What is professional services automation software?
Professional services automation (PSA) software provides a unified framework for running a more efficient and predictable business.
PSA software overview
Why has professional services automation (PSA) software been generating so much buzz and attention lately? Perhaps it's because professional services firms find themselves in a complex landscape, compelling them to seek new answers and solutions.
Demand for specialized consultancy and expertise is soaring. However, the same clientele seeking this know-how also want cost-effective services, quicker turnarounds, and transparent billing. And adding to this complexity is the evolving work environment, where top talent might only be accessible on a hybrid or remote basis and traditional staffing sources are dwindling in certain sectors.
As a result, many firms find themselves in a paradoxical situation. Their services are in high demand, yet they struggle to efficiently staff and optimize operations to thrive in this ever-changing market. Moreover, their existing manual and disjointed business management practices hinder their ability to adapt and reimagine traditional business models on the go.
Thankfully, cloud-based PSA software has matured to address these challenges. It smoothly integrates with existing core management systems such as ERP. More important, it delivers capabilities that are more than just suitable for professional services firms – they are built with their unique needs and opportunities in mind.
PSA software: A definition
PSA software users are typically specialized professional services firms, where billable services constitute their primary revenue source. However, it is also beneficial for organizations housing complex service departments within their operations.
The main purpose of PSA software is to establish a unified framework for running a more efficient and predictable business. It can assist in managing staffing, finance, revenue, billing, performance, invoicing, and marketing while smoothly integrating with existing business systems and offering on-demand access to dashboards and cross-functional reporting features.
Core components of a PSA software system
A PSA system combines a set of essential functions into a single, integrated suite for project and service-driven businesses. Some of the most common PSA components include:
Cloud ERP
At the core of PSA is a cloud ERP solution with built-in business processes. This helps manage and automate key aspects of the business, including project management, resource allocation, time tracking, billing, and financial management.
By harnessing cloud technology, cloud ERP streamlines and optimizes the operations of a professional services firm. It enables real-time collaboration, data accessibility, and scalability, leading to effective management of projects, resources, and finances.
Sales support
PSA tools help to support your marketing strategies and client and sales relationships from initial enquiry to completion of projects – and ongoing customer retention and care. When you can target the right leads, measure engagement, and optimize proposals, this helps businesses ensure that the best value resources are put in place – and to deliver on customer expectations profitably and on time.
Resource and talent management tools
As belts tighten in professional services firms, it’s common to see highly specialized (and expensive) consultants turning their hand to admin work, simply out of necessity. And even the best planners and strategists can’t be expected to manually assess all the many moving pieces and teams that go into every single project. Unfortunately, both these scenarios lead to an inefficient and opaque use of resources. One of the core components of PSA software is resource management. Not only finding and quickly onboarding the right person with the correct skills for each task but coordinating those teams and schedules for maximum value. PSA looks at the skills held within your teams, as well as your external contractors, your current and future projects, time tracking and available schedules, and budget tolerances – to remain profitable and on schedule.
Project performance and management
Everyone is cracking down. Customers are fickle and quick to jump ship; businesses are feeling the stress from inflation and complex workforce issues. In other words: margins for error are becoming a thing of the past. Bottlenecks and overruns can no longer be tolerated and that means tight, efficient project planning. PSA’s project management components typically include end-to-end task and milestone tracking and management, real-time expense intel, responsive client communication and reporting, tracking resources, and forecasting time or budget risks. Essentially, PSA provides a broad and comprehensive set of live reports and operational tools that look across the business, project, and teams to bring them together under a unified and transparent planning system.
Invoicing, billing, and core financial management
Professional services firms have some of the most complex billing and financials of any sector. Clients expect accountability for hours and time spent – and increasingly want a breakdown of time tracking and differently priced services (specialist consultancy versus admin work, for example). To remain efficient yet profitable requires strategy and precision. Fortunately, PSA systems shine at financial management including tracking and forecasting time and hours spent – in total or in specified breakdowns. Costs are accrued as they happen and invoicing is automated in real time. Furthermore, analytical functions such as revenue recognition and profitability analysis are handled by the PSA system, and financial records can be customized and produced in the moment, at any stage in the project.
Dashboards, reporting, and business intelligence
What you don’t know can hurt you. Today’s firms must be able to pivot quickly – to take advantage of opportunities and avoid risk. Fast data-driven insights and real-time, customizable reporting mean that business leaders don’t have to spend any time in the dark. Integrated with your ERP and other business systems, PSA tools can let users specify the parameters of their report using multiple data points (hours spent, outstanding invoices, specific internal or client-driven KPIs, schedules) to produce live reports and to initiate accurate forecasts and recommendations.
The seven key benefits of PSA for professional services companies
As today’s businesses run leaner than ever, professional services leaders are looking for solutions that help them increase their resource utilization and quickly get the staff they need up and running. Every advantage counts – especially when it leads to increased agility and profitability.
- Less admin and more billable hours. Make sure the right people are doing the right work. With increased visibility, you can reduce waste of both time and resources. You can also refer to – and reuse – past project templates to improve staffing efficiency and apply past learnings to current projects.
- Increased productivity and visibility. Get a real-time view of your business activities at any level – looking at margins, profitability, and efficiency from single engagements to an entire cross-firm perspective. Advanced notice of bottlenecks, waste, or delays, coupled with data-driven insights for how to fix them leads to better clarity and profitability.
- Improved ability to forecast. The ability to access customized reports on finances, time-tracking, and other core project-related activities helps bring clarity and focus. And AI-powered digital solutions can use those varied data sets to not only report on the yesterday and today but predict where challenges and opportunities will come from in the future.
- Seamless virtual/remote service delivery. Demand is on the rise both from clients and from an increasingly off-site workforce. A unified PSA solution ensures integrated, accurate, and consistent digital experiences.
- Improved client satisfaction. With tight, transparent billing and forecasting tools that help you anticipate client needs, PSA solutions help to deliver a satisfying customer experience.
- Reduction in revenue leakage. Silos and inefficiencies are anathema to service-based businesses. Who’s doing what? Who’s spending what? How much and when are we billing? The ability to answer these questions in real time can be the difference between profit and loss.
- Faster payment turnarounds. With automated and crystal-clear billing, invoicing, and follow-up, firms can lower their days sales outstanding (DSO) numbers and get projects more quickly into the black.
Who uses PSA tools?
Perhaps more than in any other sector, professional services firms provide deeply specialized and customized services and consultation. In the past, developing standalone automation tools was difficult and time-consuming. But now, with the ability to tailor and streamline a unified cloud-based solution, PSA software solutions are making themselves indispensable in a widening range of practices, some of which include:
Financial, tax, audit, and accounting consultancy If you bill on hours, there’s a risk of overrunning the client’s budget and losing their business. If you have a fixed-price or retainer billing model, there’s the opposite challenge of things taking longer than expected and thus becoming unprofitable. With margins tighter than ever, today’s firms have no room for inefficiency. PSA software for financial services helps businesses to track and analyze their activities, time, and output – and to implement smoother processes and more efficient automations. It helps them to prioritize their most profitable services and ensure that their clients are getting speedy and value-added services.
Management consulting firms As with pretty much every field of professional services, business and management consultants are finding themselves in a time of intense competition and rapidly changing demands and attitudes. To deliver the highly specialized and effective consultancy that their clients require – while still being able to grow and remain profitable – firms need to rethink their foundational structures. PSA solutions help business consultancies better manage and prioritize their time and services. Fewer resources and employees mean that resource planning and time tracking are crucial. And billing and client management needs to be trackable and transparent. PSA software helps to automate and coordinate admin tasks, freeing up consulting professionals to focus on what they’re best at.
Law firms In U.S. firms, the employee attrition rate rose from 16% in 2019 to 27% in 2021, which is a staggering 61% increase – the likes of which are being observed in firms in the U.K., Canada, and beyond. Firms are also dealing with greater demands for cheaper and more efficient services. With leaner operations, modern firms need solutions that can add value to all areas of their business – both administrative and legal. PSA solutions let firms recognize and analyze work and billing patterns – and automate and simplify tasks. Other PSA features can help to manage quotes, contracts, and client lifecycles.
Software, high tech, and IT services companies As anyone in the tech space can tell you, software development and IT services are highly dependent upon the smooth coordination of both teams and resources. Clients demand fast turnarounds and accurate, reliable outcomes. PSA solutions help to support sophisticated project management from time-tracking to dependencies and logjams. Client expectations are managed and met with tools that not only report on live and current sprints, but predict and notify when deliverables are at risk.
Construction and engineering firms In times of inflation and budget cuts, your clients are not only looking for cheaper quotes, they’re also tightening their tolerance for cost and time overruns. Firms have to be able to explore new types of projects and business models, and hustle to stay on top in an increasingly competitive market. For construction and engineering firms, it adds enormous value to be able to automate and track things like billing, expenses, payroll, and materials costs. But a particularly useful PSA feature in this sector is the ability to automate bidding and quotes. A tight, streamlined, and accurate proposal – that ticks the boxes and wows the client – is a powerful tool for staying in front of the competition.
Digital marketing and advertising agencies Today’s marketing agencies operate in a milieu of fast-changing media, trends, and technologies. And their clients are demanding ever more complex and value-added campaigns that deliver fast results. PSA solutions help marketing agencies to better manage and automate customer lifecycles, from sales and pitches to quotes, project management, and invoicing. When integrated with other tools like CRM systems and marketing automation tools, agencies get a unified, centralized solution to help them optimize their performance, track and analyze their output, and unlock new opportunities.
PSA integration: Cloud ERP and more
Traditionally, professional services firms have been slower than some sectors to adopt digital transformation. However, the past few years have ushered in such a need for efficiency and competitiveness that most modern firms are adopting cloud-based ERP systems in order to stay ahead of the pack and grow and scale into the future.
The beauty of modern cloud ERP systems is that they can form to an exact fit for your company. Legacy ERP systems were set up and configured to align with your operational needs in that moment – but if anything in your business model or market shifted suddenly, you lacked the resilience to adapt your systems and respond quickly. Cloud ERP systems, on the other hand, support the everything-as-a-service” (XaaS) model. This means that natively integrated PSA and project solutions work together with your cloud ERP system –smoothly and simply. And as your business models change, scale, or diversify globally, you’ll have the management tools you need at your fingertips – without having to invest in separate, standalone systems for each of your operational needs.
PSA software in action
The examples below show how some of the world’s leading professional services firms are using SAP S/4HANA Cloud (ERP) to drive benefits and rewards.
Agilita: Project management and licensing business is brought into the cloud age.
McGrathNicol: Employee productivity improved thanks to streamlined workflows, flexible and efficient end-user touch points, and easier access to information.
The best PSA software? What to look for.
When you’re ready to move to a dedicated PSA solution, be sure you’re making choices that will support your business models today and in the future. Look for cloud-based solutions that:
Integrate with your existing systems and help to automate tasks from “bid to cash”
Are preconfigured with relevant best practice and process models
Provide real-time access to data: financials, revenue, margins, staffing, and more
Are cloud-based to evolve and scale with your firm and its rapidly changing needs
Deliver a clean and sophisticated user experience to optimize accuracy and uptake among your teams
Discover PSA solutions
Support your business transformation journey and reap the benefits all along the way.
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