A/E Firms Facing Competing Budget Expectations
Press Release: September 14, 2011
FAYETTEVILLE, Ark. (September 14, 2011) — Architecture, engineering, planning, and environmental consulting firms that have successfully navigated through the recession have done so by walking a budget tight rope.
An article in the September 19 issue of The Zweig Letter explains how some finance and accounting departments have managed the heavy task of keeping a tight rein on operations while still providing the wiggle room necessary in an uncertain economy.
Finance and accounting departments have always been expected to live up to somewhat competing expectations. They are expected to exhibit prudence and yet remain flexible to meet changing demands.
“If they’re good, they’re looking at their budget versus actuals a minimum of once a month,” said Tracey Jeffers, principal, valuation consulting, at ZweigWhite. “These firms will very often have performance metrics in place that allow them to pull, in real-time, budget versus actual. If a firm has a large volume, they likely have big projects with big clients, who send in big checks – all at once.”
This will affect accounts receivable; it changes liquidity, even for brief periods of time, Jeffers says.
Firms that remained viable through the economic downturn have found ways to bridge the gap between profit and cash flow – a gap that can grow wide.
Deborah Gill, controller for Clark Nexsen, a full-service architectural and engineering firm in Norfolk, Va., and president-elect of the Society for Design Administration, says her department does not “live and die” by the budget.
Gill feels 72 to 75 percent of all expenses for A/E firms are labor related. “So, if you control employee count, you’ve solved most of the issue,” she said.“The next 15 percent are fixed expenses (rent, annual software maintenance charges)… Only the next 10 percent are variable – i.e. that you can manage. By then, is it worth the effort?
“Far more important than controlling costs is going out and finding the revenue you anticipated in the budget to begin with,” Gill said.
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