5 Things AEC Firms Should Track with Expense Reporting
Architecture, engineering and construction (AEC) firms are faced with the ever present challenge of keeping large projects on time and under budget. Tools such as Deltek Vision can help manage phases, budgets and even payroll, but can fall short in niche areas such as expense management. While able to log expenses, these tools are not built to help finance teams collect detailed, custom information needed to become more operationally efficient.
Like other project-driven organizations, expenses have a direct impact on the bottom line and can derail the budget for any project, whether it’s a tenant fit-up or a new 14-story building. As such, the urgency of having accurate data that can be used to optimize internal processes and project management has become a priority for AEC finance teams.
We’ve put together a list of 5 important pieces of information AEC firms should be tracking on expenses.
- Billable: It’s important to track which expenses are able to be charged back to clients separately from expenses that go towards the general budget. Using this information to run timely reports will ensure you are not eating the cost of expenses that should be submitted to a client for reimbursement. Tracking this will also help you learn more about the ratio of billable expenses in order to optimize future budget proposals.
Useful Reports to Run: Expenses to be Reimbursed by Client by Project; Ratio of Billable vs Non-Billable Expenses by Client by Project
- Client / Prospect: Whether your business development team is wooing a prospective client or you already have a customer agreement in place, it’s important to understand how much money you are spending to acquire and retain customers versus the revenue they are generating. Using this in conjunction with project names / numbers will also allow you to see expenses across all projects for a specific client, helping you find ways to optimize project costs.
Useful Reports to Run: Client Spend vs Revenue (Customer ROI); Client Spend by Category (optimize your per client investment)
- Project Name / Number / Phase: Adding the project name, number, and / or phase to an expense will makes tracking both billable expenses and actual costs more efficient. Project managers can see day-to-day spend in order to keep budgets up-to-date, as well as compare commonly needed resources across time periods and projects to make generating future proposals easier.
Useful Reports to Run: Total expenses per project by category (Trends for Future Budgets); Total expenses by project compared to Budgeted Costs (Actual vs Budget)
- Unit Cost / Rate: Tracking the itemized cost or time-based rate of an expense can help inform future decisions. This information, such as daily equipment rental rates or material unit costs, will help you uncover preferred vendors and influence future proposed project costs.
Useful Reports to Run: Average Per unit cost by category month-over-month (Cost Trend of Commonly Expensed Items)
- Networking Events / Association Memberships: Business development is a key acquisition strategy for AEC firms, so it’s important to track the cost of memberships, events and other association fees versus new revenue a business development employee is generating. This data will help give context to questions such as how many members of the team should belong to a certain organization.
Useful Reports to Run: Networking Event Spend by Employee vs Revenue Generated by Employee
The above information needs be tied to individual expenses, a level deeper than an employee-generated expense report. Only then can it be utilized to it’s full extent. Tracked and analyzed correctly, expense data offers valuable insights into cashflow and profitability.
Real time expense reporting software provides finance teams looking to gain more meaningful insights from their expense data with the solution. Allowing companies to capture expense data in real time and easily pivot any tracked information.