A/E Accounting For Firm Leaders by Axium
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Introduction to Accounting Key Concepts P&L Balance Sheet Cash Vs. Accrual Part 2: Managing An A/E Business Project Profit Utilization Overhead Cashflow
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A/E Accounting For Firm Leaders by Axium
- 1. A/E Accounting For Firm Leaders Daniel Laun Product Marketing Manager Axium www.axiumae.com
- 8. The Balance Sheet Equity Liabilities Assets
- 9. The Balance Sheet Equity Assets Liabilities
- 11. Cash Based Transaction A Customer Pays You $1,000 for work already Performed. Cash Increase $1,000 Revenue Increase $1,000 Revenue Expenses Assets Liability Equity Profit and Loss Accounts Balance Sheet Accounts
- 12. Accrual Based Transaction Revenue Side Work In Progress Increases $100 Unbilled Revenue Increases $100 Revenue Expenses Assets Liability Equity Profit and Loss Accounts Balance Sheet Accounts John Works 1 Hour On A Project. He Is Paid $30 per Hour (Cost). He Bills $100 Per Hour (Revenue). Two Transactions: Cost and Revenue
- 13. Accrual Based Transaction Cost Side Payroll Payables Increases $30 Direct Labor Increases $30 Revenue Expenses Assets Liability Equity Profit and Loss Accounts Balance Sheet Accounts John Works 1 Hour On A Project. He Is Paid $30/Hour. He Bills $100 Per Hour. Two Transactions: Cost and Revenue
- 18. Using a P&L to Manage an A/E Firm Project Profitability Project Revenue Project Related Expenses Non-Project Related Time Manage Employees (Utilization) Total Overhead Rent, Utilities & Other
- 21. Manage Each Project for Profitability Spent = Hours * Rates and Expenses plus markup Project to Date Billed Plus WIP is what has been billed plus what is available to bill Phase or Task: A Sub Component of the Project
- 22. Manage Portfolio’s of Projects Commercial Project M Project N Residential Project S Project T Project U Schools Project A Project B Project C Client B Project B Project T Client A Project A Project M Project S View Option 1 View Option 2 … Unlimited View Options Client C Project C Project N Project U
- 27. Measuring Cash Flow: The P&L Statement Project Revenue Project Expenses Gross Margin Non- Billable Time Other Expenses Profit & Project Revenue $1,000,000 Project Expenses ( $330,000) Gross Margin $670,000 Non Billable Time ($220,000) Other Expenses ( $300,000) Profit $150,000
- 29. The Cash Flow Cycle
- 30. Shorten Your Cash Flow Cycle
- 38. Growing Success Axium Encourages and Empowers Your Growth 20 YEARS A/E EXPERIENCE .NET 2.0 TECHNOLOGY EASE OF USE
Notes de l'éditeur
- What is the cash flow cycle and what does it affect. For this presentation I’m actualy going to start with time expended. Once an employee has committed work to a project you’re a/p in terms of payroll are accumulating on behalf of a client. Time also keys the creation of Work in Process or WIP or unbilled revenue. Once you’ve paid your employee’s you’ve expended cash into the project which you don’t recoup until the client pays you. The key to any internal change is getting buy in from your senior leadership. It’s your job to help them understand the cost of not changing. The difference between the top 25% and bottom 25% of A/E firms according to PSMJ is 69 additional days in the cash cycle. That’s providing interest free financing to your clients for almost 3 months. Not only are you not earning interest, you’re losing the opportunity to invest that money and you may be paying interest on a loan to cover expenses. Now that is painful.
- Let’s say your firm has 1million in revenue. Industry experts expect that for A/E firms you would be carrying $330K of A/R or 120 days worth. That’s a lot of dough. If a 1mm revenue firm can cut 10 days out, that $25,000 one time and $1500 annually. For our hypothetical firm their A/R at the end of the next year would drop to $305k …the difference being available for other financing activities. If you are a 2mm firm, and you can cut 10 days, that $50k. Is everyone excited about trimming days?
- When you get key people on board, working in alignment, great things can happen. Individuals without their team often can make change for a short period only to find that it disappears when they leave. Lee Ioccoca and Chrystler are a good example. Ioccoca was heralded for the change that he braught to Chrystler. However, not to long after he stepped down the company again flirted with bankrupcy. Lasting change means changing people’s minds and spirits.