The consulting world is filled with jargon that, while it might be familiar to your seasoned consultant, can leave those new to the industry scratching their heads. Utilization, PSA, billable hours, T&M, if any of those words sound new, this article is for you.

After reading this glossary of terms, you’ll be ready to literally talk the talk, and then walk the walk as a trusted advisor to consulting firms. Let's get into it!

Timesheets

Timesheets are where consultants log the time they’ve worked on a given project. The purpose of logging time on a timesheet is so that the firm can invoice exact hours to their clients and ensure each project is profitable.

Learn more: On time, every time: How to stop late timesheets with timesheet reminders.‍

Billable time

Billable time is the time logged on by employees through timesheets that can be billed to the client.

‍Non-billable time

This is the exact opposite of billable time. Non-billable time is time logged on timesheets that isn’t to be billed to the client. Employees could be working non-billable hours because they are doing admin, personal development, management duties, or anything unrelated or unable to be billed to the client.

T&M invoicing

T&M stands for “time and material invoicing” and refers to the practice of consulting firms tracking their employee's hours (typically though timesheet submissions) and billing the hours worked and any materials (see billable expenses) to their clients. On a basic level, consulting firms remain profitable by billing clients for the work of their staff at a higher rate than the cost of paying their salaries.

Fixed-fee billing

Fixed-fee billing, as opposed to T&M refers to the practice of invoicing a client an agreed-upon fixed amount. This might be paid in a lump sum, but more often, it is paid when the project reaches its a certain stage, a percentage complete, or monthly/quarterly. In Projectworks, Project Managers can choose whether they invoice their client as T&M or fixed fee.

Billable expenses

These are the expenses your company pays during the project on your client's behalf and then passes on to them. An example of a billable expense could be the cost of a permit or license the firm had to acquire on behalf of the client. While a non-billable expense would be an operational expense, like office electricity costs.

Resourcing

Resourcing, in simple terms, is the action of assigning an employee to hours on any given project. You might hear a consultant say, “I’ve been resourced for 40 hours this week,” or “I’ve only been resourced for 3 hours on Project XYX”. While a Project Manager might say things along the lines of, “I’m resourcing my team across multiple projects” or “I still have 4 hours a week I need to resources for on this project”.

Capacity planning

Capacity planning is closely connected to resourcing. Most full-time employees will have 40 hours of work time, and planning how they use that time is capacity planning. You may also hear these two terms in regard to capacity planning:

• Over-capacity: employees are those who are resourced on more hours than they work.
• Under-capacity: those who are resourced fewer hours than they are working.

Learn more: Top 6 capacity management challenges for consultancies.

Utilization rate

Utilization is a success metric that is measured by professional service firms to identify how many hours of a consultant's time is spent on billable work. It can be measured by person or project. If a given employee works 40 hours a week, and has entered 30 billable hours through their timesheets, their utilization rate is 75%.

Learn more: How to calculate your utilization.

Utilization targets

In consulting firms, not every team member is expected to bill 100% of their time. Roles such as managers may have additional responsibilities, like mentoring, admin tasks, and hiring, which aren’t billable. To account for this, the firm sets utilization targets, representing the percentage of time that should ideally be billable.

For instance, if a manager has a 70% utilization target, this means they’re expected to bill 70% of their total working hours. So, if they work 40 hours in a week, 70% of those hours, or 28 hours, should ideally be billable. If they end up billing 24 hours, that means they’ve achieved 85.7% of their 70% target.

An ideal target for a consultant is 80-95%, which ensures they are focused on client work while maintaining a sustainable workload. This balance maximizes revenue without risking burnout.

Budget burn

Budget burn refers to the rate at which a project's allocated budget is being used up over time. Professional service firms should track their burn to ensure they are going through the budget at a steady rate, ensuring they aren’t on track to go over budget.

Learn more: How to calculate burn rate.

Project deliverables

Project deliverables are everything your client expects to receive during or by the end of a project. Deliverables can include physical documents, products, or completed actions.

Scope creep

In project management, scope refers to the defined boundaries and deliverables of a project. Typically, the scope of a project is agreed upon by the client and services firm at the beginning of the project. Scope creep is when the scope of the project starts to expand past its defined boundaries. It can happen gradually as clients make more requests or as the project changes shape due to unanticipated findings or factors outside the firms' control.

WIP (Work in Progress)

WIP for consultants refers to the progress worked on the project that is yet to be billed to the client. A WIP report will show the firm the number of hours worked that has been delivered but not invoiced. This report is a non-negotiable for many firms as it identifies invoices that still need to be generated and ensure they are paid in a timely manner.

PSA software

PSA stands for Professional Services Automation. This software automates the key parts of running a professional service firm. Firms use this software to run their projects, manage their financials, and cut down on the time spent doing administrative work. We have a full article here on PSA software if you’re PSA-curious.

CRM software

CRM stands for client relationship management. A number of sectors use this software, but in the context of consultants, it may be used by a sales team to do outreach or marketing or by consultants themselves to simply record client information. The two most popular CRMs on the market are HubSpot and Salesforce. Both of these options integrate with PSA software, which means consultants can enter client details into the CRM, and automatically sync it across to the PSA system when the project begins.

Integration

Integrations aren’t unique to consultants; however, many consulting firms have integrations between their software. An integration is simply a connection between one software to another. For example, Projectworks and Xero have an integration. As a result of this integration, consultants can reduce double-handling and save time by syncing data between the platforms. For example, consulting firms can generate invoices straight from timesheets in Projectworks and export them to Xero to be sent to the client. Check out all the ways you can integrate Projectworks with Xero here.

Project profitability

The way that consulting firms remain profitable is by ensuring they are billing more than they are paying in costs. This works by charging out their expertise at a premium compared to their costs. This might look like paying an employee $80hr while charging a client $120hr for their work, representing a 33.33% margin per hour. However, in practice, projects are a lot more complicated than this, so it’s important that leaders within the business keep an eye on their revenue and costs to ensure their projects are profitable.

Learn more: 5 metrics every successful professional services firm uses to remain profitable.

Revenue forecasting

Revenue forecasting is a way to ensure that projects will be profitable 6,12,18 months down the track. Typically expressed as a report for a given project, a revenue forecast report displays the planned revenue the firm is due to bring in over time. It is half of the margin puzzle, and when combined with costs gives firms a clear view of their margin in dollar amounts.

Learn more: Using revenue forecasting to grow your consulting firm.

Cost

At consulting firms, most of the costs they incur is from paying salaries. However, there are other costs the businesses have to consider, like electricity, rent, software, bonuses, etc. These are overhead costs. Having a full view of the business's costs is essential to ensuring firms bring in more revenue than they are spending.

Margin

Now that you know what revenue and costs are, the comparison of revenue to costs is what makes a firm's margins. A margin can be expressed as a dollar amount, but it is more often represented as a percentage. For example, if a firm brought in $250,000 in revenue and spent $210,000, its margin would be 16%.

A healthy margin for a consulting firm could range from 35-50%, while some firms that offer unique services with low competition can command margins of 50% or more. Achieving this supports reinvestment, sustained growth, and long-term stability.

To learn more, click below to read our global consulting benchmark report.

Margins by people, projects, and companies

There are a number of ways you can slice and dice margins. As marking margin is critical to a healthy professional services firm, business owners may want to see their margin across different levels. This can include the margin for each team member, each project, and the whole company or companies. Seeing this data helps consulting firms identify where they are hitting their desired margin and make strategic decisions such as doubling down on higher revenue-generating strategies or cutting out low-margin work.

Learn more: How to calculate your profit margin.

What’s next?

You may already have consulting clients without realizing it. Check out our article on professional services firms (another name for consultant). Take your new and improved vocabulary to your next meeting and have even more meaningful conversations with your consulting clients.

Next, if you’re not already part of the Projectworks Partner Program, go check out all it has to offer by clicking below. There are a number of benefits to becoming a partner, one of which is getting expert advice to help you provide impactful advisory services to your consulting clients.