Using Existing Technology

Using Existing Technology to Manage Your Firm in a Recession, by Doris Cahill, CPA and President of DMC Accounting + Technology, Ltd, Originally Published in Zweig White Newsletter

Let's face it: In times of recession everyone is looking hard at managing the bottom line. The first impulse is to start cutting costs wherever possible. Along with cost cutting, there are other methods that can help a firm through a recession and should be followed by any firm in good times or bad. The first approach would be to increase billings by capturing costs that are project related. The second approach is to use existing technology to manage your firm by capturing financial information in a timely manner.

One way to accomplish billing increases is to pass along expensive internal costs to your clients via usage charges. With a small ten to fifteen person A/E firm one can typically recapture $2-$3K profit in monthly billings or $24K-36K annually in plots, faxes, copies, printing and postage. This figure is proportional to a firm's size.

Examples of cost recapturing are as follows. Photocopying can cost an A/E firm ten cents per copy. To recoup that cost the firm would bill the client twenty cents per copy. If one extends that thought, a ream (500 sheets) of paper with toner use costs fifty dollars, but one would bill a client one hundred dollars. (Note: cost per page is available from most major manufacturers of printing and copier equipment). Reprographic services that have been outsourced are another example. Charges to the A/E firm could run about one dollar per linear foot for plotting, the A/E firm in turn could bill their client one dollar plus a markup fee.

Unfortunately, methods of tracking costs for recapture are not automated for many A/E firms. Often manual logs are placed near machine and equipment areas, and a team of bookkeepers input logs into the firm's billing application. Other firms utilizing outside logging/tracking services, a publication report is received which bookkeepers then enter into the billing application. These methods of capturing costs are costly and unreliable. Many times costs are not recorded; mistakes are made with allocation to projects not to mention the time spent on data input.

In larger firms, where the labor costs for re-input is clearly noticeable, and therefore cost exorbitant, vendors supply cost information via diskette or CD Rom. The data is then formatted for import into an appropriate package with import capabilities. For those not familiar with this type of data exchange, it is important to note that most database applications are ODBC compliant or in layman's terms able to exchange data freely between applications. For instance, Excel can easily open a database file for Access.

There currently exists good, low cost solutions that can serve to remove some of the tedious labor of logging costs. This software technology both imports and tracks in-house costs. A firm can directly track costs and log files to a text file and format for import into one's billing package, thus eliminating the need for data input. Tracking software uses print driver technology to link and track usage of reprographic equipment. So each time equipment is used to print or plott costs are directly captured and allocated to a job.

We cannot always turn to revenue enhancement in times of recession. It's equally important to reflect on some long needed financial house cleaning and optimization of financial software. By taking advantage of existing technology a firm can keep costs under control before they become a problem. In times of plenty we often let the cow get fat and not address internal financial practices.

NOW is the time to clean house and keep clean books. Although I have always felt there is a relationship between success and keeping accurate financial records, it was refreshing to read a survey that confirms my beliefs. In Robert Hamilton and John English' "The Small Business Book" statistics show that the frequency and accuracy of a businesses accounting records are directly related to a businesses survival rate.

Frequency of accounting and the company's survival rate:

Frequency Survival Rate

At least monthly 79.7%

Quarterly 71.5%

Half-yearly 49.9%

Annually 36.0%

Accuracy of accounting and the company's survival rate:

Accuracy Survival Rate

Excellent/Good 63.0%

Average 49.8%

Inadequate 20.1%

Poor/Non-Existent 2.5%

If your staff has downtime, have them develop and learn other aspects of your existing applications. It is commonly thought that we as business professionals are underutilizing existing software application features by 80%. This underutilization can drive the apparent need for redundant manual processes. With education, many existing applications can fully eradicate this "need", which creates more work and ultimately costs time and money. Invest time in customizing and developing the reports that are key to measuring project productivity and budgeting. Stop, resist or at least limit, re-inputting already available information into Word and Excel.

Many A/E firms typically need the following:

• Utilization reports

• Project budgeting and scheduling

• Project profitability

• Core Financial Reports:

i. Cash Balance

ii. Accounts Receivable and Payable

iii. Balance Sheet and Profit & Loss

In order to truly manage a firm, it is not enough to simply generate computer checks and your firm's year-end tax returns from your financial system. The above reports should be looked at weekly. In doing so, it will head of problems before it is too late. Frequently, project managers and principals complain that their financial information makes no sense or that there is extraneous information that does not meet their needs. This is just not so. It is not terribly costly to understand and produce the exact project/financial report you need to run your firm profitably. The technology exists today to remove extraneous information from reports and combine information that would otherwise be presented on two separate reports. Investing in the proper reporting can save your firm years of monthly re-input into Excel.

With little investment a firm can start monitoring and capturing costs that can be passed along to clients. Likewise, with time invested in optimizing current software applications a firm's financial reporting can be streamlined so that data is presented in a manner that is pertinent and timely.

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