Accounting Overview

Fabricators need to look at 2 types of accounting

1.     Operational Accounting: practices and procedures

a.     The day-to-day processing necessary to run the business

2.     Finances: general ledger accounting

a.     The history of the business

b.    “Accounting for” all of the money which has gone in and out (and hopefully some which has remained in the business.)

Operational Accounting

This is the day-to-day processing necessary to run the business.

What do Fabricators need to accomplish?

   Some common tasks include:

The faster and easier you can accomplish these tasks, the better your business will run.

Often, Fabricators increase the productivity of their shop operations, with CNC equipment and streamlined processes, but then have a bottleneck in the office or accounting functions, because they are still using manual or inadequate systems and processes.

The challenge

Manual systems are labor intensive.

• Time consuming manual entry of information
• Entering information multiple times
• Errors and omissions
• No audit trail (difficult to find errors)

Systems designed for general bookkeeping or accounting use do not have the specialized functions needed by fabricators.

  Typically lacking are:

• Project type information (they are usually centered on customers, not jobs)
• Job costing set-up
• Links to production information, such as change orders
• Special billing functions, such as time and materials or progress billing

What is possible?

• You can automate accounting processes to a great extent.
• Just enter information once to have it linked throughout.
• Get job cost information as well as general accounting information.
• Get reports specific to your industry.

Suitable Solutions has great experience setting up, implementing and training fabrication companies for maximum accounting efficiency.

We recommend and implement the following systems, but we can also work with what you have in place now.

Intuit QuickBooks Premier Contractors Edition

A version of QuickBooks for contractors

• Easy to set-up (with right help to make sure it is set-up for your industry)
• Easy to use for basic accounting tasks
  • Job estimate (budget)
  • Purchase orders
  • Payroll
  • Paying bills
  • Billing customers
  • Banking

 The contractor edition has some other features:

• Set-up and help specifically for contractors
• Save a changed estimate as a change order
• More job cost and other construction-specific reports
• Read more...

Sage Master Builder

Advanced Construction management software 

Our goal is for you to look like this when you think about accounting.

How is your accounting going?

Take this simple questionnaire to help you to think about your accounting practices and finances, and determine what might be some areas to improve.

1.     Is your business operating at

a.     a net profit or

b.    at a net loss?

2.     Have your gross annual revenues been

a.     increasing,

b.    decreasing,

c.     erratic,

d.    flat?

3.     Why do you think that is?

_____________________________________

4.     How is your cash flow? (Circle one)

a.       Excellent

b.      Good

c.       Fair

d.      Poor

e.       inconsistent

5.     How often do you pay your bills on time? (Circle one)

a.    always

b.    most of the time

c.    not very often

d.    almost never

6.     Are you able to make payroll?

a.     Always

b.    most of the time

c.     not very often

d.    almost never

7.     How do you pay yourself?

a.     Salary

b.    Owner’s draw

8.     How often do you pay yourself?

a.      With regular payroll

b.    Monthly

c.     Annually

d.    Whenever there is money left over

9.     Do you ever under-bid your jobs to keep your labor employed during the off-season?

a.     Often

b.    Sometimes

c.     Never

10.  Are you comfortable with the amount of debt you have?

a.     Yes

b.    No

c.     Not sure

11.  What type of debt does your company have?

a.     Short-term

b.    Long-term

c.     Neither

d.    Both

12.  Are you on a structured payback schedule?

a.     Yes

b.    No

c.     Not sure

13.  How is your revenue base distributed among your customers?

a.     A few large customers

b.    Many small customers

c.     Not sure

14.  What payment terms do you require of your clients/customers?

a.     Due on receipt

b.    15 days

c.     30 days

d.    60 days

15.  How old are your Accounts Receivable collections?

a.     Under 30 days

b.    Between 30 and 40 days

c.     between 60 and 90 days

d.    over 90 days,

e.     don't know

16.  Do you have a system for dealing with pre-liens and liens?

a.     Yes

b.    No

c.     Not sure

17.  What kinds of financial reports do you generate on a regular basis?

a.    Profit and loss

b.    balance sheet

c.    statement of cash flow

d.    budget

e.    projections

f.     none

18.  How often do you generate these financial reports?

a.     Weekly

b.    Monthly

c.     Quarterly

d.    annually

19.  For the reports you produce, how much of the information do you understand and use? (Circle one)

a.    All of it,

b.    at least 75%

c.    between 50% and 75%

d.    between 25% and 50%

e.    less than 25%?

20.  Do you have a system to collect, track and reconcile on-site or employee-incurred expenses?

a.     Yes

b.    No

21.  How do you manage and control on-site expenses?

a.     Manual system

b.    Automated system

c.     Don’t manage

22.  If applicable, can your on-site supervisors sign for materials?

a.     Yes

b.    No

23.  Do they have a signing limit?

a.     Yes

b.    No

24.  Have you allocated funds for care and upkeep of vehicles, tools, materials, etc.?

a.     Yes

b.    No

25.  Who writes checks, makes deposits and reconciles bank statements? (Circle al which apply)

a.     Owner

b.    Accounting manager

c.     Bookkeeper

d.    Supervisor

e.     Accounts payable person

f.     Other

26.  Is it all the same person?

27.  Do you trust them?

a.     Yes, implicitly

b.    I think so

c.     Not really

28.  Do you review your bank statements?

a.     yes always

b.    sometimes when there is a problem

c.     no

Now go back and review your answers. Are you uncomfortable with any of the answers you gave? If so, then you've identified some primary areas of focus for your business development efforts. Begin today!

What Fabricators have asked for:

Most fabricators have asked us some form of this question: “What the #&%^$@ is going on?” 

Some examples of the types of information you need to have:

All the information you need to have:

     Estimating and Sales

    Productivity

• Which crews or individuals are the most or least productive?
• How long does it really take to perform the different tasks we need to do?
• Do some types of projects go faster than others?  By how much?
• Is our shop machinery running at full capacity?  If not, where are the bottlenecks?

Job Profitability

• What are the most profitable types of jobs?
• Do we make more on big jobs or small? Counters with sinks or plain tops? Granite or Corian?  Commercial or residential jobs?

Company Financials

• Are we making money?
• How is our cash flow?  Can we comfortably pay our bills? Make payroll?
• Are we paying bills on time and taking discounts?
• Are receivables payments averaging less than 30 days?
• What are our real job costs?

Why haven’t fabricators gotten what they need?

• Manual systems are too labor-intensive: With manual systems, there is just too much paper  to deal with so it just takes too much time to do a good job to produce the information you need.

• Generic software systems are too general to give you the type of information you need.  For example, they probably do not have good job cost type information.
• “Shallow” systems, over-simplified systems, just do not have the information you need.  They do not have enough fields or functions to contain the information. 
• The way your systems are set-up may not be optimal for your industry. Bookkeepers or accountants with just general business knowledge probably do not understand your industry needs and how to set-up a system to give you what you need.
• Often, your staff may need better training or standard operating procedures to insure accuracy.

What is possible

You can answer all of your questions about how your business is running.

• Strategic Analysis
• Operational Analysis
• Financial Analysis
• Reports
• Process Improvement

“Master Builder incorporates all aspects of your business and access to data has worked out beautifully.  I can do analysis any time I want on any job or group of jobs.  Now I get custom reports coming in showing profit by type of product.”   Patrick McDermott  McDermott Top shop

“Actionable data” information you can use to refine your business practices, make strategic decisions, and gain confidence that your business is being well managed on all levels

All the information you need to have:

     Estimating and Sales

• How many bids do we prepare per month?
• What is the percentage of bids we win?
• Which salesperson is the most productive?
• What are the actual costs vs. what we estimated?

    Productivity

• Which crews or individuals are the most or least productive?
• How long does it really take to perform the different tasks we need to do?
• Do some types of projects go faster than others?  By how much?
• Is our shop machinery running at full capacity?  If not, where are the bottlenecks?

Job Profitability

• What are the most profitable types of jobs?
• Do we make more on big jobs or small? Counters with sinks or plain tops? Granite or Corian?  Commercial or residential jobs?

Company Financials

• Are we making money?
• How is our cash flow?  Can we comfortably pay our bills? Make payroll?
• Are we paying bills on time and taking discounts?
• Are receivables payments averaging less than 30 days?
• What are our real job costs?

How do you get the information?

• Suitable Solutions systems contain dozens of individual reports each of which can be run several different ways. 
• We will help you to identify just the reports you need.
• Many of the reports can be set-up to run automatically to a file, printer or email, saving a huge amount of time and trouble.
• Easily retrieve the information you have entered. 

      Custom Reports

• Professional-looking reports and forms that give you and your clients exactly what you want.

• There is a built-in custom report writer for your use.
• We also have external report writing tools and people to give you just what you want.

Report and forms output

      Form design

• Change the look of any document to fit your needs.
• No need to purchase expensive pre-printed forms.
• Create business letters, mailing labels, complex contracts, custom check forms, change orders, invoices, and many other documents in a wide variety of page sizes. 

      Export

• To Microsoft Excel with just a click for further formatting.

• Create PDF documents (which cannot be edited.)
• Email
• Fax

Enjoy increased productivity and profits

Get the information you need, right when you need it, even mid-job, so you can catch things and make adjustments when necessary.

See where you’ve been to determine where you are going. Get a handle on all critical financial trends and ratios, so you’ll know if your sales and revenues are trending the same way as your cash flow, productivity, and more.

What to do next

See a sample list of standard reports (AB5-2)

See for yourself (demo)