Let’s say a consulting firm signs a $30,000 engagement in July and invoices the full fee upfront. The client pays quickly and the cash lands, but the work runs from July through September. By the end of July the firm has completed about one-third of the engagement - the project’s on track but the finance team have some work to do to match revenue with the costs incurred (the “matching principle” of having costs and revenue in the same period is a key accounting concept). Only a third of the project’s fee has been earned (because only a third of the work has been done), and the remaining $20k of revenue is deferred to a future period.
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Revenue forecasting plays a necessary role in ensuring consulting firms can predict profit and loss, manage financial risks, and plan for sustainable growth.
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Interested in how to calculate your margin? We’ve got you covered. Learn the formulas and strategies high performing consultancies use to track and grow their margin, including where PSA software makes the difference.
Let’s say a consulting firm signs a $30,000 engagement in July and invoices the full fee upfront. The client pays quickly and the cash lands, but the work runs from July through September. By the end of July the firm has completed about one-third of the engagement - the project’s on track but the finance team have some work to do to match revenue with the costs incurred (the “matching principle” of having costs and revenue in the same period is a key accounting concept). Only a third of the project’s fee has been earned (because only a third of the work has been done), and the remaining $20k of revenue is deferred to a future period.
Revenue forecasting plays a necessary role in ensuring consulting firms can predict profit and loss, manage financial risks, and plan for sustainable growth.
Interested in how to calculate your margin? We’ve got you covered. Learn the formulas and strategies high performing consultancies use to track and grow their margin, including where PSA software makes the difference.