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"

Decisions, Decisions, Decisions . . .

Decisions are all around us - especially today.  Companies have so many decisions that they have to make in their business on a regular basis.  

Everyday business owners are faced with a barrage of business decisions, some are major, others not so much, but you do have to make them -- either today or someday soon.  The problem with waiting is it gets easier to make a rash decision that may not be well thought out although the same can be said about quick decisions.

When making decisions in business, you have to make educated, well thought out decisions based on sound business advice.  You need to face all hard decisions head on and get the necessary counsel from your company decision makers and hired professionals -- accountants, attorneys or business consultants.

I read a book several years ago and really enjoyed the read so much so that I bought the book again and re-read it - probably loaned my copy out and never got it back.  "The One Minute Manager" is an excellent book and well worth the read.

The message in the book is to deal with things as they are handed to you and not spending the time to handle the same thing multiple times.  A really good idea especially for those people who pile things up to deal with them "later" and then later never really comes until "crisis time" happens.  This is a bad time to make a decision - when you are under the gun so to speak.

Take the time to learn the skills necessary to prioritize your tasks and start dealing with things in a manner that makes your company the most efficient and most profitable.  There are many people who can coach you in the areas of business that you are lacking to make you the best you can be in business.

Today, I am practicing what I preach.  I stopped putting off the things that I have enjoyed and started doing them professionally.  I started blogging on my other blog again today with the first of many books and blog posts to follow.  Check it out.

No more procrastination for me or you !!

Charlene S. Reed, Author

"Construction Administration Handbook"

www.MyConstructionOffice.com

mymindwanderedtoday.blogspot.com

Invest In Your Company By Investing In Your Employees

How much do you invest in your employees?  How much do you value your employees and value retaining them in your company?

Whether or not you answer this question here and now, you have already answered this question with your actions and the worst part is that your employees all know your answer.  No decision is still a decision.  By not choosing to value your employees, you have chosen. 

If you value your employees and their retention, you must invest in them - more than their salaries, more than their benefits, and more than a year end party.

You need to invest in them personally, professionally and educational.  Personally invest in your employees by understanding when they have a family emergency.  For example, allow them time off when they have a funeral or death that doesn't count against their PTO or vacation - the rewards will last a long time in loyalty to your company.  Professionally invest in them by allowing them room to grow and advance in your company.  Don't give someone a huge title such as office manager or controller and have them sitting at your front desk answering phones (unless you have a one person office).  Give them what they need to advance and grow with your company. Educational investments in your employees will be beneficial in that employees who are kept abreast of educational requirements of advancements in the company are offered to them no matter what position they hold.  Everyone needs to know that the opportunity for growth and advancement is available to them.

Companies that maintain quality, long term employees know this and practice these traits.  They know that retaining employees makes their company stronger in the marketplace.  Customers don't like change in staff occurring over and over either.  Keep your employees happy and they will keep your customers happy.

Investing in your employees could be as simple as bringing in someone to teach a few times a month for an hour or so over lunch on things that bring your company quality service, safety, document management or any of hundreds of topics  to advance your company.  I do this with my business for several companies where I go in and teach skills to people in small (2-3 people) to large groups (35-40 people).  Depending on what the company needs, I have done one on one training as well.

There are many things that you can do to show employees that you care about their future with your company without spending a small fortune.  Realize that people have families and personal lives, care about your people and they will remember that you cared when most other companies wouldn't have cared.  I'm not saying let your employees use you, just remember they are people too and not just numbers on time clocks that should act like robots in your company.

You will see in many companies that have long term employees, it is because the company treats their employees as if the company couldn't run as well as it does with out them.  Never tell your employees that you could do everything without them - that doesn't build employee loyalty.  Let them know they matter. 

Charlene S Reed, Owner/Author

www.MyConstructionOffice.com

"Construction Administration Handbook"

Understanding & Application Are the Tools of the Wise

"No amount of reading or memorizing will make you successful in life. It is the understanding and application of wise thought which counts." - Bob Proctor

Understanding the art of business is far more important than degrees hanging on your wall.  Having a degree is a great thing and I will be glad when I complete mine so that I can get another degree.  

However, I have run into a lot of friction lately because I haven't completed my bachelors degree even though I know most every aspect of running a construction company including accounting, estimating and project management.  

I have also held positions as an Operations Manager of a construction company and Practice Administrator for several physicians groups and a pharmaceutical research company.  

I have been the Controller for 2 construction companies, Senior Accountant for a large construction company and owned my own business for over 10 years.  What's the deal?!?  Why can't I get hired for a position without a piece of paper?

My thoughts on the whole thing are that the job market has tightened up so much so that people can make requirements be whatever they want them to be.  The biggest problem with this thinking is that you may get someone who can pass a test but do you have someone who can do the job?  

It never hurts to ask for a degree when you are hiring someone but I don't think a degree tells you whether or not a person can take you where you want to go in your business.  You need someone who understands AND applies that knowledge to the things that are important in your business.

I know I will be glad when my degree is done but for now -- I must get back to work.

Happy Friday !

Charlene S. Reed, Owner/Author

www.MyConstructionOffice.com

"Construction Administration Handbook"

Background Checks Would Have Saved Over $500,000.00 in Loss

Does your company perform background checks on new employees?  Yesterday, I blogged about drug screening for all new employees, random drug testing and post incident/post accident testing.  Both drug screening and background checks are important to your company's success.

You may not think that a background check will make a difference but let's visit a few scenarios that could have been prevented had companies done their due diligence.

Company "A" hired someone referred by a friend who knew someone and could recommend them for a position.  This person was hired as an Accounting Manager/Office Manager.  Gaining the owner's trust was relatively easy for this person since she had a convincing personality and was fairly knowledgeable in accounting procedure.

Skip ahead over 3 1/2 years to when the owner of the company received a phone call on a nice and quiet Sunday afternoon from a major credit card company and you can probably figure where this is headed.  Many hours later and a lot of digging proved several things:

• The company had been taken for well over $500,000.00 through several fraudulent schemes,
• The credit card company had issued several cards to this employee based on forged documents for hundreds of thousands of dollars in charges paid by the company,
• The employee had forged the owner's names on checks payable to herself for thousands of dollars,
• The bank statements and check thumbnails had been altered or replaced on the statement copies in the office,
• Bank electronic funds transfers were made to pay the major credit card bills incurred by the employee under the company name,
• Accounting records had been altered to change how things were paid and who they were paid to,
• Company accounts for cell phones, gas cards, business supplies and other accounts had been used by the employee for personal use to purchase items for herself and her family.

Had Company "A" done the background check, they would have found out that several companies had suspected this type of behavior but it wasn't a lot and it wasn't worth dealing with and they just terminated her.

There were also public records available for a forged check charges and other charges that would have indicated that this is not a person that you want to trust with your money and accounting.

There were quite a few other things that this company did wrong in this scenario such as poorly supervising this employee, not having controls in place to monitor and track expenses and checks, not opening their own bank statements and credit card statements, and not reviewing their financial records and statements carefully with an outside auditor or accountant and so many more.  

Now, Company "B" hires a friend of the family to work for them and never does a background check.  In this case, the background check wouldn't have showed anything since she was young and had no background, and after all, she was a friend.

However, being left with little to no direction and little to no supervision, an owner who didn't understand the finances of his company, and several other issues including the economic downturn in construction, it wasn't long before theft and embezzlement started along with forgery.

In the case of Company "A", a background check would have been great.  In the case of Company "B", not so much however, it may have showed the employee was having a lot of serious financial issues which would make it more enticing to have someone else pay for the fuel, food, etc. when funds were short.

In either case, the company should have had better controls in place.  In my business, I have seen this a lot and on the increase over the past 4 or 5 years.  Even more now than ever before, your company needs to perform background screening on all new hires and you need to make sure that your company has controls in place to minimize the risk of loss by forgery, embezzlement, fraud and theft.  My book covers a lot things that would help companies minimize or do away with these types of crimes against companies.

Get your controls in place and get background checks done on all new hires in your company.  Get a policy in place to make this part of the new hire packet and enforce it against all new hires including your 'friends'.  

Make no exceptions ! !

Charlene S Reed, Owner/Author

www.MyConstructionOffice.com

"Construction Administration Handbook"

PS:  Yes, she was convicted and spent several years in prison and no the company didn't carry employee dishonesty coverage as part of their general liability insurance package.