How to Choose ERP for Professional Services Industries

If you’re looking for ERP software for professional services, you’re in the right place.

Choosing ERP can be a daunting task. Over the years, solutions have popped up in every nook and cranny of the services spectrum, but many businesses get scared away from the reputation traditional ERP systems have for their complexity. This is unfortunate, considering that ERP for professional services can transform your business into an efficient, profit-making machine.

So–what kind of professional services ERP software tool do you need?

In this article, we’re going to cover the good and bad of ERP, and what you should consider before buying ERP for service industries to get the good without the bad.

What is professional services ERP software?

Professional services ERP, which also goes by the lesser-known name of Professional Services Automation (PSA) software, is purpose-built for services businesses to manage and optimize the project or service lifecycle from sale to billing. It’s more project-driven than traditional product-based ERP and provides greater flexibility and automation in features like project management, resource management and billing. This allows services firms to cater to the demanding needs of diverse clients.

It means more detailed knowledge of project schedules, budgets and finances. Greater clarity of your staff’s schedules, availability and assigned work to plan projects quickly and nimbly. Multiple billing options to satisfy both time and material and fixed-price projects.

And let’s not forget that in services, time is money. This means ERP for professional services firms will (or at least should) make it easy to track time and employee billability, giving you a more solid grip on profitability.

In short, ERP for professional services–or PSA–ensures that your teams have everything they need to sell, deliver and bill for services efficiently and at higher profit margins.

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Which services industries use ERP?

All types of B2B services industries can benefit from an end-to-end solution that streamlines their vital business processes. That’s why you’ll find services firms across all industries using ERP software.

Industries like:

  • Marketing and advertising agencies
  • Digital agencies
  • Consulting firms
  • Systems integrators
  • Engineering companies
  • Architecture and Design firms
  • Tech businesses with embedded services
  • Software-related services
  • T consulting companies
  • Legal firms

What are the basic features of ERP?

ERP for services firms combines 10 core features in one system:

  • CRM
  • Project management
  • Financial management
  • Accounting
  • Resource planning
  • Task management
  • Time tracking
  • Business expense tracking
  • Billing
  • Reporting

An ERP solution will also automate many of the repetitive tasks and difficult functions associated with these features. For example, they have the capacity to automate invoicing, quoting, timesheet population, report generation, resource role matching and financial insights.

What are advantages of ERP for service industries?

Services industries use ERP software to become the most efficient they can be leveraging one source of truth. Universally, services businesses reap a number of benefits–the most important of which can determine the success or failure of your business.

Benefit #1 is vastly improved predictability of resources and revenue.

With predictability comes control. Meaning–ultimately–that you control your revenue. Not the current economic climate or how hard your sales teams hit the pavement during a drought.

Other universal benefits are:

  • Higher productivity levels
  • ncreased billability
  • Lower operational costs
  • Fewer revenue leaks
  • mproved quality
  • Better profit margins

But we can break down the advantages of professional services ERP further using a few industry examples and see exactly what benefits certain businesses derive.

Marketing

For marketing agencies, it’s all about “production.” Projects are moving targets with tight schedules, changing customer briefs and managing many different project deliverables and tasks with multiple resources involved. Add to this managing a mix of fixed-price, time and material and retainer projects of varying size and complexity and the results are potential overdelivery, resource shortages or diminishing margins and dissatisfied customers.

ERP software for marketing agencies turns all of this around by uniting your sales and project delivery teams. Sales teams can ward against spreading the delivery team too thin by checking resource availability. Meanwhile, project managers can plan better knowing what’s coming down the pipeline.

Any new customer briefs will be shared across the sales and project departments to keep everyone on the same page and delivery within scope. Projects are easier to monitor with more eyes on the ball, and in the end, your customers get the results they wanted.

Real time project budget and margin information serve as early warning indicators to keep things on a sound financial track. And this same information, in a historical context, can greatly aid in pricing future project or retainer business for optimum returns.

Consulting

An ongoing challenge for consulting firms is getting an excellent grip on resource management in order to attract and retain the right knowledge and bring it to bear at the right moment.

With ERP, consultancies have a detailed view of resource availability. Combining that with project planning views, they can find opportunities to speed up delivery and reduce bench time. Coupled with advanced historical project data, they can know instantly what talents they need to hire and retain and how to best utilize them. This, in addition to detailed budget and margin information on past projects, will help them price correctly and maximize revenue per client and project.

Having data at their fingertips is also vital for consultants to pivot as needed, make important judgment calls and create the best client outcomes. ERP for consulting firms eliminates silos, providing real-time project tracking information and centralizing project files, statements of work and pertinent information in one transparent system, allowing consultants to provide faster, better services to their clients.

Technology

Just like in the consulting world, excellent resource forecasting has a significant impact for technology firms to wield a workforce with sufficient expertise. Otherwise, low margins and failure to thrive long-term can result.

But as tech companies frequently deal with software or systems that are critical to their clients’ success, there is high risk involved. As such, more stringent time planning and quality assurance safeguards are needed.

See how RaceRocks 3D mitigates risk and delivers high-stakes projects with VOGSY

Tech firms also share some of the agency pain as well; high pressure production-type work with tight deadlines and the potential for changes in customers’ needs. All the more important to keep a close eye on the trinity of timelines, budget and margin.

ERP makes time planning and KPI monitoring watertight thanks to quick, easy resource planning with a bird’s eye view of your teams’ schedules and availability. Then, you can track project timelines visually in Gantt charts as well as the start dates and due dates of deliverables in project milestones. Time, budget and margin are tracked on the fly, putting you in the driver’s seat at all times.

To augment quality assurance, ERP makes a number of procedures more efficient. These include smooth and simple approval processes for quotes, time tracking, expenses, invoices and supplier invoices, client sign-offs through email integration and having time stamps you can see on actions taken within the ERP software. But also, quality assurance comes down to tidy document management, proper time keeping and reporting across the entire Quote-to-Cash chain, all of which ERP supports.

What are ERP disadvantages?

Now for the bad news.

Some of the biggest complaints about ERP have been and for some vendors still are related to slow, arduous and costly implementation. It’s often fraught with shifting goals and countless customization options that lead the team ever further astray from the all-important quick Time to Value.

Keeping ERP users engaged can be a real challenge. Simple things like tracking time and entering expenses are crucial to your single source of truth and many other outcomes depend on them. Whatever ERP system you choose, user adoption needs to be a key consideration. That translates to having an easy-to-understand UI and short learning curves, as well as providing benefits for the users that will keep them coming back. No matter where, when or on what device.

In fact, these issues are often the reason for failed ERP projects. Otherwise, they can drive many mid-sized services organizations away from the ERP software they actually need to make their businesses more efficient, effective and profitable.

How to choose ERP for professional services

This section is not going to deep-dive into each ERP feature’s desired functionality points—we broke that down already in our PSA buyer’s guide.

Instead, we’re going to focus on other critical aspects of ERP selection that maybe nobody warned you about.

If you want the good without the bad, use the following list as your guide.

Get real-time project accounting

You need continuous insights into the money side of your business. And they need to be calculated automatically for you.

If you’re hashing out your project budgets and margins on a calculator, you’ll miss critical moments to get in front of problems that crash your project in terms of profitability.

Data is ERP’s strong suit. Make sure you harness a system that gives you in-depth data on your predicted vs. actual project budgets and margins at all times.

As your teams work, time, costs and expenses should be tracked against projects in real time so that budget burn and margins are always up to date.

Control of profitability at the project level like this is vital for maximizing your revenue. As well, a system that provides a granular level of project finances enables you to make your most lucrative projects repeatable.

Solid accounting features also include automated invoicing based on integrated time tracking or invoice scheduling, syncing Accounts Receivable with your accounting software, unpaid invoice tracking, revenue forecasting and employee billability tracking.

The clearer the picture your ERP software gives you of your company’s financial health, the more lucrative action you can take.

Demand quote-to-cash

What’s more important than flexible project planning, resource management and billing? ERP software that optimizes your entire quote-to-cash process, because the overall service cycle is greater than the sum of its parts.

From the quote-to-cash perspective, everything you use to deliver services–including CRM, project management, resource scheduling, time and expense tracking and billing–should blend together seamlessly.

CRM should hook into project and resource management to give you real project and resource scheduling information at this critical stage. You need to be able to start matching potential resources with the right skills to future work with automated role-matching. This will give your teams the necessary information to determine the best time to take on new business and draft better proposals based on historical project performance.

Time and expense tracking should hook into project management and billing to update project budgets and margins and automatically populate invoices for accuracy. Then, you could click a button and have the software create your invoices for you to approve, drawing from timesheets and projects, or get the software to schedule regular invoicing on its own.

And everything you do, from inputting pipeline opportunities to closing projects, should update financial reporting in real time, from your revenue forecast to your company performance KPIs, so you’re never in the dark about the impact of your actions and decisions.

Avoid a zillion integrations

Do yourself a favor and move away from modular ERP systems that rely on dozens of integrations to stretch their limits. Get a full-service quote-to-cash ERP instead.

Why?

Because, for one thing, the reality of making and maintaining integrations in-house can be hard work. It’s also not without risk considering that only a few people know these integrations inside out. Not to mention that if one tool changes, you’ll need to understand the dependencies and potentially do it all over again.

But the more urgent issue is lingering information silos that slow your teams down. The work breakdown structure often gets lost in integrations, where project, deliverable, activity and task information doesn’t map appropriately. And so, integrations between tools like time tracking and billing rarely results in a seamless flow.

Do make sure, however, that your critical service operations management software has the capacity to integrate easily when and where it needs to. Commonly, that’s at the start and finish lines: Marketing and Sales Automation software (CRM) and Account software.

Make sure collaboration is part of the deal

Collaboration between all of your team members is foundational to your services firm’s operational success. Your business s your people. If they can’t work well together, what business is there to run?

Collaboration brings remote teams together like they’re working side-by-side. For both remote and in-office teams, it makes for more effective communication, greater productivity and higher-quality work with more inspiration and creativity. This has direct outcomes for your clients.

For us, better collaboration is one of the main reasons we built VOGSY on Google Workspace. We believe teams work better when they’re able to harness a central, cloud-based file sharing location in Google Drive, configure quote and invoice templates from anywhere in real time with Google Docs, and improve Quote-to-Cash speed by 80% working from their inboxes with Gmail’s dynamic email.

But also, there’s internal messaging, cross-departmental sales, client and project data sharing and transparency. Transparency of client communications, your projects’ work breakdown structure and the goals and customer expectations for the projects your teams are working on removes hidden obstacles from your teams’ paths.

Avoid these pricing pitfalls

#1: Lock-in

Whilst discounts on multi-year deals seem attractive, bear in mind that your business can likely change during that time and your requirements will change with it.

#2: Editions

Many vendors provide software “Editions” with increasing levels of functionality provided at ever-increasing cost. The upside: you can “start small.”

In reality, you are likely to hit a feature wall quickly and upgrades are unavoidable. Note that in almost all cases, these increased prices apply to your entire user population, regardless of whether they all need these additional features.

#3: Services spiral

Traditional ERP vendors thrive on services. Anything is possible, it just requires “some work” from specialists to tweak the product to your needs.

Sounds good in principle, however chances are–looking back after some time–that you will have spent more than you had planned on external expertise. All the while becoming increasingly dependent on others for the future of your business.

The bottom line: Software should be as near to “consumption-based” as possible.

If you need fewer licenses this month, why pay for them?

True Cloud providers are fast and nimble, carrying less overhead themselves and are therefore able to provide you with simple, smart and secure software in a flexible pricing model and at a substantially lower price point than traditional vendors.

Shoot for speedy success

Generally speaking, for mid-sized firms, you should be live  within a three-month window.

Efficient onboarding will keep costs down and minimize the amount of time you need to invest in software adoption, and away from running and growing your business.

Ask the ERP software vendors on your list about implementation time, constraints and requirements. Make sure there aren’t a lot of “ifs” and conditions to wade through.

Set yourself the goal to get the first batch of client invoices out of the door in the shortest possible time frame.

Conclusion

ERP for services businesses, or simply PSA, will help your business run as predictably and efficiently as possible, and therefore become as profitable as possible. It provides a single source of truth, collaboration and automation and the provision of key financial insights. Having insights in real time is non-negotiable if you want to be nimble, as is selecting an ERP that delivers integrated quote-to-cash functionality.

Simplicity should be the defining characteristic of your ERP and your purchasing journey. If you’re choosing collaborative, quote-to-cash software, you’re on the right track.

If you need help with finding the best ERP for your services business, download our free PSA buyer’s guide.

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