By Michael Burns
Illustration: Bob Daly
 FINALLY, PSAs ARE HERE: SOFTWARE SOLUTIONS TAILOR-MADE FOR PROFESSIONAL SERVICE ORGANIZATIONS. HERE'S HOW THEY CAN WORK FOR YOU
The popular vendors of accounting systems for businesses have traditionally neglected the needs of professional service organizations — accounting firms, consulting firms, engineers and architects. Happily, for new vendors with new solutions, this oversight has left the door open to them. At one end of the range of solutions for professional service organizations are timesheet systems, which provide timesheets, expense reporting and project management. Then, there are time-billing systems that include billing and sometimes purchasing, allowing for accumulation of external costs for services and products so project managers can compare actual costs of time and materials to budget.
And now there is professional service automation (PSA) — an integrated solution to meet all the system needs of professional service organizations.
PSA usually includes timesheets and time billing and also extends the solution to include customer relationship management, opportunity management, resource management and knowledge management. (accounting functions — general ledger, accounts receivable and accounts payable — are often not included with timesheets, time billing and PSA, but there are links with leading accounting systems.)
PSA has been a buzzword for a couple of years and many new companies have emerged. Some of them struggled at first because they had initially focused their attention on high-tech companies, but PSA vendors have since set their sights on serving the needs of all professional service organizations.
So, what are some key PSA functions and what can they do for your organization? A basic feature is a time-sheet system; after all, entering time should really be easy and fast. (What employer wants to give employees an excuse to delay the recording of their hours?) Timesheet systems may track overtime, vacation time or banked hours, as well as have rules associated with the accumulation or use of these hours. Some systems provide different views — such as "daily" or "weekly" — and the ability to enter both start time and end time, or to use the system's stop clock.
Timesheet systems may also include expense reporting with multicurrency and Canadian taxation functionality. Some even provide an electronic method for timesheet and expense report approval. The timesheet system should also let you easily compare budget to actual.
PSA is an ideal application for the Internet and this is especially true when it comes to timesheets. Often, employees work offsite at the client's premises and may not come to the office for days or even for weeks at a time. But with a Web-enabled product, they can enter time and expenses from their hotel or from their home. Some Web-enabled products allow project managers and administrators to do their jobs on the Internet.
One area in which many PSA solutions are a bit weak is time billing. As most accountants know only too well, there are many issues related to invoice generation, revenue recognition, utilization and realization reporting, and management of work in progress. Unfortunately, many PSA solutions don't maintain work in progress nor do they have an automated way of allocating writeups or writedowns to staff.
PSA can also help with project management, a critical factor in any project's success. Many companies don't use project management methodology and don't have tools to assist in the process. (For a resource on project management methodology, consider joining the Project management Institute, www.pmi.org, with more than 20 chapters in Canada, or check out Solutions Network, www.solutionsnetwork.com, which issues a free quarterly project management newsletter.) Many professional service organizations discover if they have done well only after a project is complete — when it's too late to do anything about it. Some PSA systems allow employees to enter the estimated time to complete a given phase or project. In this way, project managers can compare budget with actual time plus estimated time to complete. Other systems allow you to track key dates, with e-mail alerts if they're not being met.
Another function that is offered by PSA software solutions is customer relationship management. How does this function work? Many organizations have two or three databases for customer information, such as their time and billing system and their marketing database, and they have customers in their e-mail system. Customer relationship management brings the databases together. The thing is, customer relationship management initiatives have received a bad rap because of costly implementations not meeting initial expectations. But what company would not want a tool that let it better manage its customer relationships?
PSAs also offer opportunity management, which helps with estimating and proposals — a critical process for professional service organizations. The estimate may be calculated based on rates and estimated hours; revisions will likely also be tracked. The system should generate a proposal, and update the project budget based on the estimate. These services also include monitoring the sales pipeline.
What about resource and knowledge management? PSA solutions for the former include scheduling resources to find the best employee for the job and keeping staff gainfully employed. Some PSA vendors include human resources and payroll, others provide integration to many of the leading human resource and payroll systems. As for knowledge management, PSA solutions allow employees to share information that will make them more productive. This information could include best practices, e-mail discussions and documents related to the project. The software system allows easy ways to find information using keywords and tracks revisions to documents.
Finally, some time-billing and PSA systems include accounts receivable and accounts payable information. But other systems provide integration with many of the leading accounting systems. Integration typically includes exporting customer invoices to an accounts receivable system. Supplier invoices that are allocated to a project should also be integrated. Ideally, there is also integration of customer and supplier files.
The business case for PSA
So you have decided you want software for your organization's timesheets, billing and more. But is there a compelling business case to implementing a PSA solution — which can cost as little as $150 per employee for the simpler timesheet systems or as much as $3,000 per employee? Yes. Just by computing utilization, employees will improve their numbers. For example, a 2.5% increase in utilization for a firm of 50 people with an average billing rate of $150 an hour could generate almost $350,000 to the bottom line: 2.5% (productivity increase) x 40 (hours/ week) x $150 (average rate) x 50 (number of employees) x 46 (weeks/year). Other benefits include the time saved by automating manual processes. You will likely save days in billing alone (typically one of the most inefficient processes in professional services organizations) and bills can be generated a few days, at most, after month's end. This will improve cash flow.
Don't want to buy the software? Some vendors rent their solutions. These are called application services providers. Here is how it works. The application service provider (ASP) hosts the application on its Internet site, which is typically equipped with state-of-the-art technology and security. That way, you can also avoid the costs associated with managing the computer and database that goes with it. On the downside, you must rely on Internet availability –– and there may be nagging concerns, despite sophisticated technology, that your data isn't properly secured. Unfortunately, a significant number of high-profile ASPs have disappeared over the past few years, which has made it more difficult for the remaining ASPs to generate business. Nevertheless, application service providers should continue to make inroads, given their compelling business case, the decreasing costs of communication and ever more reliable internet connections.
Solutions for professional service organizations used to be hard to come by. Now, with so much competition, it's hard to figure out which ones to examine in detail before making a selection.
Michael Burns, MBA, CA, is president of 180 Systems (www.180systems.com), which provides consulting advice in the selection and implementation of accounting and ERP systems. He can be reached at 416-963-1296 or at mburns@180systems.com.
Technical Editor: Deryck Williams, CMC, FCA, partner at PKF Hill in Toronto. |
