QuickBooks is already the financial management software of choice for many small to medium-sized professional service firms like IT consultancies, engineering practices, marketing and advertising agencies and accounting firms.
QuickBooks powerfully tracks income and expenses, vendor payments and even balances and generates financial statements like Balance Sheet to aid with tax preparation. Many QuickBooks setups are one of the first milestones to sustainable growth for these types of firms.
As client work escalates and project complexity increases, the gap between your business’s daily operational cycle and financial management will reveal itself.
While your business is quickly growing, it can no longer continue to rely solely on standalone accounting software in order to manage daily project life cycles, tracking of team members and their corresponding billable hours.
As you look to scale your professional service firm and maintain healthy profit margins, you will need to close the operational gap left by just using QuickBooks for financial accounting.
By integrating a project management system and time tracking system into your QuickBooks financial accounting, you will be able to more efficiently manage your team’s day-to-day activities, and capture all of the billable hours that would otherwise go unrealized.
The following guide will describe why you need to expand your tech stack beyond your current financial accounting, and how integrating project management and time tracking systems into your QuickBooks will transform your firm’s operations.
The Operational Limitations of Standard Accounting Software
Most professional services firms use QuickBooks for project management in addition to accounting. Since QuickBooks is primarily a financial application, it has historical financial information and acts as a great place to manage the financials related to past work completed (i.e. past income and expenses).
However, it is not a forward-looking, real-time system and cannot easily manage current work in progress and related tasks.
The lifecycle of a professional services project includes activities such as estimating a project based on a scope of work for a client, scheduling resources on a task by task basis, tracking and updating project completion milestones, managing a project’s budget to ensure that it isn’t burning through too much capital and many more.
Many of these tasks are best performed by a project manager but they are often put into the accounting software of a company to attempt to complete these functions. This can lead to many negative consequences for businesses.
- Scope Creep: Failure to include all work in the initial bid and subsequent change orders to add work not contemplated in the original estimate.
- Resource Bottlenecks: Team members are maximally employed or underemployed because the project manager has no way of knowing their current workload.
Delayed Profitability Insights: Unwittingly find out weeks after a project has completed that the project went over budget.
Not until end of month financial reports are complete will management know that profitability of the firm was negatively impacted by their previous manage projects processes.
Bridging Operations and Finance with Advanced Project Tools
By investing in a purpose-built quickbooks project management system your operational layer is in place to enable your project managers to manage information on a granular level, whilst ensuring the data is updated within your general ledger.
A fully integrated project management solution is able to:
- Manage Complex Task Hierarchies: Break down large client initiatives into distinct phases, tasks and subtasks and set an hourly rate for each part of the work to be done to ensure that you are properly billing your client for all of the work that your staff does to complete a particular client project.
- Monitor Work-in-Progress: Track the hours worked on a project in real time to help identify problems prior to the point at which the project becomes unprofitable.
- Assign Resources Effectively: See at a glance the capacity of your team members and utilize them to their fullest potential across all your current projects.
- Automate Milestone Invoicing and Phase Billing: Let QuickBooks ProBilling automatically generate invoices when your team completes milestones or moves through different project phases. Reduce the time it takes to receive payment for work you’ve completed.
This new operational data will then feed into the general ledger software to ensure that accountants will no longer have to chase down project managers for up to date project status information or spend hours of re-keying of same information into accounting software.
The High Cost of Inaccurate Time Tracking
Time tracking is perhaps the biggest determinant of profitability for any business, especially those in the professional services sector.
Inaccurate time tracking accounts for the largest share of ‘lost’ revenue in medium-sized growing businesses – sometimes up to 20% to 30% of total billable hours!
Specifically, lost revenues due to employee mistakes are reported to range from 20% to 30% of all invoiced billable hours for professional services companies utilizing manual processes for tracking hours worked (15 minute phone calls, late night emails, excessive time spent troubleshooting technical issues). This results in tens of thousands of dollars in unrecoverable lost revenues for medium-sized companies.
Delaying the recording of time can lead to a large delay in the associated invoicing of the related work and the subsequent cash flow and payment disputes that arise from clients questioning vague non-itemized invoices weeks after work has been completed.
Optimizing Time Capture with Integrated Tracking Tools
Efficiency in your time tracking process is as simple as integrating a suitable quickbooks time tracker with your QuickBooks.
Once set up your team can record hours in the time tracker for future billing in QuickBooks and payment in payroll.
Key benefits of specialized time tracking integrations include:
- Flexibility to Access & Track Time from Anywhere: Employees can record billable time as well as non-billable time from their desktops, laptops and even mobile devices. Whether in the office or on the road seeing clients, employees can easily access and update their time logs.
- Real-Time Timers & Intelligent Reminders: Start/Stop a QuickBooks online time track timer as employees transition between task serving for different clients. Automatic Smart Reminders are also activated enabling employees to complete on time online QuickBooks time tracking report submission for management approval prior to automatic billing in QuickBooks.
- Custom Approval Workflows: Set up various approval levels for timesheets before they are added to QuickBooks for invoicing of clients.
- DCAA and Other Regulatory Compliance: Enable audit-ready time-stamped logs for use with government contracts as well as other industries and organizations requiring such tracking.
Strategic Advantages of a Fully Connected Ecosystem
Unifying your accounting software with your project management software and time tracking software creates a powerful business tool. Once set up correctly this powerful business tool can enable strategic decisions in relation to the development of your business.
- Zero Double Data Entry: Your firm manually enters all client, project, employee, and activity information into accounts receivable software or QuickBooks which is time consuming, excessively expensive, and prone to error.
- Faster Cash Flow and Invoices: As your practice transitions from processing forms and inputting data, you will be able to deliver client ready invoicing to your clients much earlier in the billing cycle.
- Profitability Analysis: Now you can calculate the exact bill rate you realize on all your work, including jobs done by individual employees, on different project types and for different clients. Determine your most profitable service(s) and adjust your prices on less profitable work to maximize your return on investment.
- Better Client Relationships: Produce complete, detailed statements to clients for all time logged on their accounts, provide explanations for charges, and demonstrate the integrity of your company.
Best Practices for Implementing Your Integrated Solution
Implementation Best Practices
- Identify Firm’s Bottlenecks: Before investing in new software, identify the areas where your firm currently loses time and resources, such as slow invoicing, lack of project visibility, or inaccurate time tracking.
- Engage Your Team Early: There is nothing worse than bringing in new software only to find that it gets little to no use once you’ve started to use it. Train your employees early on how to use the automated time tracking tool and emphasize how it can eliminate many daily administrative tasks.
- Develop Consistent Categorization Procedures for Capturing Time and Data: Establish consistent guidelines and parameters for organizing service codes, activity descriptions and other relevant information and maintain consistency across related and similar projects and tasks.
Final Thoughts
While QuickBooks is an essential component for managing core financial activities of your law practice, leveraging an additional layer of project management and time tracking software is crucial in order to maximize the profit margins of your legal work, capture every billable hour, and build a strong platform to support continued growth and success.
