It's a new year and the chance for a fresh start so lets kick it off the right way!
Just like any piece of construction equipment your business system is a finely tuned machine, so to get the best out of it you need to regularly service your business system to ensure it is running at an optimum level.
We regularly see what initially starts out as a well organised business system fall into disrepair due to day to day changes in priorities, staff turnover, time constraints and as a result the benefits of an effective management system are lost and the business is at risk due to a lack of quality management information.
When systems are not working as required it may be appropriate to seek professional advice to ensure you make the right decisions on how to get your information systems back on track.
There are many different systems that come together as part of your business machine, for this article we will focus on your Accounting and Job Costing systems but other systems that could be considered are Human Resources, Health & Safety, CRM etc.
Here are some things you can do now to help ensure your Accounting and Job Cost systems are optimised and you have the best possible start to the year.
Financial / Accounting Systems
These are a minimum requirement for every business, with functionality to process Banking, Payroll, Accounts Payable, Customer Billing, GST and Statutory reporting functions such as Profit and Loss, Balance Sheet. It is a well published fact that poor financial management rather than lack of profitability is the main cause of company failure so having an accurate understanding of your financial position at all times is fundamental to your success and survival..
Here are some things to consider:
- Is the current accounting system still suitable for the business or is it creaking at the seams? If your current system is struggling to cope with your day to day accounting requirements then now is the time to start considering new options. It may take you some time to settle on a new solution and typically this takes time to implement. For Australian companies the new Financial year is starting in July and although it is not a requirement that you have to go live with a new financial system 1 July for a lot of businesses this is desirable as it is a nice clean cut off changing over financial systems at financial year end.
- If you are happy with your current Accounting system here are some things you can consider to improve it:
- Are you getting the level of reporting you need from your Accounting System, do you need to re-evaluate your chart of accounts and either streamline it because you have redundant accounts or add further breakdown where it is currently lacking.
- If you are using an operational system such as Workbench integrated to your Accounting System can you reconcile the 2 systems and explain how balances in the General Ledger have being produced.
- Take time to review your Profit & Loss and Balance Sheet each month and ensure key balance sheet accounts such as Bank, Accounts Receivable, Accounts Payable, Retentions Payable and Receivable are reconciled.
- If you are not confident in your understanding of accounting data, seek the assistance of a professional that can help you understand the financial health of your business.
The compliance requirements when employing people are complex so ensure you have a well proven payroll system with a suitably trained administrator.
Salaried people are often more straight forward than wages staff but here are a few things to consider:
- Are you correctly recording staff expenses and related Fringe Benefit Tax.
- Review staff leave balances, if people have accrued too much leave encourage that some of this is taken.
- When are staff due Long Service Leave.
Wages Staff can be more complicated due to the fact wages are calculated based on the hours worked. With larger workforces there is often a huge opportunity to streamline the data capture and calculation of awards for payment to wage earners.
- Do your employment procedures ensure your payroll system is updated with the correct Wage and Allowance rates.
- If you have an EBA, is it understood and regularly reviewed for compliance.
- How are you collecting worked hours from staff, if it is done manually is it time to look at an electronic system to streamline this data capture.
- Do your Timesheet recording, EBA and Payroll processes work together to ensure correct pays.
Workbench and other similar operational systems
Workbench deals with a range of operational functions but you can assume that a number of the items listed below could also relate to other systems which are fulfilling an equivalent role.
The following Topics should be considered:
Often these tools are used in isolation by a few individuals within an organisation, you may be estimating using a formal system or alternatively using an internally developed spreadsheet system.
- If you are using Excel and have multiple estimators is everyone using the correct version of the spreadsheet?
- Is the coding used on your estimates in line with how you are currently delivering projects, does this coding need to be reviewed and updated?
- Are the rates you use for estimating current? If employees have recently received pay rises and your Labour cost base has now increased is this reflected in the labour rates you use for estimating.
- Are the rates you use for material cost estimating reflective of current rates. Is there margin factored in to these rates to allow for fluctuations in material prices.
- If there are things that you do on a regular basis that comprise multiple components e.g. Installing a light switch, this might involve a switch, some cable and some labour. Have you thought of using Bill of Materials, Assemblies, Kits for making this type of item quicker and easier to price and to ensure components are not forgotten when estimating.
If you are delivering projects, this refers to the method you use for managing these projects and tracking their performance.
- Does the structure of your Job Costing system currently reflect the way in which you are delivering projects. If it doesn't then why not, does it need an overhaul.
- Does the breakdown of codes you use on your projects give you enough information to successfully evaluate how a job is performing. Too many codes can make accurate data capture difficult, not enough coding can make it difficult to identify areas that are underperforming.
- Do you have appropriate reporting in place that is used and understood by Project Managers and Senior Management. There is nothing worse than spending a lot of time and money implementing a specialist Project Management system only for a Project Manager to go away and recreate his own method for running his jobs in Excel.
- Are your staff appropriately trained and do they know how to use the system properly?
- Are there key processes that you know you should be doing but are not e.g. Monthly Cost to Complete Forecasts, Project Cashflows, Monthly WIP.
- Are you required to maintain a Subcontractor Retention Trust Account.
- Do you have approval hierarchies within the business, do these need to be reviewed / updated.
- Do users have the appropriate level of access for their role, too much access can potentially be a security concern, not enough access will prevent people doing their job properly.
- Do you need to do a bit of house cleaning e.g.
- Close out old jobs
- Make Inactive old Employees, Suppliers, Activity Codes, Sales Codes, Stock Items
- If you use Catalogues for procurement are these up to date?
TimesheetsDo you capture timesheets for job cost purposes?
- Is your breakdown of labour activities appropriate for your job management requirements
- Do your labour cost rates reflect your current actual costs i.e Wage Rate, Superannuation, Payroll Tax, Work Cover. PPE etc.
- Is your EBA up to date.
- Do you have appropriate approval processes to ensure accurate Timesheet data.
EquipmentDo you have a fleet of equipment?
- Is the list of items up to date
- Are the rates you use for costing equipment to projects up to date
- Are you tracking non-productive hours to understand utilisation of your fleet
- Do you have a pre-start process, are you tracking faults?
- Do you have a maintenance strategy in place and is the fleet being properly maintained
- Are you tracking the costs of maintenance by equipment item, this can help you identify problem equipment
- Is your depreciation schedule up to date.
- Are your current billing processes efficient and supportive of the way in which you need to bill your customers
- Are you owed retentions that are now claimable
- Do you have a large outstanding debt, time to chase the slow payers or maybe engage a debt collection specialist.
Hopefully this will give you some ideas on areas that you can address with your business systems to ensure effective running for the next 12 months. Although it can appear daunting, often the short term pain and cost of implementing improvements does have a positive and lasting impact on your business.
As always our team at Workbench is ready to help you succeed, if you feel you need help then reach out to us.