Reflecting on end of year position to discover a better business performance strategy
As the 2021 calendar and financial year is now closed, it is time to reconcile performance. Some insights may have already been gained through your internal project closure and client churn. For most however, the bigger picture eludes them until an in depth review has taken place. This intelligence sets new growth and realistic, but ambitious performance targets for the year to come. All too often, there is a considerable amount of manual effort to compile data and check sources are correct. In addition to this, there may be team members who will want to be shown suitable evidence.
Whilst Tempora offers many out of the box reports which can provide such evidence in a single click. Each report has customisation options allowing users to tailor the data returned to their option. If you are ready to build your own report, Tempora provides export an export engine and API frameworks. You can find more information on this within our knowledgebase, found within the user support area.
Regardless of your reporting preference, there are key data metrics that Tempora can help organise which organise, track and evaluate. We will introduce each below.
The key metrics that Tempora recommend looking at in summary are:
- Hours Spent
- Salary Cost (with business overheads)
- Charge-out Value
- Utilisation of Staff
- Total Projected Income
- Cash Flow
It is equally important to look at both hours captured in timesheet tools or logs and those hours not captured. Many businesses advised by Tempora have not previously tracked overtime for example. The issue here is, even if staff aren’t paid for overtime it is still hours conducted on behalf of a client. Tracking these additional hours is crucial in looking into team scheduling and looking at true cost of conducting work. For example, you may agree a rate of £15 per hour for 1000 hours, charged at a total of £15,000 for a project. As the budget amount is over utilised the value is watered down. At 1100 hours that is £13.64, at 1200 it is £12.50, greatly diminishing the hourly selling rate of the work conducted.
What is the total value of salaries paid? For many business this is a powerful metric as it is absolute, staff will always require payment whereas client facing work may be subject to discount. Many agencies utilise salaried team members, with overtime being rewarded with flexible hours, used at the team’s discretion.
It is worth also factoring in any pay raises or bonuses awarded, in order to get the true picture. Many clients that Tempora speaks with do not factor any overheads into this number. Overheads can include additional hidden costs, such as VAT, Pension or cost of equipment or office space and software required to perform a role.
Charge out Value
What value does the business charge it’s time per staff member or discipline. As mentioned above, there is often times in which discounts are considered and utilised in order to win a pitch or retain a client. The reality often is, that unless there is a substantial creep on a quote, most retained work has fee’s renegotiated much less often than required to keep a healthy margin on work conducted.
The total figure of incoming monies for work conducted or prospective work. Tempora recommend that income represents monies already within a bank account controlled by a company. When running reports on data, Tempora advises that income only refer to monies actually received.
Total Projected Income
The total projected income refers to agreed invoices or retained fee’s with your clients that have outstanding payment or due at a later date. Often, by looking into this figure a business will start to resource their staff members and become able to determine whether additional client pitches are within capacity. In some cases a business may realise that there is simply not enough internal resource and a freelancer or temporary member needs contracting.
Many businesses will already be familiar with this term. It refers to the value flowing in and out of a business account at any given month or period (years for example). Usually, finance teams will recommend a profit figure or margin (%) as an indicator for a year whereas a cash flow looks at longer term health. Tempora often advise clients on the concept of a cash runway. This term indicates the level in which a business is able to stay solvent, all fee’s paid, if no additional revenue were to come into the business.
Compiling all information
Businesses should start with a quick overview of their collective timesheets. Looking at hours conducted against each client and internal time is a great start. This data will allow an understanding of the amount of effort placed into various clients or projects. The natural progression is to break this data down. Breaking timesheets into departments or teams and then later by individual staff or roles.
You can use Tempora reports to map data to a specific client and the staff conducting work or an internal resource and the clients worked. This will allow you to spot whether certain work types are always exceeding predictions or perhaps whether you have the resources to take on new clients. Similarly, you can use time reporting tools to determine the health of accounts and whether they are sustainable with business growth.
You may also wish to investigate time spent on certain activities against all clients. For example, all pitch time spent across the business to determine the average pitch time per acquisition. This allows an individual to determine whether types of activity typically take the same amount of time and resource or whether perhaps a single client is an outlier.
Once you are comfortable with the data, you can begin to compare hours worked against income generated. Often, a few projects worked show as greatly over serviced. However, if you look at a wider picture the account balances profitable. We advise examining profitability on a one month, quarterly and annual basis with the averages compared to identify consistency. During initial pitch time for example, there is a large front heavy work effort, but as the account matures the amount of time would balance out.
Finally, it is time to weave in staff cost rates and time selling rates to compare a true profitability figure.