General Inquiries

Good morning,

As I am consulting at an excavation contractor I'm finding challenges in the accumulation of job costs. They are not currently using Purchase Orders.

In preparing the WIP, several projects are showing very high Billings in Excess of Costs. I am told they do not front-load their billings.

As I inquire it appears that many of the vendors (materials, subcontractors, etc.) are very tardy in submitting their bills. Hence, my incurred costs are understated which explains the reason for the high BIE #.

Do any of you encounter a similar challenge and what do you do to overcome it?

Regards,
​

------------------------------
Stuart Guber BS- Accounting
Stuart H. Guber, CPA
Springfield NJ
(973) 255-8249
------------------------------

Stuart,

I generally have accrued any significant expenses that haven't been posted yet, this could include invoices received but not yet approved as well. I would debit job cost for the expense and credit an Accrued Job Payable account. This allows the expense to be recognized in the month incurred and reflected properly on the WIP report.

Best,

------------------------------
Kevin Halme CCIFP
Constructive Tech Solutions
Omaha, NE
www.consttech.solutions
------------------------------

Original Message:
Sent: 09-19-2019 11:42
From: Stuart Guber
Subject: Purchase Orders

Good morning,

As I am consulting at an excavation contractor I'm finding challenges in the accumulation of job costs. They are not currently using Purchase Orders.

In preparing the WIP, several projects are showing very high Billings in Excess of Costs. I am told they do not front-load their billings.

As I inquire it appears that many of the vendors (materials, subcontractors, etc.) are very tardy in submitting their bills. Hence, my incurred costs are understated which explains the reason for the high BIE #.

Do any of you encounter a similar challenge and what do you do to overcome it?

Regards,
​

------------------------------
Stuart Guber BS- Accounting
Stuart H. Guber, CPA
Springfield NJ
(973) 255-8249
------------------------------

Kevin,

Thanks for getting back to me.

I'm not sure if you addressed my concern...that being we've incurred the costs but have no invoice nor PO to accrue by.

The PM's, when billing, obviously estimate the man days, materials and sub costs resulting in the much higher billing to date vs. the revenues earned based on the understated costs.

Would you concur that implementing PO's would/should mitigate this issue?

Regards,

------------------------------
Stuart Guber BS- Accounting
Stuart H. Guber, CPA
Springfield NJ
(973) 255-8249
------------------------------

Original Message:
Sent: 09-19-2019 12:58
From: Kevin Halme
Subject: Purchase Orders

Stuart,

I generally have accrued any significant expenses that haven't been posted yet, this could include invoices received but not yet approved as well. I would debit job cost for the expense and credit an Accrued Job Payable account. This allows the expense to be recognized in the month incurred and reflected properly on the WIP report.

Best,

------------------------------
Kevin Halme CCIFP
Constructive Tech Solutions
Omaha, NE
www.consttech.solutions

Original Message:
Sent: 09-19-2019 11:42
From: Stuart Guber
Subject: Purchase Orders

Good morning,

As I am consulting at an excavation contractor I'm finding challenges in the accumulation of job costs. They are not currently using Purchase Orders.

In preparing the WIP, several projects are showing very high Billings in Excess of Costs. I am told they do not front-load their billings.

As I inquire it appears that many of the vendors (materials, subcontractors, etc.) are very tardy in submitting their bills. Hence, my incurred costs are understated which explains the reason for the high BIE #.

Do any of you encounter a similar challenge and what do you do to overcome it?

Regards,
​

------------------------------
Stuart Guber BS- Accounting
Stuart H. Guber, CPA
Springfield NJ
(973) 255-8249
------------------------------

Stuart,

PO's may help with materials depending on the process used. If a PO is used and received materials are recorded that would allow you to determine the cost of materials received. However, without a PO the PM could probably tell you the percentage of the materials received and the dollar amount of the materials ordered from a vendor based on the quoted dollar amount. With a quote and a packing slip you can do the same math as if a PO was issued. Many contractors use PO's loosely and can't determine the value of materials received.

It's my opinion (as an non-CPA) that a reasonable estimate of the cost incurred is more accurate than waiting to recognize the cost in a later period due to lack of exact information.

------------------------------
Kevin Halme CCIFP
Constructive Tech Solutions
Omaha, NE
www.consttech.solutions
------------------------------

Original Message:
Sent: 09-19-2019 13:43
From: Stuart Guber
Subject: Purchase Orders

Kevin,

Thanks for getting back to me.

I'm not sure if you addressed my concern...that being we've incurred the costs but have no invoice nor PO to accrue by.

The PM's, when billing, obviously estimate the man days, materials and sub costs resulting in the much higher billing to date vs. the revenues earned based on the understated costs.

Would you concur that implementing PO's would/should mitigate this issue?

Regards,

------------------------------
Stuart Guber BS- Accounting
Stuart H. Guber, CPA
Springfield NJ
(973) 255-8249

Original Message:
Sent: 09-19-2019 12:58
From: Kevin Halme
Subject: Purchase Orders

Stuart,

I generally have accrued any significant expenses that haven't been posted yet, this could include invoices received but not yet approved as well. I would debit job cost for the expense and credit an Accrued Job Payable account. This allows the expense to be recognized in the month incurred and reflected properly on the WIP report.

Best,

------------------------------
Kevin Halme CCIFP
Constructive Tech Solutions
Omaha, NE
www.consttech.solutions

Original Message:
Sent: 09-19-2019 11:42
From: Stuart Guber
Subject: Purchase Orders

Good morning,

As I am consulting at an excavation contractor I'm finding challenges in the accumulation of job costs. They are not currently using Purchase Orders.

In preparing the WIP, several projects are showing very high Billings in Excess of Costs. I am told they do not front-load their billings.

As I inquire it appears that many of the vendors (materials, subcontractors, etc.) are very tardy in submitting their bills. Hence, my incurred costs are understated which explains the reason for the high BIE #.

Do any of you encounter a similar challenge and what do you do to overcome it?

Regards,
​

------------------------------
Stuart Guber BS- Accounting
Stuart H. Guber, CPA
Springfield NJ
(973) 255-8249
------------------------------

​In our ERP System (Vista) we have our jobsites electronically scan and enter receipts on a daily basis against Purchase Orders. There is a setting in Vista that allows posting of expenses immediately when receipts are entered against PO lines. Thus, you have real time cost and don't have to depend on invoices. If the invoice comes in later after the month is closed if there is a small difference (freight, etc.) the additional small cost is posted to the current open month. If most receipts are entered against POs that have been setup properly there are no adjustments.

------------------------------
Paul West
Director of Enterprise Applications
The Middlesex Companies
Orlando FL
(407) 206-0077
------------------------------

Original Message:
Sent: 09-19-2019 11:42
From: Stuart Guber
Subject: Purchase Orders

Good morning,

As I am consulting at an excavation contractor I'm finding challenges in the accumulation of job costs. They are not currently using Purchase Orders.

In preparing the WIP, several projects are showing very high Billings in Excess of Costs. I am told they do not front-load their billings.

As I inquire it appears that many of the vendors (materials, subcontractors, etc.) are very tardy in submitting their bills. Hence, my incurred costs are understated which explains the reason for the high BIE #.

Do any of you encounter a similar challenge and what do you do to overcome it?

Regards,
​

------------------------------
Stuart Guber BS- Accounting
Stuart H. Guber, CPA
Springfield NJ
(973) 255-8249
------------------------------

Hi Stuart,

I agree with Paul.  While the use of PO's is better than not using POs, the material aspect of PM estimates will be mitigated if you use PO Receipt functionality.  A PO alone would be a starting point for a project manager to fashion an estimate but I would counter that the same exercise could be done reviewing the Phase Code / Cost Types original/current estimate.  Receipts, recorded quickly and diligently, remove the guesswork.

Respectfully,


------------------------------
Timothy McNally
Principal Consultant
Tilson Technology Management
Annapolis MD
1-720-739-2322 - office
970-391-1475 - cell
------------------------------

Original Message:
Sent: 09-19-2019 11:42
From: Stuart Guber
Subject: Purchase Orders

Good morning,

As I am consulting at an excavation contractor I'm finding challenges in the accumulation of job costs. They are not currently using Purchase Orders.

In preparing the WIP, several projects are showing very high Billings in Excess of Costs. I am told they do not front-load their billings.

As I inquire it appears that many of the vendors (materials, subcontractors, etc.) are very tardy in submitting their bills. Hence, my incurred costs are understated which explains the reason for the high BIE #.

Do any of you encounter a similar challenge and what do you do to overcome it?

Regards,
​

------------------------------
Stuart Guber BS- Accounting
Stuart H. Guber, CPA
Springfield NJ
(973) 255-8249
------------------------------