Budget vs Actual for Month End

Does your company have a budget vs actual set up to be reviewed every month and at year end?  If you do, have you been reviewing it and what has been the out come so far this year?  

If you don't -- you need to have a budget vs actual in place and you need to be reviewing it every month with the key people in your company or organization.  Several months prior to year end, you need to work on the budget for the next year with input from all department heads.  

Looking at historical data and anticipating expenses and revenues for the upcoming year based on projects that your company has in the works and in the pipeline is critical for your company's survival.

Companies that don't have budgets vs actuals are working without any idea of what to anticipate and face too many unknowns.  

Your company budget needs to be finalized and approved by all department heads and business leaders in your company and each department should know what they have to work with in the coming year.

Any changes during the year need to be conveyed to those same persons.  Feedback from management to departments and from departments to management is necessary throughout the year to deal with changes that occur or changes that are anticipated.

Budgets vs actuals will help with cash flow requirements and can help with tax planning and company marketing and planning.

This is the time of year when you should have those controls in place.  Most of the calls I get this time of year are for planning and year end close out.  If you don't have your plans in place for 2013, get those started today.

Charlene S Reed, Owner/Author

Responsible Business Services

"Construction Administration Handbook"

www.myconstructionoffice.com

Exit Interviews - Does Your Company Perform Them

When employees leave your company, are they participating in an exit interview?  An exit interview is an important step in keeping your company out of some legal issues.

Of course, exit interviews are not required and you won't be sued for not performing these, however, you could protect your company from claims brought on by an employee who says they were treated unfairly or didn't get offered COBRA or other items that should be covered when an employee leaves.  

If an employee has decided to leave your employ, you should ask them several questions and encourage honest feedback such as:

• What made you decide to leave the company?
• What did you value about the company?
• What did you dislike about the company?
• Was there a single event that caused you to look elsewhere for employment?
• What does the new company offer that you made you decide to accept a position with them and leave our company?
• What did you dislike about your job? What changes would you make in your job?
• Do you feel you were given all the necessary tools to perform your job?  What was missing? (Training, etc.)
• How was your relationship with your supervisor or manager?  Did this affect your decision to leave?
• Did you feel you had clear goals and know what was expected of you in your job?
• Did you receive adequate feedback from your supervisor or manager regarding your performance?
• What changes or recommendations would you like to share with us?
• What do we need to look for in finding your replacement (skills, characteristics, qualities)?
• Can you offer any other comments or suggestions that would help us to improve our company to become a better company?

Your exit interview should be ended with a positive affirmation to your employee that the comments and answers will be taken into consideration and used to provide the management with feedback on the processes.

Be sure to wish them much success in their new position.  Thank them for their feedback and comments.

An exit interview doesn't have to be a bad situation even when an employee is terminated for cause.  You should review the items that caused the termination whether it is attendance, theft or whatever it is to learn why the employee failed at their position.  

Feedback is always a good way to learn what and where your company can improve.  Never pass up the chance to learn what others are thinking even if you disagree.  Take the opportunity to learn what is happening in your company.

Happy Thanksgiving ! !

Charlene S Reed, Owner/Author

www.MyConstructionOffice.com

"Construction Administration Handbook"

Using Excel for Project Analysis

What do you use for data analysis on your projects?  I prefer Excel for a lot of things.   I use it to create pivot tables, sort long lists, re-create forms, financial statements and other financial spreadsheets and charts.  I think the only other programs that I use as much as Excel are Photoshop and Outlook, but that is another topic for another day.

Excel can be used for so many things and yet it can be used on very complex spreadsheets, graphs and charts and dashboards.  I am still working on a dashboard specifically for contractors that would keep owners updated in a one-page report to show them where all areas of their company is at.

Some of the things that I am needing is feedback from companies to tell me what they want to see and what they don't want to see.  I know every company is different and am working on a way to be able to hide what some don't want to see, and still have it available to the ones that do want to see it.

I know people in charge of Operations will want to keep their hands on the pipeline of projects coming and the status of projects in all stages.  They will also be a little concerned with the accounting of projects and marketing.  

Project analysis on a single project basis would definitely be a large part of this project.  Every project should have it's own page complete with graphs and charts showing the complete breakdown of budget vs actuals, costs and billings to date, overhead expenses allocated and used, over or under billings, costs to complete and any pending changes or modifications.

The big challenge is pulling this all together and making it expandable to companies that want to use this who have over 100 projects all the way down to the company that has a handful of projects.  The challenge will be pulling all of the data into one sheet to consolidate the information.  

This wouldn't necessarily be for the larger companies that are running Timberline or other programs like this since they have these reports built into the system and would most likely not have a need for it.  I have just had several people request something like this who don't run the bigger accounting and project management software programs such as Timberline.

Give me some feedback on what would help you and your company to be more efficient every day.  You can even email me privately if you prefer.

Thank you,

Charlene S. Reed, Owner/Author

www.MyConstructionOffice.com

"Construction Administration Handbook"

PS -- check out my other blog: mymindwanderedtoday.blogspot.com  -- always interesting things happening there :)  recipes and tips.  Thanks,

Reading DCAA Audit Manual for Government Contracting

“The more that you read, the more things you will know. The more that you learn, the more places you'll go.” - Dr. Seuss

Staying up to date with your business planning and critical steps necessary to survive are more critical now than ever before.  Staying up to date with business practices and continuing your education in your field is very important.

A lot of people don't see a need to continue in education once they are in business and doing OK.  I have to say I agree with Dr. Seuss on this one.  I love to read (and not the Twilight series -- sorry Penny)  -- I have to read information books and I have a ton of them.  

My latest book is the DCAA Audit Manual (Defense Contract Audit Agency Audit Manual).  I know, you are thinking 'boring reading' but it will help me a lot in the long run and I don't mind the reading.  :)  It's actually not as dry as GAAP.

I've learned a few things about audits and how to pass an audit by the DCAA in government contracting.  I've also learned how to make Quickbooks DCAA compliant.  Pretty interesting.

The government is out to spend money still in contracting and so many other areas.  I attended a workshop here in Phoenix, AZ last week (several actually), and learned some new things about the SBA and government contracting.  There are so many programs that you can get involved in with the government.  

Business planning is a critical part of any business success and reading is an important part of planning.  Learn what your business needs and learn those things that you don't need but that would help you reach your goals to expand or grow your business.  

I try to push my clients to read and expand their knowledge all the time.  I am mostly successful -- only 1 that hates to read and would rather watch it on TV -- I guess I could take up reading on video for those clients -- hmmm, OK, maybe not.

Take the opportunity today to get a book on something that your business needs, something that you need to learn or something that you just want to learn.  Read everyday -- expand your knowledge.  

Charlene S. Reed, Owner/Author

www.MyConstructionOffice.com

"Construction Administration Handbook"

Vacation Time and Employee Benefits

How much vacation time do you have left that you need to use before year end?  How much can you carry over to next year?

If you are like me, you will still have quite a few days left that you haven't used and a lot of companies won't let you roll them over to next year.  You are quickly running out of time to plan and take your vacation time.  If you don't know your company's policy on vacation time and carry over, you will want to find out before you lose a lot of vacation time that you really should use.

Vacation time is actually good for you.  It gives you a time to get away and rejuvenate and be ready to come back refreshed and ready to tackle the tasks at hand again.

Plan some time away this year and enjoy it.  Some times just being able to stay home and rest is nice too.  

Now is also a good time to review all the benefits your company offers you.  You may be missing out on some great benefits that you could really benefit from.  One of the companies I worked for had some great benefits and people failed to take advantage to them most of the time because they were too busy working.

Some companies offer tuition reimbursement and you could take some classes that would make your job easier or help you get a promotion that you have been wanting.  Still other companies have on site training that will help you gain experience and knowledge.

Insurance is only a small portion of the benefits that companies can offer you as an employee.  Check with your human resources department to see what you are missing out on and get involved.

Whatever you decide to do, enjoy it.  You could also tackle some of your own projects at home or take up a hobby.  Do something that you enjoy to take your mind off work for a while. 

Charlene S Reed, Author

www.MyConstructionOffice.com

"Construction Administration Handbook"

Is There a Reason to Archive Your Files at Year End?

Archiving your files at year end is a good practice and helps you keep space open in your office for new projects and new files for 2013.

Keeping your files archived is much more than just moving out the old and adding the new.  You need to have a system so that you can find things when you need them again.

Now is the time to start looking at setting up your filing system for 2013.  You should have your file labels ready to be printed including files for:

• Accounts Payable
• Accounts Receivable
• Sales Tax reporting
• Journal entries
• Job cost reports
• Deposits and other credits
• Bank Statements for each account
• Benefits plans
• Licensing, Corporations and other regulatory files
• and so many other business files.

You should have a color coding system in your office for the various file types so that you can find them easier if they are misfiled or on your desk with other files and paper.

Setting up a filing system is time consuming but well worth the effort in the long run.  It is something that you will use all year long and be in and out of many times.  Make sure you are comfortable with the filing system.

You have less than 2 months left in this year so get your filing system set up for 2013 so you are not panicking and running like crazy come December 30th.

Charlene S Reed, Author

www.MyConstructionOffice.com

Costs In Excess and Billings in Excess

What does all of that mean and what does it have to do with construction?  Why does it matter to me?  

Well, let's look first at what it is and then the why it is important to know what this is.  

Usually, you will find these two things on financial statements of construction companies and other manufacturing companies where products are billed out - sometimes ahead of time and other times well after completion.

Construction line items are cost loaded and have subcontractors, suppliers, labor and other costs attached to them.  At any given point in time that you want to compare these two items, (usually month end, quarterly or yearly) you would need to know where your costs are at on that date.  You would then prepare your invoice to the owner or agent based around these line items and the costs that have been incurred to date.

At this same point in time, you will determine those items that you can and cannot bill for on each line and bill accordingly.  You may decide to bill for something that you know is going to happen within a few days if the owner allows for it or you may be faced with a situation where costs have been incurred but you haven't reached a milestone that would allow you to bill for that item yet.  

Invoices are prepared for all projects and sent to the owner and now things are at a point where you need to determine whether you have costs in excess of billings (CIEOB) or billings in excess of costs (BIEOC).  

Let's say you have 10 projects and they all have invoices prepared and the numbers are all calculated.  You now need to look at each job individually and decide based on total billings and costs to date including your earned revenue portion of each contract, whether you are paying out money you haven't collected yet or if you have collected money that you haven't earned yet.

It really is as simple as that -- if you haven't earned the money yet, you have billings in excess and if you have paid out more money than you have billed for, you have costs in excess.  

You need to understand how these affect affect your bottom line.  If you have costs in excess of billings, you will have this booked as an asset since it is money that is owed to you for work that was completed but not billed for or collected yet.

At the same time, you need to understand that if you have billed for or been paid for work that you have yet to complete, it is a liability since you 'owe' the owner for what he has already paid you for -- work that you have not done yet.

At the end of this exercise, you will take all the amounts that you are over billed and all the amounts that you are under billed and net the two amounts out to see what the adjustment needs to be against revenue.  There are sometimes other factors to consider such as deferred revenue, however, this is the simplest explanation of this fact. 

Some companies will have entries that are very simple and others will be very complex because they want to see what these numbers are based on costs centers or by states or any other way that they have financial statements prepared -- there are many options and ideas depending on what the owners or investors are wanting to see.

Whatever your company decides to do, you should understand what is behind the numbers and this is a good primer.  I have always used Excel spreadsheets to make these calculations quicker and easier.  If you need help with these calculations or understanding them, check out my book or contact me for assistance or an accountant where ever you are located.

Understanding where your money is at is critical for your company's survival.  This calculation is a key component.

Charlene S. Reed, Owner/Author

www.MyConstructionOffice.com

"Construction Administration Handbook"