The Ultimate Mid-Year ROI Opportunity: Out of Scope Audit

We’re at the midpoint of the year, which means most service providers are looking for what initiatives can be undertaken to improve financial performance the rest of THIS year. We’re talking the sustainable kind of improvements, ones that provide longer lasting benefits into next year and beyond (not “what can we pull from next Q1 into this Q4?”).

Even more ideally, we want those initiatives to achieve the “trifecta” of financial performance improvements:

• Increased revenue, AND
• Increased gross margin, AND
• Increased EBITDA profit

Auditing and actioning your out of scope opportunities is one of those handful of initiatives that meets all these criteria.

• Capturing and contracting out of scope work generates revenue that doesn’t exist if you don’t charge for it.
• That revenue will boost gross margin (and profit) since it’s largely cost-free revenue. Let’s be honest, a lot of the out of scope work that will be identified is already occurring or about to occur without proper contractual coverage, and has already been resourced (often informally).
• Incremental revenue that improves gross margins will naturally increase EBITDA margins (and profit), often with outsized effect.
• It also improves bookings, backlog performance and forecasting, and resourcing transparency, and- believe it or not- customer satisfaction.

The trick is- you need to start now and action it properly, to get the best results within this year.

?Specific to clinical research providers, the combination of long contract durations and high complexity and unpredictability of clinical trials means most contracts require multiple changes over their lifecycle. Managing scope change is a constant consideration on these contracts.

Most providers struggle with the entire process chain involved- identifying and pricing out the scope change, communicating it to the customer, reaching verbal agreement, converting that verbal agreement into a signed amendment, and even billing the resulting changes.

Below are some best practices for auditing your out of scope opportunities and process, in approximate chronological order:

• Designate an executive sponsor with accountability and decision making authority.
• Sample size should combine your largest revenue projects with a wide sampling of smaller projects.
• Review documents (contracts, SOPs, forms, etc.) independently of any comments, excuses, or hearsay received while collecting those documents.
• Action obvious project specific issues with large dollar impacts along the way (early ROI).
• Meet with a wide range of staff across multiple roles involved in the process, making clear the goal is improvement, not blame.
• Discuss recommendations with executive sponsor and top stakeholders, with a timeline and process for decision making and implementation of those decisions.
• Ensure broad based rollout and training is provided as quickly as possible (you do not have to wait for updated SOPs to do this).
• Track ROI monthly, report and celebrate your success and struggles at regular intervals.

?The initiative itself should take no more than 45 days if you’re focused. The process can be done 100% internally, or you can call me. Early ROI comes from actioning the missing scope change you will find on your largest projects. Long-lasting ROI comes from the process improvement itself.

Now, stop reading and get it done!

I specialize in pricing and financial strategies for service and technology providers. Contact me to discuss solutions for your organization.