For many of India’s booming IT service firms, a nagging question keeps leaders up at night: are our projects actually making money? The company’s overall P&L might paint a rosy picture, but the real profitability of each client engagement is often a black box. This uncertainty, typically managed with a chaotic web of spreadsheets, makes strategic decisions feel like a gamble and allows profits to quietly slip through the cracks.
To get a real handle on profitability, you need to see the full, true cost of every project. This goes beyond just tracking billable hours and direct expenses. It means you must systematically account for a fair share of the company's operational costs—things like rent, administrative salaries, and shared software tools—and assign them to the projects they support.
This is where a unified platform like Oracle NetSuite GRC changes the game. It swaps out manual, error-prone calculations for an automated, rules-based system, giving you a clear and precise view of project-level profitability as it happens.
Getting Granular: How to Apportion Every Rupee of Expense
To find a project's true cost, you have to look at two types of expenses: direct and indirect (also known as overhead). Direct costs are simple; they are expenses you can point to and say, "This was for Project X," like the salary of a developer working only on that project. The real challenge lies with overhead costs—the shared expenses needed to keep the lights on. Allocating these correctly is the secret to unlocking true profitability.
Expense allocation is simply the process of spreading these shared costs across different projects in a fair and logical way. If you skip this step, you end up pricing your services with incomplete information, which is a fast track to underbidding on projects and watching your margins disappear. This is where Smart Expense Allocation through automation can transform accuracy and efficiency.
A Practical Guide to Apportioning Common Business Expenses
Let's look at how a typical Indian IT services firm can divide its most common overhead costs:
- Salaries (Admin and Support): Think about your HR, finance, and administrative teams. Their work supports every single project, not just one. A fair way to divide this cost is by headcount. If 20 out of your 100 employees are on Project A, then it makes sense for Project A to carry 20% of the administrative salary costs for that month.
- Rent and Utilities: The monthly rent for your office in a Bengaluru or Hyderabad tech park is a major fixed cost. You could allocate this based on the floor space each project team uses, but an even simpler method is to use headcount, just like with salaries.
- Software and Tools: Your business runs on shared tools like Jira, Slack, and your accounting software. You can distribute the cost of these licenses based on the number of people on each project team who use them. A project with ten team members would naturally carry a larger share of the software costs than a project with only three.
Use Case: An IT Services Firm Finds Its True Margins
Picture a mid-sized IT system integrator in Pune. For years, they juggled their finances between basic accounting software and a maze of spreadsheets. They were landing new clients and seemed busy, but the leadership team couldn't shake the feeling that some projects were bleeding money. The finance team would spend the first few weeks of every month just trying to piece together the previous month's costs. By the time project managers saw the numbers, it was ancient history—too late to do anything about budget blowouts.
The Problem: Managing in the Dark
The firm was stuck with several critical issues:
- Delayed Reports: Profitability reports were always weeks late, making them useless for active management.
- Incomplete Costing: They tracked direct labor but had no consistent way to assign overhead costs like rent or admin salaries. This gave them a completely skewed view of their margins.
- Reactive Management: Project managers were flying blind. They could manage timelines, but they had no idea if their project was financially healthy until it was too late.
The Solution: A Unified View with NetSuite
The firm switched to NetSuite SuiteProjects, bringing its finance and project management onto a single platform. The change was immediate.
- Real-Time Time and Expense: Consultants started tracking their hours and expenses directly against project tasks in NetSuite. This instantly gave the company accurate, live data on direct labor costs, their biggest expense.
- Automated Overhead Allocation: The finance team configured Dynamic Allocation Schedules in NetSuite. This feature automatically handled the overhead costs each month.
- They set up a Statistical Account to track the live headcount for each department.
- They created a rule to automatically split the monthly rent and utility bills across projects based on the percentage of total headcount working on each one.
- They did the same for shared software costs, allocating them based on the number of users per project team.
- Live Profitability Reports: With all costs—direct and indirect—flowing into one system, project managers finally got access to NetSuite’s Project Profitability Reports. For the first time, they could see a live P&L for every single project under their control.
The Results: From Chaos to Clarity
This new approach delivered tangible results:
- The invoicing cycle sped up by 30% because billing was tied directly to project milestones and tracked expenses.
- Live Budget vs. Actuals reports gave project managers the power to monitor margins constantly and get ahead of problems.
- With a clear view of which projects were winners and which were losers, the firm was able to focus its efforts on more profitable work, improving its average project margin.
By Overcoming Multi-Entity Reporting challenges, the company gained a single source of truth for its financial data, enabling consistent visibility across all business units.
Making Smarter Decisions About Your People
Getting a clear, accurate picture of project profitability does more than just tidy up your financial reports; it changes how you make strategic decisions. When you know the true cost and margin of every project, you can be much smarter about how you use your most important resource: your people.
- Put Your Best People on Your Best Projects: With clear data, you can make sure your top talent is assigned to the projects where they can create the most value and generate the highest returns. You can move from staffing based on who is free to making data-driven choices that boost the bottom line.
- Quote with Confidence: Accurate cost data from past projects gives your sales team the power to quote new work with certainty. They can stop guessing and start building proposals that lock in a healthy profit margin from the start. It also helps them focus their energy on the types of clients and projects that have proven to be most profitable.
- Turn Project Managers into Business Owners: When project managers have live financial data at their fingertips, they become true owners of their project's success. They can see the immediate financial impact of adding another resource or approving an expense. This builds a culture of financial accountability and empowers them to deliver projects that are not just on time, but also on budget.
Your Path to Financial Clarity with SaasWorx
Moving from financial guesswork to controlled, predictable profitability is a game-changer for any growing service business in India. The key is to systematically and automatically allocate all your costs to see the true financial story of every project.
Oracle NetSuite provides the unified platform to make this happen, but a successful implementation needs a partner who understands the local landscape. At SaasWorx, we are a domain-led consulting firm that specializes in configuring NetSuite for the unique challenges of Indian professional services firms. We help you unlock the full power of the platform to drive efficiency and maximize your profitability.
Book a complimentary consultation with our NetSuite experts today and take the first step toward making your project profitability crystal clear.
