Construction Company – Lack of understanding of costs

Construction Company – Lack of understanding of costs

Problem:

Client lacked an understanding of costs on a project specific basis, and could not identify which projects were enhancing profitability and which were holding them back. Client also lacked a process or structure to track orders (both sales & purchases), invoicing and cash flow. Duplication, inefficiencies and a lack of communication between the accounting function and other departments was leading to substantial additional costs for the company.

Solution:

GLT worked closely with client to implement a complete overhaul of the accounting function and introduced professional, yet simple accounting procedures which were adopted by all company staff. A networked Sage accounting software package was installed and customised to suit the client’s needs. 
GLT trained all non-accounting staff to carryout functions such as setting-up a customers and raising sales & purchase orders. Accounting staff were shown how to professionally carryout functions such as preparing monthly management accounts, cash flow forecasting, capture all income & expenditure by project and document all communications with both debtors & creditors. All staff were trained to use the reporting functions which allows them to make informed decisions.
GLT implemented a system for tracking the time that each individual employee and department spent on each project. This provided our client with information to analyse key project factors such as total hours worked, chargeable hours and average charge rate. Other project expenses such as travel, out-of-pocket expenses, shipping could be easily identified by project.
The new accounting systems allowed the client to measure the performance of each service, department and the overall business. It quickly became apparent that certain services generated the majority of the client’s profitability. Prices were raised on some services to ensure that they generated an acceptable profit margin. While other services were delisted as they were generating a loss and the gap between needed and actual pricing was insurmountable
GLT Continues to work with the client to develop a strategy and help management to decide the future direction of the company. Goals and objectives were defined for the overall business and for each department. Budgets & KPIs are implemented which clearly identified the level of performance required based on the level of resources employed. Employee and department performances were linked to bonus payments. This gave all staff a clear focus and incentive on what needed to be achieved by week, month, quarter and year.

How GLT Business Created Client Value:

• Installed a new, integrated accounting system 
• Introduced strong accounting procedures, controls and checks for the business.
• Freed senior management to focus on determining future business direction, attracting new clients and expanding the business
• Implemented a new time and expense tracking system to measure profit and track projects in process.
• Introduced budgets & KPIs to provide a yardsticks for evaluating performance.
• Provide ongoing financial controller support to the client’s internal accounting staff.

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