As service-based businesses ourselves, we understand the unique nature of running a business with fixed personnel costs and variable income streams. What’s more, when you make or buy a product, it’s relatively straightforward to track the profitability of each item. However, tracking the profitability of customers and projects requires accurate tracking of team utilisation recovery rates and a system for calculating pricing. 

In some areas of the service sector, performance-related pay is commonly used, adding an element of variability to the fixed nature of team costs. Performance-related pay is usually linked to targets such as sales and requires accurate recording. For e.g. tracking categories in Xero can be used to track team members’ sales and integrate this reporting into the payroll process. 

Managing working capital can be challenging for service businesses. Knowing when to bring in new team members is a key part of growth – too late, and you’ll be unable to meet customer demand, but too early, and you’ll be carrying unnecessary costs. To help manage this, having an up-to-date financial forecast that includes profit and loss, balance sheet, and cash flow is a key tool that we support our clients with. 

Harriot Pleydell-Bouverie