subject: Boosting Revenue through Utilization [print this page] Boosting Revenue through Utilization Boosting Revenue through Utilization
In professional service firms the knowledge, skill, and experience of the employees is critical to growth and customer satisfaction. The work these skilled professionals perform is the primary source of revenue. A key strategy to company growth and success, therefore, is to maximize billable projects and hours, while the key to driving revenue growth is utilization. Making every employee aware of utilization, billable hours, accurate time keeping, and securing key projects can dramatically improve an organization's productivity.
For professional service firms, revenues are based primarily on two factors: (1) billing margin, which is the billable hourly rate less the employee's hourly cost, and (2) employee utilization rates.
So how can a firm boost revenue?
One option is that the billing margin can be adjusted to increase revenues by either charging clients more or by paying employees less. We all know where that can lead by potentially damaging relationships with our clients and staff.
A more efficient way is to improve employee utilization rates. The utilization rate is a key metric of employee productivity and is the relationship between billable hours and working hours available. The more billable hours there are, the greater the potential revenue that can be generated from those hours. Utilization can, therefore, have a significant impact on a company's overall revenues and profitability. The use of electronic timesheets also has a unique ability to help improve utilization rates and generate additional revenue.
"Whatever is measured improves." Elton Mayo
By keeping an eye on utilization, executives not only focus on revenue generation, the primary strategic goal of a firm, but also keep their fingers on the pulse of their firm's performance. Utilization rates thus provide valuable information for making key strategic decisions. Improving the utilization rate is a strategic initiative that has an immediate impact on a firm's bottom line. A decline in the rate is a call to action.
Firms can increase billable time just by having their employees fill in a timesheet daily and make employees aware of their personal billable utilization goals. Daily timesheet entry coupled with visibility into individual utilization can transform strategic business goals into personal goals for every employee. This knowledge can be empowering and energizing. When employees know their utilization rate they focus on achieving their targeton increasing the hours they have to bill. With the appropriate guidance from management, employees will begin to think and act strategically.
Successful companies are those where every employee is focused on a single strategic purpose: revenue generation. If their utilization rate falls, they, not senior management, often figure out how to improve it and take action. This also helps employees focus on the actual time entered on their timesheets. Previously missed billable hours in the form of extra services, scope changes, and time coded properly on hourly projects versus fee-based projects (which equate to potentially lost dollars/revenue) can be captured and billed by simply making the employees more aware.
Showing utilization ratios within the timesheet transforms strategic business goals into personal goals for every employee. Managers simply set up a personal target for each employee. Every time they update their timesheet, Deltek Vision's utilization ratios update as well. They know, every day, whether they are below target, on target, or above target.
Acumen Advisors was able to assist a 50-employee engineering firm increase their billing/revenue by 11.63% by assisting them with implementing daily timesheet entry and providing the employees with visibility into their personal utilization.
Most firms can increase billable hours per employee by 10% or more just by having employees fill in timesheets daily and empowering them with the knowledge of their own utilization rate.
What is this worth in increased revenue at your firm? Make every employee count!
