgets, and profitability. However, you might be loathe to spend time manually calculating these metrics (after all, it’s time you could be spending making clients happy), so these numbers are often overlooked. Fortunately, there are new platforms that combine project management capabilities with financial insights, so you can see the correlations between work and financial results.
Used correctly, such solutions can give you actionable metrics that help you get the most out of every client engagement and allow you to provide optimal service. Here are ten key performance indicators (KPIs) that can help consultants stay on task and on budget with even the most challenging of IT projects:
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1. Manage the retainer
Understanding the dynamic remaining retainer is essential because it helps your firm discover if you’ve mismanaged the entire project. Have you used 70 percent of the retainer but only completed 30 percent of the work? You should have had a running retainer metric that showed you the shortfall, so you could have proactively addressed the situation. Your firm’s partners, principals, and accounting team need insight into such situations so they can step into the project if needed.
2. Track the in-progress (but not billed) work
Everyone on your project team should have an understanding of the project’s overall financials. This helps to provide context for how their time and actions can relate to the bottom line. Providing a work-in-progress metric is very useful to illustrate billable work that has been completed (or is very near completion), but not yet on the invoicing system. Your accounting team will want this allocated as an asset for financial reasons (perhaps if your business needs a line of credit). Work in progress also gives management a glimpse into cash flows and alerts them if there’s a late payment issue that requires intervention.
3. Manage the total client hours
Every outsourced IT project will have a time budget, so your team should know the total logged billable time that is used and still unused. Profitability narrows quickly when your team goes over allocated time and is left holding the bag with time that cannot be billed. Having this context allows management to proactively talk to the client and request more time or money if needed.
4. Track utilization rates
If your firm focuses on fixed fee instead of hourly projects, there’s still the need for utilization metrics to ensure the team is working efficiently. Such metrics can expose situations where some teams are producing more billable hours than others, helping management to uncover underlying reasons for differing performance levels. Utilization also provides a projection metric if you’re considering moving from fixed-fee to hourly.
5. Understand the write-ups and write-downs
Some consultancies will bill the client more or less than the actual amount for the time period in order to dynamically manage the overall budget. Doing this accurately requires knowing the write-up and write-down amounts in near real time, so you can make the right billing decisions.
6. Handle lagging payments
IT consultancy managers must always be aggressive when it comes to receiving payment for services rendered. Expecting complete and on-time payment isn’t rude or unreasonable, so managers must have metrics on the percentage and dollar value of bills paid and outstanding. You should immediately know about red flag situations such as repeat offenders, and you shouldn’t be shy about ceasing additional work until payment is rectified.
7. Keep an eye on profits
Using a project management platform that also tracks hours and payments provides management with a clear picture of profitability. Profitability, of course, is the essential metric that keeps your entire operation going, including expansion, bonuses, operational expenses, and fresh coffee in the breakroom. Managers should review project KPIs on every finished job to spot unprofitable projects that should be avoided and uber-profitable ones that can be presented as models for your sales team.
8. Analyze the contract
Put a metric in place that illustrates the spread between the amount to spend in the contract, the dollars the client has spent, and the remaining balance. You can’t always avoid a project that exceeds or falls short of the contracted amount, but a consistent pattern of not meeting contracted amounts might point to flaws in the bidding process.
9. Check the budget
A complete budget analysis is a corollary to the contract review metric. You need a dynamic data point that shows the budget maximum and the amount of budget used so far. If a finished project is over or under budget, what did your team do differently? Was scope creep from the client successfully avoided? Did you use a different outsourcer that proved to be less expensive?
10. Determine the earned value
Earned value offers a clear picture of a project’s ultimate success. This metric involves dividing the amount earned through work by the contracted amount. It provides the team with a baseline for the value of the completed work, and management with a better understanding of the types of projects that you should or should not pursue.
You can easily access these KPIs without lifting a finger by using a sophisticated project management platform from a company with experience in time and expense tracking, accounting, and project management. Correlating time and money helps consultancies to complete projects on time, deliver efficient work to clients, and protect profits.
Steve Burns, FAIA and Chief Creative Officer, BQE Software (opens in new tab)
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