In an effort to boost revenue, you may have been tempted to invest in flashy marketing tactics or jump into diversifying your service offerings. While those strategies have merit, they should be secondary to updating what you’re already doing in-house.
The most cost-effective way to pump up profits is to maximize the resources you already have and prevent revenue leaks. An audit of your billing practices and team utilization can reveal quick corrections to prop up your bottom line.
Before you go fishing for new clients or productizing your services, it’s vital to maximize operational efficiency because it’s risky to bring in new business if your processes are bottlenecked. The new revenue may not warrant customer acquisition and onboarding costs, much less long-term overhead.
In a 2020 Boston Consulting Group survey, 45% of international business leaders acknowledged that revenue leakage was a problem their businesses were facing.
To prevent your agency from falling into that group, let’s take a look at two ways to support revenue expansion by identifying opportunities to correct.
A billing audit involves taking a magnifying glass to your client billing processes to ensure you’re invoicing accurately. By systematically performing this audit, you’re not only checking that you’re getting paid what you’re owed, but you’re gathering the information you need to set up sustainable systems.
Step 1: Review your invoicing processes. Use the following checklist:
✓ Are we using consistent invoice templates?
✓ Do those templates include clear terms and due dates?
✓ Are billing rates and terms correctly applied for each client?
✓ Do we have an error-proof system for managing recurring invoices?
Step 2: Compile all billing data. Gather all of your invoices, timesheets, contracts and other billing-related files over the period you want to review, perhaps a quarter or six months.
Step 3: Cross-check your time logs with invoiced hours. Look for discrepancies between the hours your team has logged and the hours you’ve invoiced for. Are the discrepancies due to improper estimation of how much time and effort a project would take, or are they due to misallocation, haphazard scheduling or another internal planning issue?
Step 4: Reconcile client expenses. Double-check that all reimbursable expenses incurred on behalf of clients are accounted for on your invoices. This maintains accurate accounts and is a contributing factor in fostering trust and transparency with your clients.
Step 5: Analyze payment timelines. Note the length of time it takes for each client to make a payment. Are there consistent delays? Data from Accelo users show that most payments are made 15 days late.
Step 6: Review unbilled services. Look for any services you provided but haven’t billed for. You’d be surprised how often this happens, especially in busy agencies.
If you’ve uncovered instances of underbilling or overbilling clients, it’s crucial to address these immediately. Apologize for the oversight and approach the communication with transparency and tact. Provide documentation and offer your clients the opportunity to ask questions.
For consistently delayed payments, discuss new payment terms, introduce incentives for early payments or consider adjusting late fees. Communicate new terms or conditions to clients in writing.
Unbilled services and other internal errors often signify a workflow problem. Determine ways to simplify the invoicing process with tech, and create a campaign to move more of your clients to recurring contracts that renew automatically — like Australian agency Bang Digital did with Accelo.
Reviewing employee hours is an absolute must for making sure your team’s efforts are focused on the most valuable tasks. A climbing utilization rate translates directly into profits because it means you’re getting more out of the same resources.
➡️ To complete a proper utilization audit, you’ll need to be using a time-tracking tool.
The questions you’re aiming to answer are:
Start by asking your team to meticulously track their time for a week or two. Once you have the data, categorize each task into revenue-generating and non-revenue-generating activities. This exercise alone will often reveal startling inefficiencies. You’ll see if your top earners are spending a lot of time on low-value tasks and if you’re underutilizing junior staff.
Continue your audit with the following steps:
You may very well discover that some team members have downtime or are working on tasks well beneath their skill level. These issues can usually be addressed with reallocation of workload, training and skill tracking. You may also discover that you need to charge higher rates for services that are particularly time-intensive. But the most impactful way to increase utilization is to automate processes your team does every day, week or month.
Remember, an audit isn’t a one-time affair. The business landscape changes, your agency evolves and new inefficiencies can creep in at any time. Make these billing and utilization reviews part of your operational calendar — ideally on a quarterly basis.
Don’t overlook what’s already within your grasp when you’re looking to expand revenue. Before looking outward, look within your business to unlock latent potential.
Ready to explore even more ways to drive revenue up and to the right? Download our latest guide for ambitious agency leaders.