Builders’ Accounts-Processing Essentials

Builders’ AccountsProcessing Essentials

Lunch atop a Skyscraper, 1932, by Charles Clyde Ebbets

Builders Basic Accounts Processing Essentials Next time you are having lunch, consider that great customer service includes promptly presenting complete, detailed, accurate accounts. Your client has expectations about your account and while these may not align with what they actually receive, they will certainly be unimpressed if you overbill them or underbill them, then a month or four later bill them what was missed or doubled up on.

Small Builder Basic Accounts Processing Essentials You do not have to operate a formal order book system, but you can if you want to. The basic system must include the discipline of keeping a tidy record of every purchase with an unambiguous reference linked to the invoice. That record could be a carefully stacked pile of delivery dockets and other records of telephone order details.

Contrary to trade practice, the floor of the ute is not where you file your delivery dockets and purchase records. Setup your “Orders Not Invoiced” records filed for easy retrieval. When a job ends or your billing cycle comes around, dive into your “Orders Not Invoiced” file and identify every delivery/receipt document by client/project. Then accurately cost those deliveries so you can use these values to accrue costs to your accounts ledger and accurately bill your client.

Coping with Expanding Company Accounts growing pains Arrow International in the mid 1990’s, were on the rise. They had order books but no control over how many were issued and who they were issued to. There was no accounting for order numbers used or not used. The mailroom opened the invoice mail and distributed it directly to the project managers who had to match it to the order numbers they had issued, then return matched invoices to accounts for payment. The mailroom usually had to guess which job the invoice was for. Misdirected deliveries of invoices slowed supplier payments. Project managers (read builders) would lose invoices in new and interesting ways.

I asked accounts about what works well and what does not. The big problem was that suppliers were regularly getting shirty about not getting paid on time. Supply would stop and jobs got into trouble. Go figure? The company had good cashflow but bad payment processing systems and discipline. Solution: 1. Inventory the order books, do not issue another one until the old one is nearly used up; 2. Send all invoice mail to accounts; 3. Send all delivery dockets to accounts; 4. Match dockets and invoices in accounts then issue for approval in batches, where the count and value of invoices is recorded for QA purposes; 5. Track the batches until they are returned to accounts for processing and filing. Service to suppliers and clients improved, project managers workload and stress levels dropped, accounts had more functions but the same volume of work, just not the negative stuff. Suppliers always got paid and jobs never stopped.

Small or large, every organisation needs basic invoice control disciplines to keep their promise to their suppliers and customers.

The New Zealand Building Economist Editor, Matthew Ensoll FNZIQS Reg.QS, who maintains and publishes the NZBE current construction costs rate library (see www.nzbe.co.nz for details and more builder friendly blogs) and Mentors/consults to builders and specialist trades who are seeking to improve their business practices and results when tendering or administering construction contracts. Editor@nzbe.co.nz