If you look at well-managed civil engineering firms and how they do things, there’s one trait they all seem to have: They don’t let their finance and accounting departments slide on any of their assigned responsibilities. If, on the other hand, you look at poorly managed companies in this business, you will see a common thread that many of the daily chores of the finance and accounting staff are not being completed on a timely basis. The owners/top managers of these firms buy their excuses and let them off the hook way too easily!
So what am I talking about? Here are some of the tasks that you must insist your finance and accounting people always get done, every time: Project initiation—When you have a new job, immediately open a job number so people can charge time to it. Doing it later may mean missing out on billable hours because staff can’t charge their time to the project. Accounting has to be on top of this.
Payroll tax deposits—If there’s one thing I have learned in this business, it’s that you don’t mess with Uncle Sam’s money.
Payroll tax deposits must always be done on time. If not, the government can and will shut you down. This, in itself, is the reason for ADP’s existence. They pick up the liability for not making these deposits.
Daily bank deposits—Every day, all cash that comes in must be deposited at the bank. No exceptions. No excuses.
Daily cash-flow reporting—What comes in must be recorded and reported to all. On one hand, if you have great cash flow and aren’t hitting your line of credit, you may be perfectly happy seeing a weekly report of cash in. On the other hand, if you don’t insist on seeing this information daily, my experience is that accounting can get sloppy and not get the money into the bank as fast as they can. The finance and accounting people will do this report if you tell them it’s important.
Longer-term cash-flow forecasting—This is something every firm needs—a cash-flow forecast that looks weeks or months into the future to predict whether or not the firm will have to borrow, or if it will run out of cash and credit altogether.
Finance and accounting must do this at least once per week to stay out of cash-flow trouble.
Timely invoicing—The accounting team controls invoicing, and it ought to be concerned if any bill does not get out to a client at the earliest possible moment. Cash flow depends on getting the bills out. Delays cannot be tolerated! Collection efforts—I have long advocated that accounting professionals should be the front-line bill collectors in engineering firms. They do a better job of this than the typical design or technical professional. That said, there are steps that must be followed at certain stages along the way. Changing the process, aborting the process, or not following the process is not acceptable. Finance and accounting staff members who don’t do their job in collections cannot be tolerated.
Borrowing base certificates—Many banks require that you fill out one of these once a month to show them you are still worthy of borrowing their money on your line of credit. They have to be done and done properly. This is a job for your finance and accounting people. You cannot risk your banking relationship by not complying.
Paying down the line of credit—Nothing drives me crazier than seeing there were six figures in the bank all weekend and a five-figure balance on the line of credit that could have been paid down easily. Get out of debt every chance you get. It is the accounting department’s job to manage this tightly.
Logging all payables as they come in—There is no excuse for a principal or project manager to present accounting with a subconsultant’s or supplier’s invoice that needs to be paid immediately.
Accounting should catch invoices the moment they come in, and log them into the system so staff aren’t caught off guard later.
Proper payment of payables—Vendors, suppliers, and subconsultants have to be paid if you want to remain in good standing within the business community. Not paying these bills because accounting is either sloppy or "too busy" is unacceptable.
Anything to do with payroll—As the late Bill Bell, former chairman of Carter & Burgess, Fort Worth, Texas, used to say, "There are two sacred things here: Pay and parking!" You don’t mess with pay. If someone gets a raise, has a change in dependents, or has any other change in status, it has to show up in the employee’s paycheck at the right time. No slip-ups can be allowed.
Closing out the month-end report—I will never understand why some accounting departments cannot get the month closed.
Some firms fall months behind on this completely necessary activity, which means they don’t know how they are doing. Accounting departments have to lead the way with the discipline it takes to get the month closed on time, every time. Five working days should be sufficient if bills are going out continuously, and if the project revenue calculation and adjustment process is handled with discipline.
Finance and accounting personnel are unsung heroes of their companies who toil away with little direction, reinforcement, or appreciation from their principals and fellow employees. But they need some help. They are counting on you, as the owners of the enterprise, to set the priorities and to use their talents in the best possible ways. And, depending upon what services your firm provides, you may find that you need a higher level of discipline and diligence from them than from anyone else in your firm.
Mark Zweig is founder and principal of ZweigWhite.