Making a profit isn’t easy in the current economic climate, particularly when you even lose money on some of the work you do. With services firms having to deliver profitable work to succeed, these are my 8 top tips to stop projects heading into the red.

1. Don’t force your people into delivering perfect timesheets
Anyone having to account for their hours knows that timesheets can be a messy business. You never work exactly what you planned, you always have loose ends, and you often spend too much time on figuring out one thing over the other. As a result, insisting on picture perfect timesheets will only lead to incorrect information. It might make your reporting look good on the surface, but the picture your painting is not representative of what’s happening in the business.

To steer the company effectively, you need to know what’s really going on. Ensure you have an hour entry policy in place that’s clear to everyone. Encourage honesty, don’t attach blame to written off hours, and search for constructive sustainable solutions when people don’t achieve what they expected.

2. Don’t make discounting your default setting
Times may be tough, but continually discounting your services is not the way to build sustainable growth. If you can’t sell a project without doing it, maybe it’s time to reconsider your rates and how they relate to the market. Heavy discounting kills long term profitability and makes a mess of your reporting.

If you need a sweetener to get a deal over the line, try giving a few hours away free instead. This will show up unambiguously in your financial reporting, helping transparency and making it much clearer where exactly in a project any losses were accepted.

3. Stop booking project hours internally
Projects can run amok. It happens. But writing the hours on an internal project to cover up the mistakes that were made doesn’t help anyone. It puts a stop to you identifying where you need to improve, making it very difficult to turn the corner back to profitability. Create hour types for time you can’t invoice, or better yet, have the consultant write them anyway and have the invoicing discussion with the project manager. Either way, take the decision out of the consultant’s hands and encourage transparency and traceability for time that’s (potentially) non-billable.

4. Rebill purchases with a margin
Whether you simply print a lot of documents or buy a range of supplies for a project, don’t forget to include your costs, plus a margin, in your project invoicing. Lots of businesses fail to do this, despite the time their people spend in procure activities. Failing to re-bill with a margin dents your profitability. Have a standard margin for re-billable expenses in each contract equal to your overall project margin goal.

5. Remember your travel costs
Unless the customer is practically on your doorstep, don’t forget to factor in travel costs when billing a project. Depending on your industry, it may also be accepted that time en-route to a client can be billed as hours lost. They may often seem small amounts, but over the course of a project, or multiple projects over a year, you can be talking about considerable sums.

6. Ensure the project scope is properly defined
Not setting your project scope clearly at the start of the project is the easiest way to lose money. It sounds obvious, but it’s often forgotten. Make sure you and the customer agree on what results need to be delivered within the framework of the project before you start. Any misconceptions can then be ironed out, and if necessary included in the budget, before anyone gets moving. If you don’t, you’ll quickly find yourself working unbillable hours to deliver something the customer expected but you didn’t plan for.

7. Extras on accounts
Sometimes, an account need that little bit extra attention. With what you consider to be high value, important customers, it might be more than a little bit. Free hours, discounting, special overtime rates. If you engage in this, make sure you keep accurate track of the additional investment. Ensure you can be critical about all the effort you invest across the business. Added up and presented in black and white, you may discover that the extra attention is actually giving you very little return.

8. Index your rates
Inflation is a given. That your rates update automatically every year in line with it is not. Forgetting to move with the rest of the economy on a yearly basis will hollow out your profits. You can guarantee your employees won’t forget when they consider their remuneration. Insure your income moves in line with the additional expenses your business incurs.

So there we have it – they might all seem basic, common sense issues when presented like this, but experience has shown that they can easily creep under the radar. Think carefully about them, and ensure you’re not hurting your bottom line with issues that can be fixed with relative ease.