Going under the couch cushions, my favorite audience question from the Vancouver IEEE Consultants Network
Last night, I gave a presentation on the quote to cash process at the IEEE Consultants Network in Vancouver, Canada. My favorite audience question was, “how would you recommend a firm start encouraging our professional services managers to look under the couch cushions?”
“Going under the couch cushions” is my semi-joking name for a strategic backlog review. I have children, and there are only two things I find under my couch cushions: spare change, and messes that need cleaning up.
In professional services, the spare change you find in the backlog comes from those customers with an odd number of hours left and an open Statement of Work. In these cases, the contract specified time and expenses based billing, and the project is done, but there are some hours left over. More often than not, the professional services firm’s finance department expects that those hours are going to become revenue shortly. The client has an open purchase order and expects to be billed for those hours. By periodically looking at all deals still in the backlog, it is possible to identify clients where you can position a “new” service offering with them. From the client’s perspective, this is a good deal, as they already have an open purchase order. It is often just a case of filing a change order to modify the terms of the original Statement of Work to include a new activity that uses up the ‘spare’ time.
There are also messes under the couch cushions. Those are the deals where the client has gone dark or is actively resisting scheduling their engagement. Where there was a change order to put the project on hold, and the client does not answer your phone calls. If you have enough of those, it is a mess, because finance expects that backlog will become revenue under normal circumstances.
A regular strategic backlog review should be considered an ethical mandate for professional services managers. Failing to clean up the backlog means that your firm is potentially misreporting their finances. Under normal circumstances, financial forecasting is tied to the amount of backlog, and that assumes that the backlog is genuine.
However, not everyone sees this as an ethical imperative. In these cases, a firm can re-define the role of the professional services manager to include a strategic backlog review. Your firm could choose either positive incentives – essentially bonuses from preventing revenue leakage caused by stale backlog – or negative incentives, depending on how your firm is philosophically oriented. Whether or not a professional services manager regularly conducted a strategic backlog review can be an evaluation criteria on a quarterly review form. Many people will need some form of motivation because going through a backlog review can be viewed as an inherently upsetting process. However, it beats the alternative of your firm learning that you will miss your revenue targets for a quarter.