Does Your Nonprofit Need a Professional Services Automation System?

 In Accounting Management and ERP, Assessments and Roadmaps, Capacity, Constituent Relationship Management (CRM), Software Selections

A professional services automation (PSA) system is software that provides a range of functionality to support the delivery of project-based services. Using the right system within this category can help organizations manage their projects more effectively to produce better outcomes.

Over the past 20 years, I’ve had the opportunity to work with a number of nonprofit organizations that perform such work for clients and funders, but few of those organizations have ever heard of the PSA software category. For those organizations that deliver such work as part of their mission, this article therefore may well be your first introduction to the idea. For those who have heard of the PSA category or a product within it, this is your opportunity to refresh or broaden your awareness.

What is a professional services automation system (PSA)?

A robust PSA solution provides an interconnected set of tools that support the project lifecycle, from scoping a project all the way through billing and revenue recognition. These tools might include:

  • Management of team resources, including their skills, project assignments, and utilization/availability
  • Template-based or ad hoc scoping of projects, including tasks and milestones, levels of effort, roles, and billing basis and rates
  • Agreement management (contract, statement of work, grant agreement, cooperative agreement, etc.)
  • Project task management
  • Project financial management
  • Timesheets
  • Expense management
  • Billing/invoicing
  • Revenue recognition
  • Business intelligence (reporting, analysis, dashboards)

How does a PSA interact with other important systems?

A PSA might integrate with both your contact relationship management (CRM) system and your enterprise resource planning (ERP) or accounting system. With a well-integrated PSA system in place, data for accounts, contacts, and projects would flow between the CRM and the PSA system, and project financial data would flow between the PSA and the ERP system.

Having this integration is helpful but not necessary. A PSA system may be used as a stand-alone product—and there are several reasons why this might need to be the case on a temporary or permanent basis, including an organization’s budget constraints. But when not integrated there will be duplicative data management requirements across all three systems. An example of this might be management of the account (client, funder, agency, or other) and contact billing information across all three systems. A second example might be the need to manually create the project record in the PSA rather than having it automatically occur when opportunity is marked “Closed – Won” in the CRM.

Do the capabilities of a PSA overlap with other types of systems?

Yes, and this is one of the things that can make the PSA category difficult to understand.

Most modern ERP systems have native project financials capabilities, time and expense management, and billing. Some ERP solutions also have the resource management component. So, there is significant overlap between functions in the ERP and PSA categories.

However, when comparing those capabilities between ERP and PSA product, the PSA products will often have more robust functionality and better user interface for those capabilities. This is in part because major cloud ERP solution providers don’t develop their solutions in these areas beyond a certain point, leaving room for the growth of a robust set of marketplace partners to develop more robust solutions that integrate with their ERP.

These marketplace partners can be PSA providers, but they can also be providers of more focused systems that provide one, two, or a few of the capabilities that would be contained within a PSA solution. For example, one product might focus exclusively on timesheet management, another on timesheet and utilization management, a third on expense management, and a fourth on project scoping.

It can be difficult to distinguish what makes a PSA product truly unique when comparing it to all the overlapping capabilities from other solutions in the market.

The case for a PSA system

If so many of the capabilities within a PSA solution can be found elsewhere—most notably within an ERP solution, and since most organizations have one—what is the argument for implementing a PSA?

The answer is typically the robustness of the features and the tight integration between all of its components.

As mentioned above, a good PSA solution generally has more robust feature sets that those included natively in the ERP. So, when your organization has a complexity of business requirements that goes beyond a certain point, you will need to consider additional solution options—including PSAs.

Regarding component integration: when you set up a project in a PSA (which can occur as early as when you are scoping the opportunity to submit a proposal to a client or funder) you are setting it up one time for all purposes. In other words, the tasks and milestones become project elements against which scopes and budgets can be created, resources can be assigned, time and expenses can be tracked, and invoices can be created. That integration might not be as tight if you are leverage separate systems for each of those sets of capabilities: e.g., project financials in one system, time and expense in another, project task management in another, etc.

A good PSA solution becomes the single point of truth (the “SPOT”) for project information and performance analysis. And because projects can often be organized into parent/child relationships and/or into portfolios for reporting by project type, service area, practice area, business unit, etc., you have an opportunity to do broad analysis. Some organizations spend a lot of time gathering data from multiple places to inform project and organizational performance, which is costly (in terms of labor) and can make it difficult to gather insights that will lead to timely decision-making. A properly used PSA system can be a valuable asset in solving for these challenges.

It also is a valuable source of information for analyzing team member utilization, both past, current, and forecasted. Setting and meeting target utilization rates has several benefits, ranging from reducing staff turnover by making sure staff aren’t routinely over-utilized, to increasing organizational profitability by making better use of under-utilized staff.

Challenges for Nonprofits Evaluating and Using PSA Systems

The most complicated aspects of figuring out how your nonprofit can effectively use a PSA might be grants management, indirect cost management, and answering the question “what is a project?”

Because grant-funded nonprofit organizations can often have a single grant funding multiple projects, or multiple grants funding a single project, it can be a priority for the PSA system to be able to have a data model that allows you to allocate funding from different sources to project elements (for example, a task or a resource), track and report on the draw-down against those allocations as the work is performed, report on the disposition of all the funds by grant and/or by funder, etc. Many PSA systems do not have the capability to perform this well, although some do.

Calculating indirect costs during the project scoping/budgeting phase, applying and tracking them as the project moves along, and reporting and billing those costs at the appropriate intervals is also a challenge. Because different funders have different requirements associated with indirect costs, and the organization itself might have differing internal best practices, it can be difficult to manage these processes in a heavily automated way within a PSA system, or within the PSA system alone. Additional tools may be needed to do this effectively, including modules within the ERP system, or possibly Excel-based tools or a robust financial planning and analysis (FP&A) solution. It is worth mentioning that many organizations struggle to manage the diverse range of indirect cost and reporting requirements from the various funders with which they work.

Finally, organizations that have different definitions of “project” within their organization may struggle to broadly adopt a PSA solution. One part of the organization may perform contract-based “projects” where the tasks, milestones, and deliverables are clearly defined, and another part of the organization performs grant-funded “programs” in which the tasks and deliverables are more loosely defined. Determining what different types of projects will be managed in the PSA, including their commonalities and differences, and reconciling nomenclature (e.g., between “program” and “project”) may be necessary to effectively use a PSA.

Professional Services Automation System Options Your Organization Might Consider

If your organization thinks it might benefit from a PSA system, my first recommendation would be to just kick the tires on a couple of solutions to see how an eyes-on, or even maybe hands-on, experience will inform your thinking.

Generally, I suggest to clients they first take a look at Mavenlink, for two reasons: (1) it has a very good user interface, which makes it easier for those unfamiliar with PSA software to understand what general features a good PSA tool should include, and how it would be used in day-to-day scenarios; (2) it is one of the top-rated PSA platforms available in the space.

Then, I suggest to clients they take a look at Kimble, which I regard the “Cadillac” of PSA solutions and is also a highly rated market leader. In Kimble, you will be exposed to an extremely robust system that might be more capable of addressing some of the challenges identified above. Kimble also has the advantage of being built directly on the platform and tightly integrated with Account, Contact, and Opportunity data in Salesforce—and that is a huge plus for those organizations using or considering Salesforce. But it is also something of a liability, as design limitations within that interface make its toolset less approachable than Mavenlink. (But Kimble is also a more complex product, so there is some inevitability to it having a complex user interface.)

There are many other PSA options available (for example, FinancialForce PSA, Clarizen One, OpenAir PSA), but exploring Kimble and Mavenlink will give you a good sense of the capabilities of a high-end Professional Services Automation System and what it can do, particular in comparison to the software your organization may already be using.

“Pure PSA” Alternatives

One of the things my clients sometimes learn during their Professional Services Automation System exploration process is that the cost of a PSA system and/or the change the organization would have to undertake to adopt it successfully makes it unapproachable—at least at the present time. In that circumstance, organizations sometimes reconsider how they can make gains in other areas.

Often at this point the focus turns toward the existing ERP or accounting system at the organization, and/or the existing time and expense tools. Some organizations realize they would achieve all the gains needed at the current point in time by upgrading to an accounting system that has a better and more well-integrated project financials module (such as Sage Intacct, NetSuite, or Workday, among others). These ERP systems might have native time and expense modules with sufficient functionality, or you can look to third-party time (ClickTime, Replicon, etc.) and expense (Expensify, Concur) tools with pre-built integrations to their selected ERP system.

Finally, particularly within the government contracting and professional services space, there are several robust ERP/PSA tools that command attention, including solutions from Deltek and Unanet.

Two Final Thoughts

With so many options to consider within the PSA category and within system categories that provide overlapping functionality, it is imperative you are clear about the business benefits you want to achieve, and develop a set of solid business requirements, so that you can more readily differentiate between the options available.

And for some organizations, moving to a Professional Services Automation System can mean adopting a uniform approach to project management for the first time—which can represent a major cultural change. You should carefully consider the change management costs associated with making this change, which may be significant, and weigh that as part of the investment cost to adopt the new system.

Need more expertise?

Do you need an interconnected set of tools that support your project lifecycle, from scoping all the way through billing and revenue recognition? Could your organization benefit from investing in a robust PSA?

Build’s team knows nonprofit operations and technology (including CRM and ERP systems), we know the PSA software vendor landscape, and we are experts in change management. We combine deep nonprofit experience with a set of information strategy best practices, to provide you with all the qualities you need in a strategic nonprofit technology advisor. Let’s talk!

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