How To Develop Your Company's Information System

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If the first tool required for long-term business success is a business plan, the second is a solid information system. It's simple: You cannot manage what you do not track. Control is the key to achieving goals. Your information system will be your control system.

Because your information system will be primarily financial in nature, make sure you know how to read a financial statement. Encourage your key managers to learn how, as well. Then, assemble the following menu of financial reports as your foundation.

Financial statement

Produce one each month and compare it to your budget. Meet with key managers to discuss any variances, along with your options for making adjustments to your game plan.

Job cost system

Build one that is integrated with both your estimating system and your financial system. Though this can easily be set up manually, many companies opt to place the system on computer. The key to this system's success really has nothing to do with software, though. It has to do with management's commitment to being consistent from one application to another.

Your job costing system must resemble your method for estimating. The way you estimate work will establish job costs vs. overhead costs. This will then dictate how these different cost types are reported in both your job costing system and general ledger.

For example, if you estimate something as a cost of a job, that item must also be treated as a job cost in both your job costing system and general ledger. However, if an item is not specifically estimated as a cost to the job, it is an overhead cost. The item will be omitted from the job cost system and will be treated as overhead in the general ledger.

Labor is the best way to illustrate how this works. Ask yourself if the following labor functions are job functions or overhead functions:

  • Supervising
  • Travel
  • Loading
  • Equipment maintenance by crewmembers
  • Moving equipment and materials around the yard
  • Premium portion of overtime pay
  • Vacations, holidays and sick pay
  • Job injuries
  • Meetings
  • Training
  • Paperwork
  • Make-good work
  • Bad weather

There is no correct answer here. You simply must do what is best for your company. Just make sure you are consistent in handling each item.

Process and update your job cost data consistently at the end of every payroll period. Print your reports. Make sure you review each job's status with everyone associated with a job—especially the crew leader.

Accounts receivable and payable

Maintain schedules of accounts receivable and accounts payable—which will age the outstanding amounts in increments of 30 days. Review these weekly with key managers.

Cash position

Generate a daily cash position report which focuses on:

  • Daily balances of cash in the bank
  • Deposits received (that day)
  • Anticipated payments
  • Balances of receivables, payables and notes
  • Upcoming events that will require your special cash-management attention

These four reports will give you a strong basis for being able to maintain a finger on the pulse of your business. Generate them regularly. If you need help, call your financial advisors to assist; that's what they are there for.

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