Business to Business Marketing Firm

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-Tom Pearson, CEO of Pearson & Co.

Project	Before	After
Financial Reports	21 Days after month end with "B" quality	3 days after month end with "A" quality
Month-end Close	21 Days	3 days
Year-end Close	2 months	1 week
Payroll Reports	2 days	Instant direct integration
Financial System Cost	$110,000	$42,000

 

Strategic Analysis:

The CEO of an established B2B marketing firm specializing in strategic initiatives for high-tech companies knew that his firm's complex business operation model needed to be revamped. His goal: improve company efficiency, employee accountability and profitability so that he could share profits with those employees delivering the highest returns. The challenge: how to effectively measure and track not only project, but individual and team profitability when dealing with fixed price project fees.

For any service company operating on a fixed price revenue model, it's clear that this is no small task. For this particular company, it was even more daunting, given the proprietary software system being used to track time and costs against dozens of simultaneous projects. The other problem was the need to accommodate a flexible work force-and numerous remote locations. With the current system, the IT department needed to frequently update up to eight different copies of the firm's central database to enable remote access. In addition, the current systems did not provide any real time reports on the progress or profitability of projects in progress; hence the employees could not effectively manage their projects to ensure profitability.

The deficiencies of the current system also took its toll on the accounting department, which struggled to close the books 3 weeks after month end and needed a full 2 months to close the end of year financials. Worse yet, costs would often "appear" long after jobs were considered complete and billed, turning what initially appeared to be a profitable engagement into a losing proposition for the agency.

Strategic Financials quickly determined that a robust time and cost tracking system that included forecasting capabilities, was an absolute must. It was also apparent that remote workers needed to have access to the same information used by in-house employees, without the burden of multiple databases. Moreover, project managers needed immediate notification if project activities took longer than anticipated in the project estimate. Most importantly, the company's measure of success needed to shift from employee time booked to client jobs to the absolute value and profitability of each project billed to the customer.

Solutions:

After the audit was completed, recommendations were made to help the firm save both time and money in its financial procedures. Key to this effort was assessing the software tools available to provide accurate, reliable control mechanisms for all budgeting, time tracking and purchase orders, as well as provide customizable reports for tracking work in progress. Without these, any new system would fall victim to the same problems. Web-based application software was selected based on its robust and proven project management capabilities. Budget templates and several report masters were created to reduce set up time for new projects and continuously track job progress and profitability. Finally, special reports were created to forecast revenues from active jobs and track individual employee profitability over a rolling three-month period. As seen in the chart below, the implemented changes impacted all facets of the business:

Activity	Before	After
Timecards	Manual data entry monthly	Web-based electronic entry weekly
Payroll	Manual entry	Electronically transferred from timecards
Payroll Reports	Hard copy	Fully integrated automatic entry to the general ledger
Payroll Checks	Direct deposit	Electronic direct deposit
Invoices	Printed and mailed monthly	Electronically generated and delivered via email
AP	Processed weekly with checks cut and sent	Electronic payment to vendors
Expense Reports	Hard copy	Electronic submissions
Purchase Orders	No purchase control	Purchase orders generated for all project items

Results:

Today, managers at this company are easily able to set up their own budgets and reports, as well as track progress on line. They also know all costs in advance, and are able to track these as the job progresses. What's more, they are for the first time able to track any client changes in job scope and revise the project estimates accordingly.

The financial impact has been equally dramatic. In addition to reducing IT and accounting by 61%, they were able to outsource all of the financial operations to Strategic Financials. . The company has also benefited from increased executive visibility into employee, project and customer profitability. Finally, the new and improved business intelligence has greatly enhanced financial visibility. The bottom line: more efficient operations that continue to drive profits up.and project losses down.