Managing Subcontractors to Increase Cash Flow
Does it take 6-8 weeks to turn subcontractor labor into revenue and/or cash?
Are you struggling with manual timesheets and lengthy reconciliations just to create a bill?
Are constant labor corrections impacting your cost reports?
If this sounds familiar, you could benefit from Unanet’s subcontractor process!
It’s All About Time
As a professional engineering services firm your business is PEOPLE, and you make money by turning people into revenue. So, it is easy to understand why it is important to collect labor accurately and in a timely manner, so that you can bill and recognize revenue as quickly as possible. This process is difficult enough internally, but when you add subcontract (SubK) labor, the challenges are even greater. The process can take up to 8 weeks from the time labor is charged until is it billed and there is significant manual effort involved. Time collection systems that are client server, disparate, and paper driven will slow down the process costing the business big bucks. So, what is the solution?
Best Practice Process for Accounting for SubK Labor
The process can be dramatically improved by utilizing a system that all SubK’s can access for charging and billing. For example, utilize Unanet’s web based solution so that all parties are operating from one system. This Best Practice Process helps both the SubK and the prime collect money faster and more efficiently, a complete win win!
SubK’s input their time into the Prime’s time collection system. The approvals are done real-time by both the SubK and the Prime. Labor is then posted to AP, and the time is now available for billing and revenue recognition. There is no manual activity, reconciliations, or mailing of invoices. Best of all, there are no surprises!
Current State Process for SubK Labor to Revenue Cycle
In the current state SubK employees are charging to their own time collection system. All the work authorizations are done on the SubK side. Billings are then submitted to the Prime in a lump sum format with time sheets attached as backup. The submittal can be via snail mail or email. The Prime has no idea what is coming in the billing or who has charged what. The labor reconciliation and approval process for the Prime is time consuming and manual. Time and expense entry is disconnected from the Prime PR and PO process. If there are issues the billing must be sent back to the SubK and additional time and effort are put into the process. This cycle could be 6–8 weeks from the initial labor input. Putting an additional month or more into the cycle is costly.
The Best Practice Process helps save time and money for both the Prime and the SubK.
Best Practice Process Benefits for Prime:
- Increase in efficiencies in the SubK’s cycle from incurring labor to collecting cash
- Decrease in cash cycle time of 4–8 weeks per SubK to send invoices
- Decrease in accrual amounts
- Decrease in days working capital through reduced days sales outstanding
- Enhance project execution with real-time visibility and front-end controls over SubKs on project
- Ability to dial in the funding and maximize every penny
- Increase profits and cash flow
- Eliminate need to reconcile SubK invoices to contracts/project budgets
- Improve relationship with SubKs
- 2- and 3-way matching for subcontract consultants
- Optional approval process
- Commitments decrease as time and expenses are entered in Unanet
- Period sensitive commitments reporting
- Assign subcontract consultants and PO to Project
Best Practice Process Benefits for SubKs:
- Faster payment cycle, increasing cash flow
- Less manual effort and fewer mistakes
- No invoices are produced and mailed
- No rework cycle
- Increase profits and cash flow
- Improve relationship with Prime
Unanet’s web-based timesheet software enables the anytime, anywhere collection of hours and status for tracking project effort. This supports systems for payroll, invoicing, project accounting, chargeback, and job cost accounting. Unanet provides robust features for auditing and is recognized as a best in class timesheet, complying with compliance requirements. SubKs can also access the system and utilize the power of Unanet. Unanet timesheet software is proven in organizations ranging from 10 to thousands of users!