Leading KPIs of Positive Financial Performance. Presented by: Hugh Shaw, Ventera Corporation Bill Riviere, Unanet

Transcription

1 Leading KPIs of Positive Financial Performance Presented by: Hugh Shaw, Ventera Corporation Bill Riviere, Unanet

2 Introduction Hugh Shaw (Ventera Corporation) Bill Riviere (Unanet) 2

3 KPI Introduction Monitoring your key performance indicators (KPIs) is a powerful way to improve financial and operational results. Identifying these key drivers isn t always easy. Unanet is designed to provide reports with commonly used KPIs and also provides information to tailor KPIs for your business. 3

4 KPI Introduction Following are some steps you should consider to identify what s really driving your business results. Review the various levers that drive sales Review you financial projections Interview your Operations team Continue to evolve and be fine-tuned (continuous process improvement) What s important to you? 4

5 KPI Introduction Lagging Historical Utilization Avg. Bill Rates, Avg. Cost Rates Indirect rates Leading Predictive Forecasted Utilization Backlog Sales Pipeline Revenue Forecast Corporate Budget Project Plans 5

6 Unanet KPI Reports Utilization By person or group Resource Allocation report in Unanet Historical or Forecasted Project KPI s Project Periodic Cost Summary Reporting 6

7 Unanet Reporting Demo 7

8 Client Dashboard & KPI Reporting Ventera dashboard demo and process 8

9 2018 Client Internal Dashboard Income Statement Based Results and Forecast ($000s) Revenue Direct Margin Direct Margin % Indirect Expenses Operating Income Operating Income % EE Utilization % Total Utilization % May MONTHLY YTD 2018 PRIOR FCST PLAN May PRIOR FCST Resource Allocation Report (EE s only) PLAN FCST PRIOR FCST PLAN 2,615 2,600 2,530 12,285 12,000 12,130 30,305 30,200 30, ,290 4,300 4,245 11,005 11,000 10, % 36.2% 37.5% 34.9% 35.8% 35.0% 36.3% 36.4% 36.4% ,675 3,750 3,725 9,285 9,300 9, ,720 1,700 1, % 5.8% 5.9% 5.0% 4.6% 4.3% 5.7% 5.6% 5.4% 76% 68% 75% 70% 70% 72% 76% 70% 71% 83% 75% 80% 77% 77% 78% 83% 77% 77% MONTHLY FORECAST ($000s) Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 AVG Bill & Cost Rates comes from project Cost Summary RPT Resource Allocation Report (EE s + IC s) NR 2,200 2,300 2,720 2,450 2,615 2,520 2,500 2,650 2,600 2,750 2,600 2,400 DM , , DM % 35% 35% 36% 32% 36% 37% 36% 38% 38% 36% 39% 38% IND OI OI % 2% 1% 9% 6% 6% 6% 7% 5% 6% 6% 9% 4% MONTHLY KPI TRENDS Firm to Forecast Project Periodic Cost Summary & Status KPI Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Avg Bill Rate Avg Cost Rate EE Utiliz % 76% 74% 74% 76% 81% 82% 77% 73% 76% 79% 79% 81% Total Utiliz % 78% 77% 77% 77% 79% 75% 74% 72% 77% 80% 77% 75% Firm to Fcst% 100% 100% 100% 100% 100% 98% 88% 82% 80% 65% 65% 62% 9

10 KPIs...Where Do People Go Wrong? Too many. Detail-oriented people such as accountants, programmers, and engineers tend to make everything a priority, which begs the question if everything is a priority, is anything a priority? Too complex. Measuring KPIs can end up looking like a mini- P&L. This is too complex to maintain. Too little time. Some give up without testing KPIs for long enough and seeing valuable trends. It s not easy. If it were, everyone would be doing it. Remember, KPIs help focus the organization on what is important. It is worth your while to discover and track them. An imprecise definition of a metric can also cause issues (i.e. utilization calculated using regular hours vs. total hours) 10

11 KPI Takeaways KPIs Top 5 KPIs used Profitability, Utilization, Firm to forecast, AVG Bill/Cost rates, Wrap rates Unanet can provide real time KPIs Use of KPIs is critical to the accuracy of forecasting Well defined KPIs can make the difference between anticipating changes in the business versus reacting to how your business is changing 11

12 Additional Thoughts... Forecasting Set annual plan Update full year forecast monthly KPIs are critical to accurately forecast revenue and O/I Refreshable Web Queries (RWQ) used to update external resources Use of Plan Sets High level view of plan sets Role in monthly close and forecasting Features, benefits 12

13 Q&A Thank you! Feel free to contact either of us for more information and insight. Hugh Shaw Bill Riviere 13

14 Obtaining a Clean DCAA Accounting System Certification Presented by: Andrew Scalise, CPA Sr. Manager, SC&H Group Pete Ragone, CPA Director, SC&H Group John Klapouchy, CPA Sr. Business Consultant, Unanet

15 Objectives Learn what the DCAA Accounting System Certification entails and what to expect Clear up common misconceptions as to what constitutes a DCAA certified accounting system Observe the procedures performed in an accounting system certification engagement and how to self-audit in advance Recognize your role and the role of Unanet in obtaining a clean accounting system certification 15

16 Background What is the DCAA Accounting System Certification? Formally Form SF-1408 Pre-award Survey of Prospective Contractor Accounting System DCAM Chapter 5 Section 200 Goal is to determine whether the accounting system is able to properly accumulate costs as required under FAR/CAS for a government contract Referred informally as an accounting system review, but technically an examination engagement 16

17 Background (cont d.) Who performs the examination engagement? Independent CPAs When bidding to a prime as a sub When bidding on non-dod contracts When you want the comfort of passing the examination before DCAA comes in (can also perform mock examinations) When DCAA refuses to accept the engagement or significant delay in starting and the contracting officer will accept an independent CPA s report DCAA When bidding as a prime on a DOD contract When bidding as a sub on DOD contracts and procurement requires DCAAonly certification When petitioned by another agency and DCAA accepts the engagement 17

18 Background (cont d.) Pros and Cons of using an Independent CPA Pros Much more timely (2-3 weeks vs. several months) Less adversarial (more willing to advise) Done at your request (DCAA does not accept requests from contractors) Cons May not be valid for certain future contract bids Contractor pays for the examination 18

19 What You Will Need POLICIES & PROCEDURES Describe the accounting system and any other systems / software used (HRIS, payroll, etc.) Describe what processes are manual, automated, and outsourced Accounting Policies: Cash Receipts, Cash Disbursements, Budgeting, Fixed Assets / Depreciation, Purchasing, Billing, Contract Management, Payroll, Indirect Rates, Financial Reporting HR Policies: Timekeeping, Expense Reimbursement, Job Design / Hiring, Termination, Severance, Bonuses, Pay Increases, Paid Time Off PRACTICE WHAT YOU PREACH 19

20 What You Will Need (cont d.) Draft Form 1408 or Completed Accounting System Questionnaire Description of process for unallowable costs (we usually provide a separate questionnaire) Access to all accounting system reports, employee personnel files, payroll records, and contract and billing files 20

21 When Using Unanet Follow Unanet s requirements for DCAA compliance: Require approvers to review details Disable the ability for users to self-approve Disable the ability for managers to edit timesheets Disable the ability for end users to delete timesheets Enable the Time Sheet Audit Trail Require timesheet approval Require approval for expenses (reimbursable expense reports) 21

22 The Process - Planning Auditor must complete a risk assessment before performing the examination Understanding the accounting system Understanding the contractor and personnel Understanding internal controls and policies and procedures Auditor adjusts procedures based on risk Scrutinize high risk, trust but verify low risk 22

23 The Process - Planning High Risk Quickbooks / Excel Internal payroll Weak timekeeping process / manual timesheets Most executives are only G&A so they don t fill out timesheets, don t provide receipts Poor documentation / minimal employee communications Low Risk Unanet / Other High-Level System Outsourced payroll recognized provider Strong culture of internal control and communications to employees Robust process documentation Good segregation of duties 23

24 The Process Internal Control Required Controls Approval of employee time entry and corrections Approval of employee reimbursable expenses Logical access control to accounting and timekeeping system Desired Controls Approval of vendor invoices and subsequent payments Approval of payroll Approval of personnel changes (hires, terms, salary) Approval of customer billings 24

25 The Process SF1408 Question 1 Is the accounting system in accordance with generally accepted accounting principles applicable in the circumstances? When is labor cost recorded? When are costs related to vendor invoices recorded? When are customer billings and revenues recorded? How are fixed assets depreciated? 25

26 The Process SF1408 Question 2 - Does the accounting system provide for: a) Proper segregation of direct costs from indirect costs? Let s see the Trial Balance. Who determines direct from indirect on common costs (travel, consultants, etc.) and how? Pick an entry from a travel account and trace to the supporting document. 26

27 The Process SF1408 Question 2 - Does the accounting system provide for: b) Identification and accumulation of direct costs by contract? Let s see the Project Cost Summary (PSR or JSR) for all projects. Do total direct costs by individual contract agree to total direct costs overall? 27

28 The Process SF1408 Question 2 - Does the accounting system provide for: c) A logical and consistent method for the allocation of indirect costs to intermediate and final cost objectives (contracts)? Let s see the Statement of Indirect Rates. If using total cost input, does the sum of the G&A Pool + G&A Base equal the sum of all allowable cost accounts? Do the calculated indirect rates agree to the rates used on the Project Cost Summary (JSR)? 28

29 The Process SF1408 Question 2 - Does the accounting system provide for: d) Accumulation of costs under general ledger control? Let s see the General Ledger. Can I trace individual GL line items to supporting documents and up to specific contract reports? Do the totals of all account balances on the GL agree to the Financial Statements and Project Cost Summary (JSR) for all contracts? 29

30 The Process SF1408 Question 2 - Does the accounting system provide for: e) A timekeeping system that identifies employees labor by intermediate or final cost objectives? f) A labor distribution system that charges direct and indirect labor to the appropriate cost objectives? Let s see the Labor Distribution Report for the last month. Can I trace an individual s hours by time entry code to his/her timesheet? Can I recalculate that individual s effective hourly rate based on the payroll register? 30

31 The Process SF1408 Question 2 - Does the accounting system provide for: e) A timekeeping system that identifies employees labor by intermediate or final cost objectives? f) A labor distribution system that charges direct and indirect labor to the appropriate cost objectives? Let s see the Labor Distribution Report for the last month. Can I trace total direct labor cost for one contract to the Project Status Report? Can I trace an indirect labor cost item to the General Ledger? 31

32 The Process SF1408 Question 2 - Does the accounting system provide for: g) Interim (at least monthly) determination of costs charged to a contract through routine posting of books of account? Is there a monthly closing process? Are all accruals recorded? Depreciation? Revenues? Do current period expenses agree in total to amounts reported on the Project Cost Summary? 32

33 The Process SF1408 Question 2 - Does the accounting system provide for: h) Exclusion from costs charged to government contracts of amounts which are not allowable in terms of FAR 31? Do you have separate unallowable accounts identified? Let s sample from a couple high risk accounts (Travel, Entertainment, Marketing) Do you provide bonuses or severance? If so, do you have a formal policy? 33

34 The Process SF1408 Question 2 - Does the accounting system provide for: i) Identification of costs by CLIN and by units? Let s see a Project Cost Summary by CLIN for a contract with multiple CLINs Can I agree individual labor costs to timesheets? Can I verify funding status for individual CLINs? 34

35 The Process SF1408 Question 2 - Does the accounting system provide for: j) Segregation of preproduction costs from production costs? Requirement applies mostly to manufacturing entities. Typically met by maintaining different account numbering sequences to each phase of production. 35

36 The Process SF1408 Question 3 - Does the accounting system provide financial information: a) Required by contract clauses concerning limitation of costs or on payments? b) Required to support requests for progress payments? Let s see the contract information module. Can you add contract value, funding value, rate ceilings, and other limitations? 36

37 The Process SF1408 Question 4 Is the accounting system designed and records maintained in such a manner that adequate, reliable data are developed for use in pricing followon acquisitions? If you pass the rest of the examination, you will satisfy this requirement. 37

38 The Process SF1408 Question 5 Is the accounting system in full operation? An auditor cannot give a fully clean opinion if the system implementation is still in process The rest of the system can be audited even if one component is not yet implemented, but it will likely result in a follow-up audit. 38

39 The Process - Reporting Can receive three different reports: Pass Pass with exceptions (recommends a follow on examination after contract award) Fail If using an independent CPA, you should also receive a list of best practices and recommendations. 39

40 Conclusion Once certified, the system retains that status until a material change occurs: Change in accounting software Substantial change in personnel or policies and procedures Change in cost accounting structure / indirect rate structure Report can also be considered outdated based on the judgment of a contracting officer. 40

41 Q&A 41

42 Additional Information The following items can be provided upon request: Example Policies & Procedures FAR 31 Unallowable Costs Checklist Process/Control Questionnaire Pete Ragone Director Andrew Scalise Senior Manager 42