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New Accounting Standards

July 30, 2007

The Wall Street Journal published an interesting article detailing some potential upcoming changes to the financial accounting standards:

Profit as We Know It Could Be Lost With New Accounting Statements

See the draft layout of how the new rules could affect financial statements

While this may seem trivial the effective design of financial reporting can create more rapid and thorough insight into a company. You should spend as much time designing your financial reports as you would designing your estimating take-off / recap format. Using the standard, "canned" reports that come with your accounting system is unlikely to produce optimal results for your unique business.

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Company Integration

Currently we have several clients who are involved in acquiring, merging or otherwise integrating the operations of their company with another. This is a very exciting way to grow because of the upside of almost immediate revenue dollars but behind the scenes there are thousands of details that need to be managed.

If these details are not managed correctly then the chances of those additional revenue dollars turning into profits are slim to none - losses are more likely.

There is a great short article called "The Right Way - and Some Wrong Ways - to Make an Acquisition" written by Wharton / GE Capital that outlines some best practices. The dynamics of integration do not change whether it is a $10M company integrating a $1M company or a $100M company buying a $10M company or simply trying to tie together a strategic partnership.

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The Work In Progress (WIP) Series

July 19, 2007

For a construction financial manager, mastering the understanding of how a work in progress calculates and compiling the report successfully are only the first steps in really working with this important tool. The work in progress is much more than in income reconciling tool. Taking the time to gain understanding on what affects the numbers really do have on the health of a project will lead you to a greater understanding of construction processes.

Let's take the a look at change orders and extra work for instance. What affect does extra costs hitting a project have on the calculations of earned revenue? What if the contract is not adjusted to meet the value of what is actually to be expected? The affect is that the project looks as though more work has been completed. Because the schedule is driven off of the original estimate, as actual costs rise the mathematical calculation against the projected earnings essentially rises causing an increase in the under billed. That is why it is so important for changes to be updated on both sides of the system. Costs are naturally captured. Estimate adjustments/documentation of change orders are driven only by how well processes are set in place. Discovering whether or not extra costs are going to lead to increased revenue in the way of billable change orders or if the case is that the project is running over early on in the project is crucial. Examining line item budget items if over billing occurs will lead you right into whether or not a project is running over budget or is just not invoiced up to date. Identifying cost overruns makes a huge difference in the steps that will be taken from that point on. If it's discovered that a project truly is running over early enough, perhaps you as the CFM can be the star in assisting the turn around on a project.

In summary, a CFM should always question the under billed. Assuming the cause is a lack of billing that will catch up in the next cycle is if nothing else is dangerous. Apply business sense to the numbers that appear in front of you and it's surprising as to what might be uncovered. Especially in an under-billed situation. There are many factors in the life of a project that can affect the numbers on the work in progress. Learn what they are. Don't just produce the work in progress and balance out the income on the financial statement.

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Building Information Management

July 17, 2007

California Construction magazine provided a great overview of BIM - It's a BIM New World

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Personal or Company Responsibility?

July 01, 2007

Just reading the latest edition of IEC Insights and there was an article by Christopher E. Hoyme, a partner at Berens & Tate. The article described a case setting some precedence regarding an employers liability for an employee's mobile phone use.

Recently a Smith Barney broker was using his mobile phone on his personal time but making a call to a client. The broker got into an accident and Smith Barney was sued because it was "understood" that brokers made business calls on their personal time. The case was settled out of court for $500K.

This is amazing and just goes to show how there continues to be a degrading line between an employee's personal responsibility versus a company being responsible for almost everything an employee does on or off the clock.

For more information about employment law sign up for Laborwatch newsletter from Berens & Tate or contact them directly:

Berens & Tate, PC, LLO
10050 Regency Circle
Suite 400
Omaha, NE 68114
(402) 391-1991 PH
(402) 391-7363 FAX
www.berenstate.com

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