How to tackle the top four challenges of running an agency or firm
When building a professional services business such as an accounting firm, creative agency, architecture firm or consultancy, there are four common challenges you’ll likely face: managing your ever-growing list of projects, tracking billable hours, getting paid on time and keeping a handle on your cash flow and revenue forecast.
Fortunately, if you’re aware of these challenges, you can put processes and technology in place to help you manage all the moving parts as you grow and stay in control of your business.
Apps available in the Xero App Store can help streamline and automate some of these processes, giving you more visibility over the metrics that matter so you can drive profitability while keeping your clients and staff happy.
1. Forecasting your revenue
The challenge: One of the biggest hurdles for professional services businesses is predicting revenue – important for reporting to stakeholders, making hiring decisions and forecasting overall growth. Shifting market dynamics and fluctuating client demands can make it tricky, and relying on historical data alone can lead to inaccuracies.
How to address it: Start by analysing your target market. Look at similar businesses to get a sense of pricing and demand, and then use conservative estimates to create your own revenue forecast. As you gain experience, refine your projections based on actual data and consider creating multiple forecasting scenarios—best case, worst case, and most likely. When you’re ready to go beyond spreadsheets, reporting software and apps with revenue forecasting capabilities can help you visualise trends and adjust as needed.
Apps can help: Syft can help you create beautiful, interactive reports, forecasts and dashboards that sync with your Xero data and give you a full picture of your business. ProjectWorks can give you smart revenue projections based on financial and resourcing data, all of which you can see and control from within the app.
2. Timesheeting and tracking hours
The challenge: Keeping track of hours worked can be tedious, but it’s crucial for billing clients accurately and managing resources effectively. Inaccuracies in time tracking can quickly eat away at your profitability, and inconsistencies can throw off timelines and budgets for projects, burning out employees and losing the trust of your customers.
How to address it: Implement user-friendly time-tracking software that encourages your team to log hours consistently. Look for apps that allow for real-time tracking and integrate with other systems your team uses, like Xero. This type of technology can give you more visibility over who’s working on what, and for how long. The result? You get tighter control over project budgets and hours to maximise profitability of jobs, and can more accurately quote in the future.
Apps can help: MinuteDock makes logging hours efficiently easier for employees, with the ability to easily switch between clients and projects and track time via their smartphones, while giving you centralised timesheets. It connects timesheets with Xero to automatically generate invoices with the right details.
3. Project management and resourcing
The challenge: Managing multiple projects can quickly become chaotic, especially if you’re juggling deadlines, client expectations, and limited or changing team resource.
How to address it: Choose a project management tool like Trello or Asana to organise jobs and keep an eye on project progress, and consider an app to manage employee resource, showing you who is available or over-capacity. Clearly define project scopes, deadlines and responsibilities from the start. Check in regularly with your team to identify roadblocks early and keep everyone on track. All of this can help you deliver projects to a high standard, on time and within budget.
Apps can help: Projectworks shows you your current employee capacity at a glance, so you can more easily plan successful jobs without impacting timelines or burning employees out.
4. Getting paid
The challenge: Late payments – or what we call ‘unapproved debt’ – can cause financial, emotional and physical stress on small businesses, and make it hard to manage healthy cash flow.
How to address it: Establish clear payment terms upfront – make sure clients understand your billing process and deadlines. You might decide to set up invoice reminders, offer incentives for early payments or apply fees to late payments.
Apps can help: Digital invoicing options in Xero make it easy for clients to pay you promptly. Our global data shows that invoices with an online payment service attached get paid up to twice as fast as customers who don’t use online payments. Plus, apps can help automatically apply late fees and customise invoices with accurate timesheet data. For example, payment apps like GoCardless automate payment collection from regular customers so you’re no longer chasing unpaid bills. MinuteDock allows you to set details like hourly rates and tracking categories, making invoices more accurate and therefore more likely to be paid on time.
Final thoughts
Starting a professional services business comes with challenges. However, when you focus on establishing solid processes for revenue forecasting, timesheeting, project management, and invoicing, you’ll build a more resilient business that’s prepared for growth.
See all apps for professional services businesses in the Xero App Store.
The post How to tackle the top four challenges of running an agency or firm appeared first on Xero Blog.
Source: Xero Blog
