ERP for Consulting Firms, UK

Day rates, fixed fees and the UK engagement cycle

The cycle I map in UK consultancies runs: lead, qualification, proposal with a day-rate build, contract or SOW under the client's terms, resourcing request, bookings, mobilization, timesheets, invoicing on the agreed basis, change control and close. The detail that trips firms up is that nearly every price is built from day rates, while many contracts are fixed fee or milestone based.

That creates two measures that both matter. Recovery, sometimes called realization, tells directors how much of the day-rate value of recorded time was actually billed. Engagement margin tells them whether the work made money after the cost of everyone involved. A fixed-fee engagement can show strong margin and weak recovery at the same time, and directors need to see both without asking finance to rebuild the numbers.

I agree the definitions first, including whether a day is a fixed number of hours or whatever a consultant records, and how part days are treated. Then I specify how each contract type is set up so the system calculates those measures consistently. My consulting industry overview sets out the general model, while the notes here concern British firms specifically. Law, accountancy and architecture practices are covered separately on the UK professional services page.

Associates, personal service companies and off-payroll rules

Many UK consultancies rely on associates: experienced people who work through their own limited company and join engagements as needed. The off-payroll working rules, often called IR35, govern how those arrangements are treated for tax. Depending on the size of the end client and who is responsible for the decision, a status determination may be made by the client, by your firm or by the associate's company, and the outcome changes who deducts what.

I do not make those determinations; your employment tax advisor does. What the system needs is a clear record per associate and per assignment: the contracting entity, any umbrella or agency in the chain, the determination and who issued it, when it was last reviewed, and how payments are handled as a result. An associate can fall outside the rules on one engagement and inside them on another, so the record belongs to the assignment, not just the person.

Operationally, associates should record time in the same system as employees, against the same engagement codes, with the same approver. That lets associate invoices be matched to approved days and lets engagement margin include associate cost at the real day rate. Where an assignment falls inside the rules, payment usually runs through payroll or a third party, and I design that handoff accordingly.

Public sector frameworks and call-offs

Consultancies selling to central government, the NHS, local authorities and other public bodies often work through framework agreements run by central purchasing bodies or individual buyers. Winning a place on a framework does not create revenue by itself. The work arrives as call-off contracts, sometimes after a further competition, each with its own scope, ceiling and day-rate caps drawn from the framework.

That layering needs to be visible in the system. I design a structure where the framework is recorded once with its rate caps and terms, each call-off links to it with its own ceiling and purchase order, and individual SOWs or work packages sit beneath the call-off. Timesheets and invoices then roll up to show consumed value against the ceiling, which is the number public sector buyers and your directors both ask about.

Public buyers also tend to require specific invoice references and purchase order numbers, sometimes submission through their own portals, and some frameworks ask suppliers for periodic management information on spend. I list those obligations per framework in the requirements so reporting becomes a query rather than a quarterly spreadsheet exercise. Check current procurement rules and framework terms with your bid team, because they differ between frameworks and change over time.

Recharging expenses and VAT on recharges

Expense terms in UK consulting contracts vary more than most firms admit. Some clients reimburse reasonable travel and subsistence at cost, others cap daily subsistence or insist on their own travel policy, public sector buyers often apply the rules set in the framework, and some fixed-fee SOWs include all expenses. If consultants have to remember each client's rules, recharges are missed or disputed.

I record the expense terms per engagement and design the approval flow so each claim is tagged as rechargeable or absorbed before it is approved. Mileage, rail, hotels and subsistence each get a defined treatment, and the invoice shows recharged costs the way the client expects, whether itemized or as a single line.

VAT is the part to settle with your accountant. Recharged expenses are generally treated as part of the consideration for your service and follow the VAT treatment of the fee, while genuine disbursements paid on a client's behalf can be treated differently. Overseas clients add place of supply questions. The system has to apply whatever treatment your accountant confirms, line by line, and that the evidence for each recharge stays attached to the claim.

Choosing systems for a UK consultancy

UK consultancies are usually choosing between a professional services automation tool alongside Xero or Sage, a mid-market ERP with project and resource modules, or a CRM-led stack extended with timesheets and billing. The deciding questions are practical: how many associates you use, how much public sector work runs through frameworks, how many contract types you sell and whether directors want forward bench views tied to pipeline.

I run the comparison on your terms. Each shortlisted option is asked to show a day-rate SOW with a change request, an associate assignment with a status record, a framework call-off approaching its ceiling and a retainer drawn down monthly. I score the results against the requirements and then review implementation proposals, because the difference between two quotes is usually hidden in their assumptions.

I deliver this remotely, using video calls for workshops, a shared mapping board and specification documents your directors can mark up, with sessions booked inside your working day. Consultancies weighing a wider systems change can look at how I approach ERP projects in the UK and the UK country hub, and the process mapping service explains the first stage in detail.