By Anne Van Delst, CPA, CA, LPA, Partner
When you started your company, you had intimate, hands-on knowledge and were fully immersed in each of the projects your company secured. As time passed, your focus has shifted. More often than not, you now find yourself delegating more responsibility to your management team. Your time and attention is now spent on the business administration side of the company and you no longer have the time to continue with the hands-on approach. To ensure the continued success of your company, you need to ensure that you are getting the right information to manage your business.
Your accounting system needs to be set up so that it provides the meaningful information you need to ensure that new projects continue to be profitable for the company. Your system needs to provide timely and relevant financial information to those who will evaluate project results. As a business owner, you need to ensure that any new project bids can continue to cover their direct costs as well as all workforce and overhead or burden costs.
What you need to know
Tracking costs from past projects can provide a good basis for creating bids on new projects. Comparing a project’s actual incurred costs against its original budget can provide valuable insight on what areas should be looked at more closely prior to submitting the next bid. There may be room for efficiencies in some areas, whereas others may benefit from additional resources.
We have all heard the saying that time is money. Investing the time and effort to understand the outcomes from past activities can improve a company’s financial results in the future. The key is to analyze the appropriate information. The good news is that it’s all available in your financial records.
First, take a look at the financial information that you are able to review on a project-by-project basis. Next, look at the financial information that is available to you on a monthly basis. Is this all of the information that you need to manage your business? Is it possible that the accounting system that was established when you started the company needs to be modified? If you find yourself searching for extra information that falls outside of the project-by-project or monthly reports, the answer is likely a resounding yes.
A good accounting software package has project costing modules built in. The time it takes to acquire the training to use these models effectively is well worth it. If you are tracking the financial information for each project on a spreadsheet external to the accounting system that’s expressly built for this purpose, you may be duplicating work within the company. When correctly set up, most accounting software packages allow purchases and payroll costs to be assigned to a given project with only a few extra key strokes.
The last word
Reliable, accurate and timely financial information is vital to the continued success of your company. Take the time to evaluate your financial reporting needs and processes. Establishing strong internal controls that look after purchasing, costing and contract oversight become more important as your company grows. Similar to other areas of your business, your accounting software and processes need to be reviewed and appropriately managed as you go through periods of growth.
Over time, the pre-existing policies and procedures are often not updated to reflect the new realities that accompany growth. Financial practices that were established when the company was laying its original foundation may no longer be enough to support the thriving venture it’s become.
