Don’t Forget Scheduling!

Smart contractors realize that projects that take too long to complete often experience cost slippage, where actual costs exceed the original planned cost.  Cost slippage on fixed price jobs falls straight to the bottom line.  Cost slippage and delays on time and materials billing jobs may not show up directly in financial performance, but can cause customer dissatisfaction which will erode reputation and have a negative effect on the bottom line over time.

A scheduling program can help orchestrate the intricate plan of an efficient project by identifying:

• The work or tasks required to complete a project, and estimating how many days it should take to perform the tasks 
• The resources needed to complete those tasks, whether employees, equipment or subcontractors
• The ordering of materials, especially those that must be special ordered and may have long lead time
• The arranging for inspections required by building codes
• The timing of billings, especially those dependent upon specified milestones in the project’s completion

A schedule should take into account the order in which tasks must be performed, which tasks must be completed before the next can be started, and which tasks can be performed simultaneously. In some organizations, the availability of resources such as specific employees, subcontractors or equipment may be limited and if they are assigned to another project, the schedule for this project may be affected as well, so resource planning and conflict identification can be important.  Contractors that are consistent and effective schedulers find that their subcontractors and employees appreciate knowing when they are expected to perform tasks and how long they have to perform them.  By periodically updating schedules, contractors can identify changes to the original schedule resulting from taking more or less time than planned for completed tasks and project new task starting times for subsequent tasks.  Effective project managers can then promptly notify resources assigned to these subsequent tasks of these changes and help them adjust their own schedules.

I often find that managers of my clients are surprised to find that Sage 100 Contractor has had an effective scheduling module built in to the core system for many years!  They are looking to acquire a scheduling program when they have had one in their office for as long as they’ve had Sage100 Contractor and its predecessors.

Scheduling can be quite complex, between building task lists, estimating task durations, identifying and defining task predecessors, estimating lead and lag times and putting it all together into a coherent schedule.  Scheduling is one of the many processes that usually isn’t perfect “out of the box” and benefits greatly from ongoing refinements gleaned from job autopsies.

Contact us for assistance and more information about the scheduling module.

What Do Your Workers Cost?

Smart contractors make sure they are accounting for all possible costs when estimating the cost and bid price for a project.  One area where the cost isn't always readily apparent is the cost of labor.  While estimating the number of hours it takes to perform work is where an experienced estimator earns his or her keep, it is equally important to make sure that the hourly cost of performing that work is truly accurate and all inclusive.  Everyone understands that the gross wage one pays a worker is included in the hourly cost, and most also understand that payroll taxes and workers compensation insurance should be included as labor burden added to the gross wage.  However, smart contractors look at ALL costs of employing a worker when estimating the cost of performing a project.  Costs that vary with employment activity (or the incremental cost of putting a worker in the field) that are too often overlooked as components of labor burden may include:

• Liability insurance
• Employer’s cost of health and other employee benefit insurances
• Employer’s portion of contributions to retirement plans
• Estimated cost of providing company owned vehicles
• Allowances paid to employees for use of their privately owned vehicle
• Estimated cost of providing company owned mobile devices
• Allowances paid to employees for use of their privately owned mobile devices
• Estimated cost of providing uniforms
• Estimated employer’s cost of training, licensing and certifications
• Estimated cost of providing paid time off, including vacations, holidays, sick leave and any other paid time off
• Estimated cost of providing items too numerous and individually too inexpensive to specifically job cost when purchased, but which can become significant over time, such as small tools and supplies for production
• Estimated supervisory costs that are not being directly job costed

The above list may not be complete, and may vary from contractor to contractor.

Some estimators will go to great lengths to develop a comprehensive cost of employing production staff and use it quite effectively in their estimating and job cost budgets, only to find that the accounting department, in job costing their payroll costs, does not recognize and account for the same components of labor burden.  This creates a built-in price variance when analyzing budgets versus actual costs. 

For example, let’s assume that the estimator correctly predicted that work will take 100 hours to complete, and estimated that the true cost of the employees doing the work (including all possible labor burdens) was $45 per hour.  The accounting department’s payroll calculations only include and job cost the gross wages, payroll taxes and workers compensation insurance, which adds up to $28 per hour.  The job cost budget shows 100 hours with a total cost of $4,500, while the actual cost to date shows 100 hours with a total cost of $2,800.  It is misleading to say that actual costs beat the budget by $1,700 when the estimated hours were spot-on!  That $1,700 difference is a price variance.  Consider the same project, except that actual results were 160 hours, job costed at $28 per hour.  The budget versus actual report shows actual labor costs of $4,480 versus the budget of $4,500. It looks like the work was performed on budget, but it actually took 60% more time to do the work than estimated!

Clearly, it is important to prepare budgets and job cost reports consistently and comparably.  Budget versus actual reporting should avoid built-in variances and show how production is really doing in light of the estimator’s plan.

Fortunately, the payroll system of Sage 100 Contractor was designed for the specific and unique needs of contractors.  Payroll calculations can be designed to include all such labor burdens as mentioned above in the cost of employing workers.  Additional labor burden costs can be calculated as a percentage of gross pay, or per hour worked.  These payroll calculations effectively pull costs out of overhead expense accounts and make them part of job costs and direct expenses with very little effort once they are setup.

If you want to look more closely at how you are burdening your labor costs, or how to add payroll calculations that you know you should be including, give us a call.

Current Version Information!

The latest version of Sage 100 Contractor is version 19.5.34, the release of which was announced on January 23, 2015. 

In addition, on February 27, 2015, Sage released a Tax Table only update to accommodate lately released tax table changes for the District of Columbia.  This is not considered a version change, so your Sage Advisor Update does not appear to consider this a change worth notifying users about.  If you have employees in the District of Columbia and have a current support plan, you should look for this Software Notice 15-B or give us a call.

Solution to an Inventory Dilemma

Recent tips have been geared toward general topics about Sage 100 Contractor.  This one is just for the accountants and bookkeepers out there.

Users of the Inventory module know that the system will not let the quantity on hand for any inventory item go below zero.  Recently, a client called with the following scenario:

• They found that a payable invoice for two inventory items had been entered erroneously on Monday through the use of menu 12-4 Purchase Order Receipts. 
• Tuesday, an inventory allocation had been entered and shipped to move one of these inventory items to a job. 
• Wednesday, it was discovered that the second inventory item entered on Monday had not been received and was instead backordered.  When the error in the entry of the invoice on Monday was discovered, the client tried to void and re-enter the invoice correctly.  However, the system would not permit the client to void Monday’s erroneous entry because there was not sufficient inventory quantity on hand of the one item to absorb the quantity that would be subtracted from inventory with the voiding of that invoice – it would have caused the quantity on hand for that item to go below zero.
• When they called for help on Thursday, I suggested the following steps to correct the erroneously entered invoice:
• Copy the erroneous AP Invoice record that was entered on Monday in menu 4-2.
• Paste the copied invoice to a new record in 4-2 and modify the entry to the way it should have been entered with the item that was received and not the item that was backordered.
• Save this new 4-2 AP Invoice record.
• This will increase the quantity on hand for the first inventory items involved in the correction and the Tuesday inventory allocation.
• Then go find the erroneously entered AP Invoice and void it.  This takes the backordered item out of inventory and adjusts the quantity on hand of the item actually received on Monday and partially shipped out on Tuesday to the correct amount.
• The order in which these entries are recorded is a little counter intuitive, but when you follow it through, checking the recorded inventory quantities on hand at each step, you can see how it works.

For more help with inventory issues, don’t hesitate to call your friendly Certified Consultant!

Current Version Information!

The latest version of Sage 100 Contractor is version 19.5.34, the release of which was announced on January 23, 2015. 

In addition, on February 27, 2015, Sage released a Tax Table only update to accommodate lately released tax table changes for the District of Columbia.  This is not considered a version change, so your Sage Advisor Update does not appear to consider this a change worth notifying users about.  If you have employees in the District of Columbia and have a current support plan, you should look for this Software Notice 15-B or give us a call.

Backups? I don’t need no stinking backups!

Now that I’ve got your attention, let’s talk about backups – effective backups. 

To most people, the title above sounds totally ridiculous.  Everyone knows you do need to back up your accounting data.  So many things can happen to your accounting data that may require a restoration of data from a recent backup – inadvertent deletion of data, interrupted posting processes that result in corrupted data, an ill-advised change in an accounting process or principle that is easier to “roll back” to an earlier state than to make correcting entries, or the dreaded virus or malware infection.

I’ve recently had several clients suffer from the CryptoLocker malware infection or a variation of it.  Someone in the office opens an email attachment that they shouldn’t, and before they know it, a malware program seeks out and encrypts database files on their network, rendering them totally useless.  The encryption is a strong encryption that is difficult for anyone to crack without a decryption key.  The extortionists that sent out the malware in the first place make a limited time offer to sell the decryption key, accepting bitcoin or some untraceable payment form for the ransom.

Paying the ransom is just wrong! It encourages other “evil-doers” and sets a bad example for your staff.  The correct solution to the problem is to clean the infected machines of the virus, and restore your data from backup data.  This is a moment of truth for your backup processes.  I have had at least two clients discover that there were no effective backups being done, even though they were told by their IT professionals that backups were being performed!  And several clients were down for more time than they should, waiting for their complicated backup restoration process to be performed.

Whether you get hit with the CryptoLocker malware infection or just need to restore from backup for some other less nefarious reason, don’t take the chance that your backup processes are faulty.  Insist that your IT professional demonstrate to you that backups are being performed consistently, completely and securely, and that the data can be restored from backup in a reasonable timeframe.  Make sure that the backups are insulated from your network so that a malware virus can’t infect the backup at the same time it’s infecting your live data.  Also, insist on a process to periodically copy off a permanent, archival copy of your data each month and keep then in safe storage for a year or more.

If you want further help with your backup processes, give us a call!

Current Version Information!

The latest and greatest version of Sage 100 Contractor is version 19.5.34, the release of which was announced on January 23, 2015.  This version was released to update state income tax withholding tables for states that were tardy in publishing their withholding tables.  It also contains some fixes for problems discovered in version 19.5.27. The 19.5.27 version was announced in the middle of December 2014 with the caveat that it should not be installed before the payroll of 2014 (based on check date) is processed and posted to the general ledger and the 2014 Payroll Year is closed. This version includes the latest Federal and State withholding tax tables for 2015 available at that time and enhancements for helping employers collect and report employee benefit information to comply with the Affordable Care Act.