Full Sail Partners Blog | Accounting (10)

For most professional services firms, planning for growth is a natural part of business. There are different strategies for doing so, and choosing the best one depends on your ultimate growth objectives. But whatever your goals, understanding how your growth plan affects your cash flow plan is essential to achieving the results you seek.

The way you grow affects cash flow planning.

Organic growth. There are a number of ways to grow one’s business organically. For example, in a generally healthy economy, your firm could continue doing “business as usual” (i.e., not increase your marketing or business development activity) and still experience significant growth from the improving economy. This type of growth is typically slow-paced; you can keep up with the increased demand either by using existing staff or gradually “ramping up” your staffing to meet the growth curve.

A somewhat more aggressive growth plan might be to expand your client base in the same market niche and geographic area where you’re already doing business. In such a scenario, you are typically increasing your marketing and business development outreach to generate business. As this outreach occurs, you may experience rapid growth that requires you to have staff immediately available to meet the increased client demands.

Strategic growth. Alternatively, you might be planning to significantly expand your service offerings or target market. For example, an engineering firm might add a new service line, or expand into another geographic market. In such cases, you could expect to take on additional marketing and staffing expenses, along with expenses for market research (please do not skip this step), software and equipment and possibly even new office space. These added expenses occur up front, well before you bring dollar one through the door. 

Expect a time lag before reaching ROI.

The fundamental point to keep in mind is that your cash flow will take a hit, probably at least for 90 days for increased staffing costs, and longer for marketing costs. The reason for this is the unavoidable lag between when you begin investing in expansion, and when you actually start reaping the benefit.

Here’s the general reason for the time lag. Once you decide to expand, there are several types of expenses you’ll incur at the beginning of your growth effort — investments that will not bear fruit immediately. For example, there are costs to hire and train new employees, with probably 60 days before they’re doing billable work. Even if you’re very efficient and bill on day 61, then the earliest you should expect payment for their work will be another 30 days, making it a minimum total of 90 days where cash is going out, but no additional revenue is coming in.  

How to meet the demand: sub-consultants vs. salaried staff.

In general, hiring consultants requires less of a cash investment than full- or part-time staff, as they typically will not get paid until you get paid (Paid When Paid, or PWP). This advantage may be offset, however, by the fact that consultants can also be more challenging to manage and they have their own clients (and potentially conflicting commitments as well). Additionally, you still have to invest manager time to assign and manage the sub-consultants’ performance.

On the other hand, while full- or part-time staff may be more costly to hire, they will likely gain institutional and process knowledge as they work, which should make them increasingly valuable to your company. Additionally, they are typically focused on the company’s needs and requirements; you can control their priorities.

Tracking cash flow and return.

The other part of cash flow planning during a growth period (or at any time, for that matter) is monitoring your expenditures and results (hopefully in the form of additional revenue). As with any plan, it’s essential to have an idea of the effort you need to expend, and what results you expect from that effort. Even if your plan is “business as usual” because of an improving market, you should understand what results you expect from the improving market. If you are increasing your marketing effort in your existing market, you should know what you expect from that effort in the form of additional leads, opportunities, clients and, of course, revenue. Without the increased revenue, what is the justification of the increased marketing effort (and assumed increased cost)?

There are a number of approaches for tracking results, ranging from one-off spreadsheets to purpose-built ERP solutions.

In our experience, one of the most effective strategies is to find a solution that accomplishes several key functions at once. Deltek Vision, for example, is a purpose-built ERP solution that provides a unified platform for connecting the front and back office functions — providing up-to-the-minute insight into cash flow planning, as well as accounts receivable, billability and utilization statistics, and much more. It even includes integrated solutions for automating major parts of your processes for customer relationship management, proposal development and tracking.

Watch the details, but don’t neglect the big picture.

Keep in mind that the timeframes for generating ROI mentioned in this article are generalizations. In fact, they’re based on an ideal scenario that assumes making good hires, efficiently training and integrating them, finding a receptive market … and getting paid on time.

Naturally, as the fine print often says, actual results may vary. This makes it even more important to build-in expectations that cash flow will take a significant hit for at least a few months before you start reaping the rewards of you investment.

Growth is rarely painless or easy — but knowing what to expect is far better than wading into a growth plan without knowing when it will start paying off.

What is forecasting? Forecasting is a tool that many professional services firms use to help management make decisions based on past and current data trends. 

There are two types of forecasting we will focus on in this article: 

1. Utilization forecasting
2. Cash flow forecasting

For professional services firms, forecasting starts with the analysis of the work that is yet to be performed and equating that to overall firm revenue. The revenue then becomes the basis for the accountant to project cash flows coming in, considering average day’s receivables, to drive what cash is available versus the cash required to cover current expenses.

Without these forecasts, it makes it much more difficult for management to schedule, staff, plan or perform the work in production that is necessary without them sitting up in bed at night on a regular basis. 

So let’s break the process down into steps and then focus on the key benefits of what is forecasting. 

1. To properly track utilizations, it is important to establish two budgeted figures, target utilization and available utilization. Both should be established for every staff person and documented by employee in your system.
   Definitions:

• Target Utilization is a function of the targeted billable hours over the standard hours in the work week.
• Available Utilization is a function of all available hours minus just the benefit hours.

One engineering firm we are working with used to post the labor utilization “curves” on their message board in their lunch room and it was measured against budgeted utilization for the year as a constant.  This singular graph showed what the firm was projecting for scheduled utilization against target and available which kept staff cognizant of both the need to schedule fully.  The graph also served as a tool for staff to promote billable hours against project deadlines.

From this data, management was able to see the most important single factor for the firm, how far out they were scheduled, and if they needed to adjust staff or move project timelines to increase project throughput.  Since labor costs against labor revenue is the single most influential impact on a firm’s bottom line, forecasting in this way had this firm’s management sleeping better, while it also empowered the firm’s staff to keep an eye on utilization. 

Since this level of tracking was in place at this particular firm, it also allowed their senior financial person to produce informative forecasts of revenue, which in turn, promoted the morale of everyone in the firm. 

To note, when the firm had many proposals out with the results tracking per the graph above, and the firm had the ability to look at un-scheduled but awarded professional service hours as well, they knew when staffing could not meet the demand of the impending work and were able to stage clients expectation with delivery dates or let HR know that hiring was needed on the horizon. 

So, is your firm enabling forecasting to better win work and deploy resources? If not, after reading this blog do you recognize the importance of implementing forecasting at your firm? I would forecast that the answer is “yes”!  

Budgeting and forecasting is part art, part science. For too many firms, however, it is also a frustrating process that takes a lot of effort to produce less than optimal results.

All too often, the budgeting and forecasting process breaks down because the two parties involved — the executive management team and the operations side — see the challenge from opposite ends of the same telescope. It may be a gross generalization, but from what I’ve seen, management often tends to be more aggressive and optimistic about goals and forecasts. On the other hand, the operational side sees the nuts-and-bolts challenges and logistics required to meet management’s goals, and tends to be more conservative in terms of what they think can be achieved with a given budget. 

In addition to this fundamental dynamic, another challenge related to budgeting and forecasting is that unless it’s handled well, it can lead to a lack of buy-in on the part of various parties. Even worse, it can result in a budget that ends up sitting on a shelf for the rest of the year, which is not in anyone’s best interest. 

Key strategies for success

Fortunately, there are several strategies that can help an organization improve its chances of a successful budgeting and forecasting process. 

1. Start early. Think about the budget process as one of dialogue and compromise — so allow time for both management and operations to develop their budgets and plans, and then to negotiate an acceptable compromise. If you’re aiming to complete your budget by December 31, for example, consider asking management to commit to establishing and publishing their corporate goals no later than October 31. 

2. Be transparent and clear about the process. If you let everyone know up front that the budgeting process is a dialogue and compromise, there may be more chance that all parties will embrace it and comply with expectations. 

3. Have the management team kick off the process. After all, their vision for the corporate goals and general forecasts should be what drives the organization. In general, it’s a good strategy to use previous years’ results as a baseline, incorporating any relevant data about changing market and economic conditions, new products in development, and so on. Once the management team has published its goals, the operational managers develop budgets for reaching those goals. This is not the order in which it’s always done, but in my experience, it’s a more effective approach and leads to better results. 

4. Have a meeting of the minds. Last but not least, block off some time to bring the two sides together around the budget documents and negotiate a compromise. As in any compromise, it’s critical that both sides understand that they are not going to get everything they want. But by finding an agreeable compromise, the organization can develop a budget and forecast that’s both aspirational and achievable. 

Budgeting and forecasting succeeds when it brings together two very different perspectives of the organization and finds an effective meeting point. Obviously, it needs to help the organization move forward in a strategic direction; but to become a plan that staff can buy into and implement; it also needs to be realistic and achievable. Above all, don’t forget that a realistic, well-thought-out budget is essential to the firm’s financial success. 

Activities provide a greater way to gain visibility into communication efforts across the firm about a client. They provide a detailed view of what is going on with a project/firm/opportunity and are critical for providing team backup and covering your backside.  You are probably aware of three main ways to create activities in Deltek Vision – Manually (slow), Using MODI (faster but limited), and CMO (even faster but costs more $$).  The innovation team here at Full Sail Partners has developed a fourth way, the fastest, easiest, most convenient way to create activities so far:  Just do your timesheet and let the activities be created for you! 

The way it works is quite simple, just enter your hours, as well as, a detailed comment regarding work done for a project on your timesheet and make sure the first character in the comment is a tilde symbol (~).  Save your entry and close your Deltek Vision timesheet.  Overnight all the timesheets will be scanned and those that start with the special character will have activities generated for them.  Additionally the leading character will be changed from the tilde to a carot (^) to signal that an activity has been created for this entry.  Once your Deltek Vision timesheets are closed out and before billing is run all special characters are removed. 

So just by adding one additional character to my timesheet, this: 

Becomes this:

This is a great way for you to “kill two birds with one stone” (well maim them maybe) – Keeping your timesheet up-to-date and relevant (making accounting happy) and providing the CYA and team insight into your progress on the project (making management happy). Want to learn more about this and other Full Sail Partners solutions?

As an executive in a professional services firm, you have many demands on your time.  Many times you are pulled into client conferences, HR issues, and day-to-day “how-to” decisions.  With all the distractions, how do you continue to monitor your business health?  There is a plethora of financial performance metrics to help you monitor your company’s financial health. 

Most financial performance metrics are “lagging indicators”, with the exception of the backlog.  Meaning that they are a great indicator of how you performed (past tense). Unfortunately, you can’t control or affect change. The benefit of tracking lagging metrics is that it gives you the ability to change course to impact the future.  Since lagging indicators are based on actual performance, even if you haven’t been tracking these metrics, it is pretty easy to go back and get the information (accounting people everyone now hate me). In an upcoming article, we will discuss leading metrics. These metrics help your firm know where you are going therefore allowing you time to change course.  

When reviewing your financial performance metrics, it is important to understand how other firms in your industry compare.  If you consistently have a 3.00 direct labor multiplier, that may be good – and you may be profitable, but if everyone else in your industry consistently has a 3.75 multiplier, that would tell you that you need to review your bill rate structure.  Perhaps you can do even better in profits!  Several companies (PSMJ comes to mind) queries companies and publish trends on financial metrics.  Check out our past article: The Business Benchmarking Process: 4 Key Steps on this topic.

There isn’t one metric that is the “magic bullet” of reporting your company’s health (sorry to say).  Profit will tell you if you “made money” – right?  But it doesn’t tell you how you made that money and where your weaknesses are.  

Here are two examples to help illustrate:

1. Your production staff may have a 95% utilization (i.e. 95% of the time at work is spent on production projects), but if you do not have an effective multiplier high enough to cover your indirect and overhead expenses – that utilization will not translate into profits.
    
2. Your profits can be soaring but if the days your Accounts Receivable is outstanding is growing, you are not translating your profits into cash. 

Using a combination of metrics identified below can help determine if your firm is making money, but equally important, how you are making the money.

1. Profit – Well duh you say, however, you would be surprised at the number of business owners that watch their profit numbers dwindle while making excuses or “hoping” it will simply turn around.   Your profit is your way of ensuring that your revenues are exceeding your costs.   While one month of poor profit performance should not send you to the stratosphere of worry, a two to three months trend of poor performance should start you down the path of inquiry as to the cause and solutions.   Profits are tracked both as an amount and as a percentage of your revenues.  
    
2. Cash Flow – Cash is king as they say!  Profit on an accrual basis is a nice indicator of the work your staff has performed, but if it never translates into cash then you really are not ahead of the game.  If you are not collecting on your billings, then you aren’t really making money – regardless of what your financials say.  Cash inflow is what supports your ability to pay your bills – including your employees – timely.  Again, if you have one month of poor cash flow, then you probably don’t need to get too excited, but when you see this beginning to trend downward then you need to research.
    
3. Average Days outstanding – This is the indicator that you are collecting on what you bill which directly affects cash flow.  So if your profit is looking good, but your cash flow isn’t, this might be a good place to start looking.  As your AR ages, you are not putting that money back into your cash flow – keeping in mind you have typically already paid your employees.  Clients that usually pay on-time do not suddenly start paying late for no reason.   When your average days outstanding begins to grow, this could be indicative of your clients perceived service quality had decreased.  It is in your best interest to identify this issue and correct it immediately.
     
4. Utilization – For professional services firms, what you sell is your employee’s time.  So it is important to keep tabs on what your staff is doing.  If this number is steadily decreasing, then you can bet your profits are also decreasing.  This number is affected by the amount of non-production work that is being assigned to production staff.  If your production staff have billable work to do, and have also been assigned high priority non-production work, then utilization can be affected in the short term. However, as soon as the non-production work is complete, it should fall back into line.  If however, your staff is doing non-production work because they do not have production work to do that is also whole different story.  Anytime your utilization slips, it is worth an inquiry as to the reason and the finding a resolution.
    
5. Effective Multiplier – This is the ratio of your net revenue divided by your direct labor costs.  This lets you know how much money in revenue (and hopefully cash inflow) you can expect for every dollar of direct labor you spend.  This multiplier affects your ability to cover your indirect and overhead costs as well as meet profit goals.   This ratio can be a reasonable number, but if you do not have enough hours utilized on production projects, you may still not be profitable.
    
6. Annual Net Revenue in Backlog – Backlog is the dollar value (expressed as net revenue) you have contracted for, but not yet performed.  When you create a ratio of backlog over your 12 month net revenue, you can use that ratio to calculate how many days work you have under contract.  This is a forward-looking metric and the only one mentioned that looks to the future.   Focusing strictly on past financial performance won’t prepare your firm for if there is a downturn looming (i.e. low backlog) or more work than your existing staff can handle.

Remember, each of the metrics above is just one piece of the puzzle to your firm’s financial health.  You can’t take just one as your company gospel. They are interrelated and play on each other. 

Financial performance metrics are typically calculated monthly and reviewed.  However, they can also be reported only a quarterly basis.  Sometimes, people decide based on how things are trending.  If your metrics are trending up then focus on them quarterly.  If your metrics are instead trending downward then switch to monthly.  Work with your accounting staff to have these metric prepared for the past several months/years allows you to get an idea of past performance and decide how often you need to review. 

As you get to know the above metrics and understand their interrelation you will be able to quickly identify when your company is going ‘sideways’ and understand the action needed to adjust your course accordingly.  Check out this past webinar to see how your firm can become ‘Best In Class’.
 

In order to truly gain a holistic view of the organization, there are key financial ratios and indicators that project-based firms should focus upon at regular intervals. Some key project performance metrics need to be monitored on a real-time basis, or at least weekly, while others are more relevant on a monthly basis. Also, because firms must first win projects and engage in other activities that do not directly produce revenue, project-based firms should also regularly monitor firm-wide metrics.

We should not focus on a single metric but rather, should adopt a more comprehensive view and monitor a handful of key metrics. For example, firms might reach the target for their Net Effective Multiplier (NEM) and yet have too few revenue producing projects, too much overhead, and poor utilization rates.

Key Project Performance Metrics for Management

At a minimum, firms should monitor their Net Effective Multiplier (NEM) on a monthly basis. The NEM is calculated by dividing net services revenue by direct labor, which is the cost of labor charged to projects. Net service revenue is total revenue less direct cost (i.e., Direct and Reimbursable Consultants and Expenses).

Most firms would like to see a multiplier that is better than 3 times direct labor. In its recent AE Clarity Report for 2012, Deltek reported an average of 2.9 with top performing firms reporting 3.43.

One way higher performing firms achieve a better NEM is by assigning appropriate resources to their projects. More experienced resources are typically very productive, but their higher labor cost drives the NEM downward. Thus, it is important to assign the resources with the right level of expertise to complete the task at hand.

Some firms prefer to report and monitor the Realization Ratio in lieu of the NEM. The Realization Ratio is calculated by dividing net services revenue by direct labor at billing rates instead of cost rates. A target Realization Ratio would be greater than 1.

On at least a weekly basis, if not real-time, firms should monitor Project Estimate-to-Complete (ETC) and Estimate-at-Completion (EAC) values. ETC amounts are how much additional money must be spent from tomorrow through the end of the project to complete the work. EAC amounts are how much total money you expect to have spent at the end of the project. This is calculated as the job-to-date costs plus the estimate-to-complete costs. ETC amounts can be calculated simply by maintaining schedules. With a timeline defined, ETC amounts are simply future scheduled amounts at either cost or billing rates.

Best Practices Tips: To monitor ETC and EAC amounts in real-time, it’s a best practice to complete timesheets on a daily basis. Additionally, to establish a proper Project Work Breakdown Structure, subdivide a project into smaller more manageable components (e.g., phases and tasks) to maintain schedules and monitor these amounts. Ideally, EAC amounts will not exceed budgets but by monitoring these calculations weekly, firms are better able to keep projects on track and the work within scope. 

Key Firm-Wide Management Metrics

Firms should monitor their utilization and overhead rates on a monthly basis, at a minimum. The Utilization Rate is calculated by dividing the cost of labor charged to projects by the total labor cost of the firm. In the early referenced Deltek's 2012 AE Clarity Report, the average employee utilization rate was reported as 59.8%. Excluding vacation, holiday, and sick time it was 65.4%.

Firms can improve employee utilization by setting realistic utilization targets, properly allocating resources, managing client expectations, and having employees monitor their performance against their target, real-time, while completing timesheets each day. The Overhead Rate is calculated by dividing total overhead (before distributions) by total direct labor expense. Typically, bonuses are excluded from overhead for this calculation.

An interesting finding from Deltek’s AE Clarity Report was the average overhead rate for 2012 which was 161.6% with bonuses excluded and 175.7% with bonuses. Rates were not significantly different for higher performing firms suggesting they had achieved higher project profitability with better NEMs and better utilization rates.

The bottom line is that there is no magic bullet but rather a handful of key project performance metrics firms should monitor at regular intervals to maintain profitability. Does your firm have a global view of your firm metrics? Schedule a demo today to see how Deltek Vision is an ERP specifically designed to provide access to these key metrics and many more. 

I was talking recently with a prospective client who observed that his firm had outgrown QuickBooks (QB). The conversation eventually led to a discussion of the advantages of ERP systems over back office accounting systems — which include not only efficiency gains, but strategic improvements as well. 

Being in the ERP implementation business, we hear a lot of customers express frustration over outgrowing QB, so I asked my prospect what it meant specifically for his firm. Off the top of his head, he named several pain points:

• First, their QB systems were disconnected, so there was no particular place where management could view financial performance overall, let alone broken out by project manager or client. 
• QB could display AR for a specific client, but offered little in the way of project information regarding specific services or deliverables. 
• Last but not least, correspondence for each client was buried in various public folders on the firm’s file server. To make matters worse, the correspondence trail was incomplete due to users’ not following the correspondence logging protocol. 

After hearing these insights, plenty of examples came to mind of ways that even a small- to mid-size firm like his could benefit from an ERP system. I mentioned a few of the most basic advantages of ERP systems over back office accounting: the value of integrated data, open architecture and user customizations.  

I also pointed out that thanks to the evolution of niche ERP systems, small firms CAN get the type of functionality that used to be available only to firms with deep pockets. In fact, it’s now quite easy to implement an ERP system that not only addresses the accounting function, but also facilitates the firm’s core processes and way of doing business. 

The Need For Visibility

My colleague next mentioned how his firm actually had strong AR, and good visibility into its cash and cash management. The problem, he said, was that the organization lacked the visibility needed to help back office management play a more significant role in decisions affecting the firm as a whole. By the same token, it was difficult to get project managers more involved in the fiscal responsibility that goes with managing client expectations. 

I pointed out that there were several other major advantages of ERP systems over basic accounting packages. The ERP concept excels at addressing the front end of the project life cycle, by facilitating tracking of projects and providing visibility. Specific examples include:

• Managing data obtained through the business development process
• Generating opportunity notifications and creating process flow through workflows and alerts to improve efficiencies and win rate
• Forecasting for opportunities and already-awarded projects regarding not only revenue, but staffing requirements as well
• Providing for audit trails of communication with clients, contacts and opportunities and supporting technical staff in the delivery of services under specific projects
• Facilitating communication with accounting early in the business development phase regarding terms, rates, related documents and specific contract requirements
• Integrating with desktop tools like Outlook, Word and PowerPoint to facilitate email communication and automate creation of proposal, estimating and contracting documents 

I then suggested we establish a value proposition for the level of investment that would be needed at this critical juncture in the firm’s transition from QuickBooks. This is where my prospect’s eyes started to get big, as he saw how much time, factored by associated hourly costs, was being spent on efforts that an ERP system could automate. 

We assessed values for each of the existing manual processes, and compared them with the reduced time and effort involved using the ERP approach. The resulting savings would go right to the firm’s bottom line. But as significant as those savings would be, I added, the real impact would come from the improved quality of the work environment, better communication with clients, and most importantly, increased opportunities for success. 

See how today’s success-minded firms require a laser-like focus on strong project and financial management practices by downloading the whitepaper on Growth and Transition Strategies.

SaaS, ERP, CRM, LOL blah, blah, blah. Today everything seems to be reduced down to acronyms, to fit into our fast paced instant message, text, and Twitter world.  However, many times we can be left out of the story because we don’t know what they mean.  So, what does ERP mean and what are some of the common related terms? To help you decipher this business jargon, let’s discuss what it is and how it can help firms.

ERP – Enterprise Resource Planning is a system facilitating the flow of information between all business functions, from your Finance and Management Accounting to Project management, Client Relationship Management (CRM – see more below), Human Resources, Inventory and Purchasing. 

The benefit of an ERP is your business efficiency can improve dramatically as all your business processes are automatically synchronized.  The real-time functionality allows for upper management to react quickly to changing dynamics in the company and the economy. 

Some of the characteristics to look for in a “good” ERP solution are:

• Operates in “Real-Time”, reflecting what is going on with your business now
• Database that supports all applications and allows for minimal duplication of efforts
• Consistent interface throughout the system for ease in training staff

SaaS – Software as a Service is a software model where the software and data are centrally located on the “cloud” (see below).  SaaS solutions are typically accessed via a web browser allowing access from any location.  SaaS solutions have become popular over the last several years.

Some of the benefits of a SasS model are:

• Easier administration at the client level as all updates, and patches are handled by the provider on a timely basis
• Management of the data back-ups
• Subscription feel providing a lower up-front investment compared to traditional software models

CRM - Customer Relationship Management is a model for managing a company’s interactions with current and future customers.  A typical CRM system will synchronize sales, marketing, customer service and technical support (if applicable).

Some benefits of a CRM system are:

• Identification of top clients allowing for better customer service focus
• Increasing information sharing between employees
• Allowing systems to track client contacts
• Providing visibility into sales and marketing efforts

SQL – Structured Query Language is a programming language that allows access to and management of large amounts of data. The data is stored in a relational database and offers the user the ability to manipulate and view the data in various ways. Efficiency is the main benefit of a relational database as the data can be easily formatted providing ease of grouping and comparison.

Cloud refers to using the internet to access programs and data.  Operating in the cloud has some real advantages in that you can access your data anywhere at any time and the cost of maintaining local hardware and operating systems are reduced (somewhat replaced by the cost of the cloud operations).  Some concerns are ensuring data integrity and security, reliability, limited customization and latency.  Be sure to check out this whitepaper for more information about the cloud.

Project-Based ERP is an ERP system built to meet the needs of project-based industries.  Project-based industries generate most of their business via individual projects (as opposed to producing widgets).  A project-based ERP will allow managers to track the life-cycle of individual projects from the initial proposal through project close-out.  This allows management analysis of the success (or challenges) of individual efforts, apply best practices and come up with a company policies and procedures.

Open Architecture refers to the ability to add-on, customize or upgrade components of existing system software.  Software that has open architecture publishes or makes available its structure allowing for developers to access and manipulate.  In some cases this allows direct access via an OBDC (yet another acronym meaning Open Database Connectivity) connection or information sharing via an API (Application Programming Interface). 

Of course this is only a snapshot of what you hear out there. Hopefully it will serve as a starting point so you expand your research ERP.  New terms are created daily (just check any 15 year olds text messages to see) so this may be obsolete by the time it is published.  However, it does help you get a handle on the terms you have heard on the news, business reports, and around the office.  And now when someone asks you ‘What does ERP mean,’ you’ll have the answer!

Okay, here goes…I actually love doing my timesheet on a daily basis.  There, I said it and I feel so much better. But hold on, let me back up a little.  Maybe “love” is too strong.  Let’s go with “like”.  I actually like doing my timesheet on a daily basis.

However this was not always the case.  Like most of you, the idea of filling out a timesheet was akin to having a root canal, but only worse.  In our firm, timesheets are due on a semi-monthly basis, but we have a policy that timesheets must to be completed daily.  I know, right?

This policy was easy to ignore until one day, much to my surprise, I received an e-mail alert that my timesheet had not been completed the day before.  AN ALERT!  It turns out that not only did I receive an alert, but a notation was made in my Employee Info Center record of my violation.  The powers that be had sunk to a new low and now I’m faced with two options; continue ignoring the policy and get an annoying alert on a daily basis, or start doing my timesheet every day.

Being the flexible guy that I am (this is sarcasm for those of you who don’t know me), I started doing my timesheet after each completed task.  And much to my chagrin (read surprise), it wasn’t that bad!  First of all my utilization went up.  Some of those short, billable items that fell through the cracks when I was doing my timesheet at the last minute were now being captured. 

Another plus to filling out my timesheet daily is that my comments are more descriptive.  No longer am I putting “call with so-and-so” in the comments field.  I am actually able to put what was discussed in the comment.  This has made reviewing my draft invoices so much easier because I am no longer second guessing the hours I billed to my projects or having to go back to e-mails hoping I find some clue about what was discussed. 

Also, my projects are easier to manage.  I know at any given time how many hours have been charged to my projects so there are no surprises when it comes time to review my draft invoices.

I am also amazed at how little time it takes.  What seemed like hours before, my timesheet now just takes a few minutes each day to complete.

And as if it couldn’t get any better, there is now a timesheet app for iPhone, iPad, Android and other smart devices.  Now I can do my timesheet on the go.  This has come in handy on many occasions when I’m out of the office but still conducting business.

I think the key here is that my timesheet is always up on my desktop.  Even if I open it up in another window, I always have access to it so that I can record my time as soon as I complete a task.

I challenge anyone to give this a shot!  You’ll save time and alerts popping up on your dashboard or in your e-mail box will become a thing of the past.

Interested in learning more about how firms are getting their employees to submit timesheets daily? Click here.

Are you a Deltek Vision user? Check out the newest custom solution from Full Sail Partners and start getting your staff to complete timesheets daily:

For many of us, the mere mention of cash basis is not unlike the old “fingernails on a chalkboard” – not something we want to hear.  However, cash basis accounting need not be something that is left only to your CPA.  Your Deltek Vision system can be set to easily track your transactions and financials on both an accrual basis and on a cash basis with minimal effort. 

What is Cash Basis Accounting?

Cash basis accounting is the process of recognizing revenue and expense at the time that you actually receive and disburse cash in your accounting system.  Accrual basis accounting, on the other hand, recognizes revenue when you produce invoices (creating accounts receivable) and recognizes expense when you enter vendor invoices (creating accounts payable).  For firms utilizing Vision’s Revenue Generation feature, revenue can be generated when time and expense is posted to the system – prior to invoicing the client.  Most firms that we consult for maintain their day-to-day books on an accrual basis and leave cash basis for their CPA to calculate at year-end for filing of tax returns. 

How and when should I get started with cash basis accounting?

To start using cash basis accounting in Vision, you will need to get with your CPA and make a plan.  It is generally best to enable cash basis at the beginning of your fiscal year, however, it can be enabled at any time.   You will also need to get copies of your year-end accrual and cash-basis financials from your CPA to ensure that your beginning balances for both methods are correct in Vision.  Most firms get accrual based closing entries from their CPA, but may not be getting cash-based closing entries.  Talk with your CPA and setup a time to bring your Vision accounting system up to date as of your most recent fiscal year end. 

The next thing you will need to do is to map your Accounts Receivable account(s) to the proper Revenue account(s) in the Chart of Accounts Info Center.  This setting lets Vision know which Revenue account(s) to credit when you record a Cash Receipt transaction in the transaction center.  The following illustration shows the process of recognizing both accrual and cash basis revenue in Vision:

Taking Cash Basis accounting to the next level:

• You and your CPA may want to recognize cash basis revenue using multiple revenue accounts.  This can easily be accomplished by creating multiple AR accounts – one for each type of revenue.  Your AR reporting does not need to change and you and your CPA will have better detail
• Many options are available for cash-basis reporting regarding timesheet postings and payroll.  Ask your Full Sail Partners Consultant when you are ready to explore these options, including the use of a Payroll Payable liability account as opposed to your Job Cost Variance expense account.

Has your firm implemented cash-basis accounting? Leave a comment and let us know your experience.

Be sure to check out other articles written by Rick Childs.