This is the second post in a three part series on business process and financial management for landscape contractors.
Your “Ticket” To True Numbers.
The only way to get true financial accuracy is to adopt a “ticketing” system. You can manage a ticketing system with spreadsheets but it is time consuming and prone to human error as data must often be re-entered from one spreadsheet to another.
The other problem with this approach is timing as to when transactions are recorded to the job and when they are recorded to the financials. This means… yes job cost and financial numbers may not match at any point in time.
Remember, The System Is The Solution.
A ticketing system manages revenue and costs on a TICKET. A job might have one or multiple tickets, but the basic concept remains… no ticket, no work and revenue is earned as the actual costs are incurred – not as the revenue is invoiced and the labor and materials are paid.
If your system cannot do this then your financials will provide a distorted picture of Gross Profit and provide ripe ground for internal arguments about expense “allocation”. (This explains why your people keep track of their own numbers.)
The Ticket Works So You Don’t Have To
The ticket originates at the Estimate/Contract. It is slotted on the Schedule Board. The crew puts time to it on the Time-Sheet, and buyers apply materials though a Purchase Order or allocation from Inventory. At the end of every day every ticket unless it is complete is IN PROGRESS and only has earned revenue to the extent that costs were incurred.
No More Assumptions
In a ticket system there are no expense assumptions about what labor and which materials get “allocated” to the profit center. So instead of hiring people to manipulate spreadsheets, let the ticket do the work. If you do this, you can trust your job cost numbers completely and they can be easily reconciled with the “accounting numbers” using an Over/Under revenue account and labor and material Holding accounts.
Yes, you need a ticket based software system… there are just too many transactions every month to be tracked any other way without making assumptions. Stop making assumptions and your numbers will be accurate.
In the third and last part of this series, I’ll tackle dealing with paper. Stay tuned…