Once costs are identified, you need to attribute these to determine the cost of delivering your services. 

Fixed direct costs are the easiest to attribute as they are clearly identifiable. The ease of allocating variable direct costs will depend on your firm use of timesheets. If you use timesheets then the variable labor costs can be tracked and averaged out per service or client through timesheets. If you don’t use timesheets the time spent can be estimated for allocation. 

Overheads are slightly more complicated and in professional services. The first step involves calculating the allocation base and rate, which can be done on either a revenue or labor basis. 

Revenue basis: Divide total overheads by total revenue to determine overhead charge per revenue dollar. 

Labour basis: Divide total overheads by total hours spent on a job to determine an extra “hourly rate” to be applied to the service. 

The below is an example of how to calculate the overhead allocation. You can do this for any period of time, so long as you consistently apply that same period. 

Don't forget that more than pricing can impact your profits. Poor systems and processes will impact your bottom line. More profitable businesses will usually have:

• The right team members doing the work
• Efficient process and technology that minimizes double handling and low value tasks
• Robust client engagements where they are in control of the work in process eliminating disputes and “pick up put down” syndrome. 

AR automation is a system or workflow that automatically generates and sends invoices to your clients at the right time. It can reduce or even eliminate human involvement in the billing process. Depending on how you set up your AR process, you can streamline tasks such as:

• Generating invoices.
• Sending invoices.
• Sending reminders for past-due bills.
• Processing payments.

When looking for the right automated AR software for your business, make a list of the features you need, then use it when conducting your research. Perhaps you require upfront payment before starting an engagement, or maybe your payment schedules vary from client to client. You want AR software that can accommodate these needs. Ignition, for instance, offers features and automation to support various billing schedules, including weekly, monthly, annual, or on a per-project basis. When you streamline how client bills are sent, processed and paid, you can maximize productivity, improve client satisfaction, improve your cash flow and increase your bottom line. 

With these automations in mind, software integrations make for another important consideration. If possible, you want a system that integrates with your existing technology. This might include your accounting software, client engagement platform, and customer relationship management (CRM) software. When your various systems can effectively talk to one another, sending information from one app to the next, this can further reduce human involvement. Ultimately, with the right tools and automation, you’ll reduce the risk of errors, increase your productivity and save that most sought-after of resources: time. 

Read this Ignition year in review article to see how Ignition helped 6,000 customers get paid, save time and grow their revenue in 2022.

With these tools and techniques,  you can build trust and grow along with your clients, keep work on track and increase your profitability.

The Ignition client engagement and payments platform makes it simple to sell, bill and get paid for your services – all in one place. To learn more about how Ignition can help you with scope creep management and grow with your clients, watch our demo today.