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Is Your Service-based Company Charging What You’re Worth?

Posted on By Vorex on Categories Blog, Project Management

Determining the best way to charge for your company’s services is a challenge that many professional services organizations (PSOs) face — and unfortunately, there is no right answer. Welcome to the age-old debate that more than 28 million small businesses in the US have to grapple with!

The two most common pricing structures service-based business owners consider are hourly and project-based. Let’s dive into the details of both pricing structures so you can weigh your options and assess whether you’re company is charging what you’re worth!

Hourly Pricing

PROS

When should you opt for hourly pricing? Elle Smith of Demand Media strongly advises to go with this option, “when you’re not certain of the job’s parameters, such as the deadline, revisions or approval process.”

It makes sense, then, that the most obvious benefit of pricing your work based on hours spent is that you will be adequately compensated for all of the work your company has performed on any given project.

And thanks to project management tools, you can avoid the guesswork of project estimation and billing. For example, rather than charging a flat fee for a project, which could potentially undercut the amount you get paid versus the amount that you worked, by tracking all time spent with a time tracking tool, you can ensure you’re billing accurately and being compensated fairly.

CONS

While hourly pricing might seem a fool-proof way to proceed, keep in mind that hourly projects have a tendency to lack in efficiency because there are no explicit deadlines. A recent study conducted by Salary.com revealed that 89% of workers admit they waste valuable work time on a daily basis.

Once a client is billed for an hourly project, they may choose to scrutinize the amount of time spent on a specific tasks and complain about paying the full amount. The best way to avoid this is to use project management tools that track time and tasks so you can offer up documentation of all work performed for the client.

On the other hand, if your employees perform their tasks expertly and quickly, you could be in a position where your company is not being compensated for the full value of the services that you’re delivering to the client. And this is where project-based pricing comes into play.

Project-based Pricing

PROS

With project-based pricing, a flat fee and deadline have been negotiated in advance. If your company routinely delivers results on-time and with little to no revisions of the work required, you might want to consider this pricing structure.

Why? Because unlike hourly pricing, project-based pricing will help you avoid selling yourself short in terms of how the services you perform (including the long-term value) are reflected in your revenue.

CONS

The most glaring disadvantage of this pricing structure can be summed up in two words —  “scope creep.” The Business Analyst Times defines scope creep as “uncontrolled change to scope that has an adverse impact on the project and where the client is usually unwilling to bear extra costs or extend time.”

Simply put, any delays or extra revisions that your project is subjected to will bleed into your profit margin. Project management tools can help you manage scope creep by allowing your employees to monitor the time they spend on specific tasks. Time tracking tools also help you to better estimate pricing for similar projects in the future to ensure profitability.

If your organization is looking for ways to increase accountability and up the efficiency factor in your office, it might be time to look into business management software. What are you waiting for? Sign up for a 14-day free trial today.

Expense Tracking: It’s All A Balancing Act

Posted on By Vorex on Categories Blog, Project Management

Everyone knows that careful expense tracking is the key to better understanding and managing your business–even Oprah is getting in on the action. There are a lot of different systems out there for keeping spending records organized, from old-fashioned pen and paper to smartphone apps and software platforms.

In 1494, Luca Pacioli formally introduced the modern system of double-entry bookkeeping in his seminal book Summa di Arithmetica. Known as the godfather of modern accounting, Pacioli took great pains to explain the importance of knowing both your credits and debits in order to effectively manage your finances.

These systems had already been in place for centuries, but Pacioli’s book became the source of most accounting and financial knowledge in western Europe for many years.

So we can all agree that it’s essential to keep an eye on spending, but how do you know which system is best for your business? Let’s run through a few of the items to think through when you’re trying to make the decision.

  1. Balancing Act

The first and most obvious reason to track your expenses is to determine if you’re actually making money! Gross revenue can be thrilling to look at on a balance sheet, but without an accurate accounting for expenses, that sheet won’t give you the full picture of what you’re actually making in profit.

In order to understand your costs, you need to keep track of your expenses. Not all costs are expenses, but many are, and they represent a big piece of the puzzle.

Tracking and understanding your expenses offers insight into the efficiency of different parts of your business. If product A’s expenses represent a higher percentage of its net value than product B’s, you might be well served to grow sales of product A, or try and improve the margins of product B. Without expense tracking, you’d be in the dark when it comes to determining your best course of action.

  1. Plotting A Course

Planning ahead is one of the keys to managing the growth of your business. Anticipating your needs enables you to secure the resources you’ll need to continue to thrive. Monitoring trends in your expenses is absolutely necessary for predicting how you’ll have to adapt to a changing situation.

According to Pex Card’s 2014 Benchmark Expense Survey, 60% of all businesses expected spending to increase in 2014, including an average 26% increase in payroll spending.

If additional staff is the key to your growth, you’ll have to take their compensation into account. Calculating how much of a payroll increase your business can support relies on careful expense tracking.

  1. Staying on Target

Spending money is an unavoidable part of running virtually every business. While we can’t avoid spending money, what we can do is make sure we’re spending it as effectively and efficiently as possible.

The secret to spending smart is careful analysis of expense reporting to know where it’s possible to trim spending and the areas in which you may want to invest more capital. We’ve written before about how important it is to manage your projects carefully.

Knowledge is power, and careful expense tracking offers you some of the most powerful knowledge there is.

Vorex’s software links time and expense tracking associated with each of your individual projects, giving you access to sophisticated data and easy-to-understand reporting about the efficiency of your operations.

Integrated project management tools make it easy to reallocate resources in real time and make course corrections as you go, keeping you on track.

To see how an expense and billing tool can help you grow your business, sign up for a 14-day free trial today!

The Billable Hour: How It Started and Where We Are Today

Posted on By Vorex on Categories Blog, Project Management

Many service-based businesses rely on the concept of the “billable hour” to calculate a rate for their services. While often associated with the legal profession, the billable hour can be a great fit for all kinds of professional services organizations (PSOs) and agencies. Let’s take a look back at the origins of this concept and how it comes into play in the contemporary business landscape.

The Billable Hour – The Key to Increased Income

The origins of the modern billable hour can be traced to Reginald Heber Smith, a lawyer and managing partner of Boston firm Hale and Dorr for more than 30 years.

Smith is best known as one of the key voices responsible for the development of the modern Legal Aid movement and is the author of “Justice and the Poor,” in which he put forward the concept that legal services should be available to everyone, regardless of ability to pay.

As a direct result of this book, the American Bar Association created the Special Committee on Legal aid work, beginning an era of increased access to services for those previously unable to afford them.

During his time at Hale and Dorr, Smith introduced many sweeping changes to the organization that would spread amongst the profession, including budgets, timesheets and – you guessed it – the billable hour.

William G. Ross, in his book “The Honest Hour: The Ethics of Time Based Billing by Attorneys,” revealed that billable hours became popular in the 1950s when multiple studies revealed that attorneys who tracked their time usage earned more net than the gross income of those who did not.

The Billable Hour Gets Creative

David Oglivy, who many suggest is the inspiration for Mad Men’s Don Draper, claimed to have been the first person to extend the concept of the billable hour beyond the legal and accounting worlds.

The system dovetailed nicely into the world of creative and marketing agencies whose team members often worked long hours making multiple revisions to projects based on a client’s input.

The billable hours system allows for equitable payment to be calculated for projects whose time and resource requirements are subject to constant change.

Underlying Smith’s innovation is the idea that by effectively managing time, it’s possible for an organization to optimize its work and provide the best quality service to all clients regardless of the size of the job.

Modern Challenges: Accurately Capturing Time

The secret to employing a billable hour system effectively lies in another of Smith’s introductions to Hale and Dorr: the paper time sheet. The concept of the timesheet has historical origins – daily wages broken down by profession are even included in the code of Hammurabi, written in 1772 BC!

But today’s organizations need a better, more efficient means of capturing billable hours. Ensuring that every employee’s hours are accurately reported on each project provides details and insight that, in turn, ensure rates are in line with the time and expenses put into each project.

With a business management platform that captures both time and expenses, the entire process can be seamless and take the mystery — and headache — out of time capture and tracking.

In a survey conducted two years ago, marketing, IT, web development and design were found to be the leading users of time tracking software – industries most accustomed to working with detailed reporting and analytics.

Linked time and expense tracking systems like those built into Vorex’s business management platform make corralling your data easy so you can gather insight into how well your hourly rates are working, as well as company margins. Add integration with billing and invoicing and you’ve got a complete system for taking Smith’s innovation to the next level.

Success on a Shoestring: 3 Strategies for Time-strapped Business Leaders

Posted on By Vorex on Categories Blog, Project Management

Running a small- or medium-sized business (SMB) comes with the jumbo-sized responsibility of juggling multiple administrative responsibilities, projects and timelines. And with small businesses making up 99.7% of U.S. employers, it comes as no surprise that most American business owners are overwhelmed by the sheer amount of work required to run their businesses efficiently.

Unfortunately, without the right systems in place, leading your team to success can mean frustrating days, late nights, and working on the weekends. So how do successful business owners manage it all without working their lives away?

Let’s take a look at a few of the tried and true leadership strategies that work for organizations of all sizes.

1. Communicate Clearly: Set Realistic Expectations

At the beginning of any project, it’s important to communicate clear objectives and realistic deadlines to every person on the team so they know what is expected of them. By taking out the guesswork, employees will be empowered to focus on completing the task at hand and working collaboratively toward a common goal.

Giving your team the knowledge they need to do their work accurately and concisely results in a less stressful work environment, which benefits everyone. And we’re not talking micromanaging here — the most successful organizations are those that:

  • Give their team members the information they need,
  • Set clear boundaries,
  • Communicate project deadlines, and
  • Provide a system for efficient workflows.

2. Get Organized: Make Lists

While this might seem like archaic advice, there are few things as gratifying as completing a to-do list. Encourage your team to make daily or weekly to-do lists of all the tasks at hand for any particular project.

To-do lists on sticky notes or within Word docs are fine, but using a project management platform to keep lists organized creates an actionable environment where your team’s to-do lists can live in a single location to help maintain cohesive and transparent team communication.

Make sure to pay special attention to prioritizing tasks that require more time or call for collaboration with other team members. Not only do prioritized lists promote efficient workflows, they also encourage individuals to be accountable for their portion of the project.

3. Save Time: Automate Tasks

Because most businesses work within limited resources and lack the staff of a larger enterprise, time management is essential to the success of every project.

One way to save time across the board is to implement project management tools that help improve workflows and automate those tasks that waste your team’s precious time (think billing and project time estimates).

Small business managers everywhere understand the challenges that come with trying to motivate a team to get to the next level, but sometimes the simplest workflow edits can make the most impact!

For more information on how a project management platform might improve your team’s operations, download The Agency’s Scale Problem: How to Blast Through the $1M Ceiling. Our free ebook can help you discover the causes lurking beneath your team’s management struggles and what you can do to change the tide for your organization.

Or if you’re ready to try Vorex out, sign up for a 14-day free trial to see what your life can be like when you start chasing your dreams instead of a status report.

The World is Your Oyster: Vorex Announces New Multi-currency Capability

Posted on By Vorex on Categories BlogTags

We’ve always been a company with a global vision. With international investors and executive leadership, it’s long been a focus of ours to help small to medium-sized businesses (SMBs), both domestically and abroad, optimize operations, improve profitability and achieve growth.

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3 Ways To Keep Your Team Focused and Organized at Work

Posted on By Vorex on Categories Blog, Project Management

Modern life has delivered technologies that make both our work and personal lives much easier. However, the same innovations that were created to increase our productivity can end up distracting us and leading to inefficient work habits.

In fact, digital distraction is such a common problem that a recent study conducted by Careerbuilder tells us that 24% of workers spend at least one hour each day on personal calls, emails or texts. (You’re not the only one with this growing problem of distraction!)

Read More 3 Ways To Keep Your Team Focused and Organized at Work

Streamline Day-to-Day Operations: Work Smarter, Not Harder

Posted on By Vorex on Categories Blog, Project Management

Diligence, hard work and determination are characteristics that many employers consider valuable. But a strong will isn’t enough to be considered an excellent employee, CEO, manager or even a valuable team member. To complete your work daily while still having time to take account of the “bigger picture” and make strategic decisions, working intelligently is necessary.

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