Why should my professional services organization use cloud software?

When you think of what a typical small business actually sells to its customers, what pops into your mind first? Maybe you imagine the sodas at a convenience store, the detailing and polishing options at a car wash or the flowers at a local florist. But many SMBs are just as good at providing services as their peers are at selling goods. Think of plumbing, construction contracting and accounting - all of these amenities are essential in any community, and professional services organizations ensure that they get done.

In recent years, the professional services industry has gone through some major changes due to the Great Recession, which drove down corporate spending and also reshaped the U.S. regulatory environment. These shifts, together with the regular day-to-day pressures of a running an efficient SMB, have brought many professional services organizations to a crossroads: Do they stick with the tools (e.g., abundant Excel sheets and manual paper-based process) that have worked for them in the past, or do they move on to something else so that they can meet new challenges related to budgeting, forecasting and other financial activities?

Challenges on the horizon: What professional services firms will face in 2016 and beyond

Like their SMB counterparts in retail, finance and manufacturing, service organizations often struggle with their accounting. An early 2015 study from Wasp Barcode Technologies, surveying approximately 400 small-business owners across professional services and other verticals, illustrated this common issue in greater detail:

• More than 70 percent of SMBs had to outsource at least one of their accounting functions, perhaps because only 4 in 10 of them felt that they were "very" or "extremely" knowledgeable in these areas.
• A mere 42 percent of all respondents reported employing a CFO, while only one-quarter of firms with between 11 and 25 employees said that they had one on staff.
• Less than 20 percent used an asset management system capable of auditing. This could explain why nearly three-fourths of them stated that they did not understand the impact of "ghost assets" on their corporate books.

Overall, basic financial management was widely cited as a major pain point in the everyday operation of virtually any type of small business. More specific accounting challenges included difficulties closing books at the end of each month - a process that can indeed take days to complete when doing redundant data entry in Excel - as well as handling cash flow and overseeing accounts payable and receivable.

For professional services organizations in particular, the pressure on their finance teams can come from not only inefficient internal process but also from particular customer expectations. One example would be any client who requires a lot of granular reports and invoices with specific formatting.

These documents can be tough to generate with any semblance of speed or accuracy, especially when the organization providing the service (whether accounting or software consulting) has a good number of employees out in the field working on tasks with billable hours. Over-reliance on spreadsheets or legacy financial software only complicates matters: A custom form may have to be drawn up in most cases, which takes time and effort to put together and populate with data from potentially many different sources.

This combination of limited technologies (i.e., the financial software in use) trying to meet high customer expectations is a common stumbling block for SMBs in the professional services sector. A late 2014 survey of 530 professional services firms, conducted by the Hinge Research Institute, found that 29 percent of respondents reported that client demands and expectations were a primary challenge for their businesses. A similar number - 30 percent - cited technology as another big obstacle to their success.

Even as 2015 gives way to 2016, tools and processes that first became popular in the 1980s and 1990s are still front and center in the world of professionals services. A January 2014 report from chartered accounting firm William Buck found that only one-quarter of CFOs planned to adopt cloud financial software within the next five years. Research from Software Advice has also revealed that adoption of cloud financial solutions has been slower than average among SMBs.

"While the cloud accounting media drum has been beating for some time, many CFOs are still cautious about the new technology and are hesitant to move away from the tools that they have been using for decades," stated the authors of that William Buck report.

3 reasons why professional services organizations should take up cloud accounting software

The gradual pace of tech upgrades in the professional services sector gives SMBs willing to make the leap a huge opportunity. That is, if they implement a modern cloud solution, they will quickly gain an advantage over competitors who are still stuck with their Excel-based workflows and limited software. Here are three reasons that service organizations should consider switching to a cloud platform such as Intacct:

1) Access information as it becomes available
Like grains or missiles, financial information is often stored in silos. For example, the labor costs that a project manager needs to account for may be non-posting and as such hard to access and quickly integrate into project assessments. The data is in a silo that doesn't serve anyone's best interests.

Cloud budgeting and forecasting software helps eliminate such silos through automation. Labor costs can be automatically posted, plus complex inputs such as billable hours can be routed through the solution to generate a wide variety of reports. Information doesn't get siloed away but instead is made available for analysis as it becomes available.

2) Save money on staff and IT infrastructure
The automation in cloud accounting helps save time, effort and money that would have otherwise gone into generating reports by hand or performing lots of manual data entry. Beyond that, cloud financial software conserves money in other areas such as staffing and IT assets.

Instead of having to hire many additional staff to keep up with company growth, professional services organizations can effectively scale their operations with the on-demand resources of a software-as-a-service solution. The cloud service provider ensures that any modifications or scale-ups are relatively easy, especially compared with the costly hardware/software upgrade cycles of the past.

3) Boost profitability for your projects
Relying on manual processes and outdated tools means that you can easily get left in the dark about what's going on with your projects. The siloed data sources we talked about earlier are good examples of things that are easy to lose track of in this way. Not having visibility into how a project is performing is a good recipe for going over budget.

Fortunately, it's possible to dig deep into the details of your professional services organization's operations by using cloud-based software. Dashboards and reports help you see what's happening minute-to-minute. This level of insight can improve and accelerate decision-making and lead to more profitable projects.

Professional services organizations, particularly SMBs in this field, face unique challenges in managing their finances. While many are still saddled with old tools that cannot efficiently keep up with daily operations nor meet customer expectations, there is a better way forward. Cloud financial software provides the automation, cost-effectiveness and data management that can transform accounting and other processes from money pits into streamlined activities.