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Handle Your Financials in 5 Simple Days Each Month
February 24, 2020
"Factor AE is designed with simplicity in mind and facilitates the production of draft financials within five days and final financials within ten."
Sub-Consultants and Timely Billing/Financials
Another, accounting-focused challenge to timely billing is the tracking and reporting of work done by sub-consultants (subs). Most of the expenses a firm incurs — from utility bills to payroll — are handled on a recurring schedule that becomes virtually automatic for the people doing accounting. That doesn’t happen with subs. When they don’t submit their invoices in a timely manner, you don’t know if you’ll be billing the client enough to cover those bills when they do come in.
However, here again, perfect should not be the enemy of good enough. And what you’re billing the client shouldn’t be tied in any way to what subs will be billing you. Instead, you should move forward assuming that the subs have earned the same percentage of their total fee that your firm has earned of its total fee, and billing should proceed accordingly.
Being Reasonable About Reimbursable Expenses
Another aspect of billing that can lead to delays is dealing with reimbursable expenses. Things like meeting-related airfare and hotel bills should be submitted weekly along with timesheets. However, in some cases expenses like the cost of overnighting a set of drawings to a client don’t get recorded properly.
Consequently, a $20 charge doesn’t have a home and accounting, in their desire for accuracy, holds up any invoices that may need to be updated to account for that expense. We’ve found that it’s not uncommon for $30,000 worth of bills and the related financial reports to be delayed over pocket change! Here again, a better approach is to put the shipping bill in the corrections account and move on.
Keeping the Cash Flowing
What we’ve learned in our work with A/E firms is that the backend benefit of the practices covered above is improved cashflow. Often the clients of A/E firms have a very specific process for paying their bills. For example, invoices have to be received by the 15th of the month in order to be paid in that cycle.
Get your invoices there a day too late and you can tack another 30 days of accounts receivable onto your balance sheet. On the other hand, if you have your invoices to clients in time for this month’s check run, the cash keeps flowing.
Factor AE is designed with simplicity in mind and facilitates the production of draft financials within five days and final financials within ten. And while this may seem like “mission impossible” to firms that have always struggled with timeliness, the processes and policies that go hand-in-hand with Factor AE make it very achievable.
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