Full Sail Partners Blog | Nicole Temple

2021 year-end is rapidly approaching, and it is vital to begin your year-end processes to ensure a timely close. For some finance and accounting professionals, the year-end process can be a struggle and a daunting endeavor. However, Deltek Vantagepoint and Vision clients can breathe a sigh of relief with some handy suggestions.

Below are some recommended areas and process to be sure to review to help complete a thorough year-end close. It is also recommended to develop deadlines for each area prior to opening the new year to help stay on track and minimize the stress around wrapping up year end.

Create a Year-End Checklist

The first step in the year-end process is to develop a personal list of processes by noting all modules owned in the system and compiling information from Deltek Vantagepoint or Vision as well. It is also wise to review the weekly and monthly deadlines in the checklists to be sure all items have been completed.

Additionally, be sure to visit the year-end info center in the Deltek Customer Care Portal. Here, Deltek clients can gather checklists and step-by-step procedures for getting Vantagepoint or Vision ready to close out the year and begin a new year. This is updated yearly and is an invaluable source of information for the necessary processes based on the modules owned by each firm.

Year-End Process Considerations

In addition to the items and recommendations found in the Deltek Customer Care Portal, outlined below are some standard tasks to complete when preparing for year-end.

• Enter and complete posting of all 2021 transactions.
• Review the fiscal year checklist prior to completing the calendar year closeout.
• Complete all cash account and bank reconciliations and verify that the reconciled GL matches the GL balance.
• Review and complete all credit card reconciliations. This will require getting the expenses into the expense reports and posted in the year they happened - this is important for both reconciliation and for invoicing.
• Run the file reconciliation report and troubleshoot as well as correct any differences. Review the profit and lost statement and balance sheet to verify proper categorization in accounts.
• Run the unposted labor report and address any timesheets that require posting. Complete an interactive billing cleanup of any outstanding WIP that will not be invoiced, or that has been invoiced and not removed from the billing module by marking to be deleted and accepting a zero-dollar invoice.
• Make any projects dormant that are no longer active.
• Be sure to review all terminated employees for a termination date and setting the admin level for timesheet and expense reports to staff. Review all active employees and set valid company domain email addresses, hours per day, and timesheet and expense admin levels.
• Evaluate the 2021 budgets to determine if 2021 goals were met. Set goals for 2022 and gather GL budget information that needs to be entered into the system.
• Set up new holidays for the upcoming year in the holiday configuration/settings. This allows the timesheet to show the new holidays as well as for the utilization ratios to correctly calculate each year.
• Review employee vacation time reporting to send out notifications needed for employees who may lose vacation time in the cut over to the new year. Now is a good time to have employees decide what to do with approaching maxes, limits, and upcoming vacations.
• Collect on past due invoices!
• Pay all vendors due to be paid and initialize the 1099 process before opening a new year. Void outstanding checks that may have expired. Make sure to order 1099 preprinted forms NOW before it’s too late.
• Save all audit reports as PDFs for info center/hub changes.

Close Out 2021 with Deltek Vantagepoint and Vision

Following the recommended steps by Deltek and trusted consultants, year-end should not only run in a timely manner, but can also run smoothly and with less stress for Vantagepoint and Vision clients. Developing a good process flow now makes each following year even smoother and allows some of the process to be delegated out with confidence that is will be completed in timely manner year after year. Help is just a click away! Use the image button below to find year-end resources available from Deltek.

Financial statement data is vital for leadership teams. This data is the basis for measuring firm performance and influencing decisions regarding the firm’s future. There are several financial metrics that businesses track and rely on. Based on the findings of the 41^st Annual Deltek Clarity A&E Report, operating profit on net revenue has increased for ten years consecutively to 15.8%. This is a 1.4-point jump year-over-year. A variety of other important metrics were addressed in this year’s Clarity report as well. The Clarity report reveals where things measured up for 2019.

Top Financial Challenges

The financial challenges have remained similar year-over-year. This year the trend is towards challenges with increasing profitability, finding and retaining qualified staff, and managing firm growth. Although, finding qualified personnel and keeping turnover low is second to increasing profitability. It is also noteworthy that qualified staff is at the top of the list for greater than half of the respondents. Cash flow is floating in the ranks, but it seems that firms are managing it better than in years past. The unpredictable spending environment was only at 11% for 2019, though that is likely to change given the challenges many firms faced in 2020.

Building on Success

While there is economic uncertainty in the year 2020, the results show that firms strengthened their operations in 2019. Operating profit continues to rise steadily, as it has over the last decade. Of note, small businesses saw a strong increase, rising to 15.9% operating profit, up 3.5% from the prior year. The net labor multiplier has seen a minor increase as well, reaching 3.03 last year. That’s the highest multiplier measured for the industry in ten years.

Another significant metric tracked by firms is the utilization rate. It is calculated as cost of labor charged divided by total labor cost. This metric remained steady with the prior two years, except for Architecture firms that showed an increase of 2.3% points year-over-year. Employee retention is a factor within this metric. Firms with higher utilization also tend to show lower turnover rates as well as higher net revenue by employee. Does this show us that working employees are happy employees? Findings will show that investments in technology and training can keep employees engaged and productive in producing revenue.

Net revenue per employee is yet another metric to see a positive increase. This could be attributed again to the investment in technology and training, an already high productivity amongst employees, increased rates, or possibly better efficiency driving projects to completion. Since obtaining qualified staff remains difficult, firms are working with existing teams to accomplish more. Burn-out should be a consideration and cutting associated costs or wages could be disadvantageous.

With employee cost being a possible factor in retention it is important to track trends and analyze total employee cost as a metric. This is calculated as the sum of total labor and other labor related costs, (such as fringe benefits and taxes but excluding bonuses) divided by the average number of employees during a year. This returned data shows that there was not an overall noticeable change. Payroll expenses and employee numbers increased at higher percentages which in turn drove the decrease in overall cost. Where the year prior it had showed a small decline, we may see a more drastic change in 2020.

The average collection period calculation divides accounts receivable by annual total revenue, multiplied by 365. This is an important metric for cash flow stability and deserves a great deal of attention. There has been small improvement or decline in average days amongst all firms. In comparison, small businesses and high performers stand out as having notably improved. It is important to stay on top of the outstanding accounts receivable to maintain cash flow performance stability.

Preparing for the Future 

A&E firms have largely agreed that business process improvements and project management training have a strong impact on a firm’s financial health. In addition to those areas, better forecasting should continue to be a top focus area. Addressing and improving these key components can be the key to continued success, even in difficult and uncertain economic times. To read more about financial statement findings, visit the full Clarity report. 

Professional service firms don’t traditionally sell products; rather they sell their time and expertise. Increasingly, they ARE selling products and time, and are spending a great deal of capital on tools to deliver both.

A common problem is that many firms can easily see the profits generated from their services, but overlook the contribution (or lack thereof) of the inventory AND fixed assets used to deliver the service by not managing both.  Even worse, they frequently manage and track them in the same manner.

Inventory management and fixed asset management are not one and the same. Read on to learn the difference between the two and understand the importance of utilizing proper accounting for fixed asset management.

Inventory Management

In the professional services world, inventory management is only slightly different from the retail and the production world. Inventory assets represent the items sold or the materials used to create a final product that will be sold. Inventory assets in professional services firms represent the intangible or intangible assets sold along with the service. This could include software or equipment. This is not to be confused with immaterial items, which are usually expensed as overhead. For most professional service firms, the inventory asset is a relatively small percentage of total firm assets.

Most importantly, unsold inventory appears on the balance sheet as an inventory asset and sold inventory appears in the Cost of Goods Sold on the income statement. This is an important standard of Generally Accepted Accounting Practices (GAAP).

Chances are, if you are selling goods as a part of your service offering, you are likely following the standards and hopefully using the Vision Purchasing module for tracking and control. But what about Fixed Assets?

Fixed Asset Management

Like Inventory, fixed assets exist and have specific accounting treatments for professional services firms, retailers, and other types of businesses.

Fixed assets are purchased assets of the firm for long-term use to support ongoing business operations. For example, fixed assets are laptops, desks, software, and vehicles, just to name a few. Since fixed assets are transferable within the company and will be used for multiple projects and multiple accounting periods, GAAP dictates a different accounting treatment than would be used for inventory management. More importantly, fixed assets in professional services firms are typically a large percentage of the total firm assets. In today’s world, the computer, machine, and installed software are the main tools used in delivering the services and often are given the least attention in the firm.

Why Is This Important?

Inventory management is a relatively simple task, but fixed asset management presents several challenges such as:

• Knowing the location of an asset to ensure you can deliver your projects on time
• Maximizing the usage of an asset to ensure the maximum ROI is gained from the asset
• Knowing the history of similar assets to make informed about purchases of new assets
• Tracking the depreciated value of an asset for tax and insurance purposes
• Keeping the Balance Sheet clean and free of historical errors to provide accurate ROI and other metrics

Overcoming these challenges doesn’t have to be difficult and can be easily accomplished by deploying an asset management tracking system. When choosing to implement an asset tracking system, it’s important that the system is integrated with your project management, purchasing, and accounting systems to ensure information about the asset is accurately maintained and easily accessible.