Monday, August 10, 2020

Construction Accounting vs Regular Accounting

Regular Accounting focuses on the company-wide measurements of the profitability and loss, which the Profit and Loss will show the total revenue and the expenses. Meanwhile, Construction Accounting focuses on the crucial piece of information that is allocated to a specific job, which is called Job Cost, mainly consists of materials at the warehouse, labor, subcontracts, and other expenses incurred for jobs - Direct Expense.

In Construction Accounting, the Job Cost is necessary to analyze performance on other levels, instead of just from the Regular Accounting perspective. Job Cost can be further broken down into different Cost Code when necessary.

As part of the Job Cost, there will be an Estimate Costs provided for each Cost Code of a job, which to helps in measuring the progress, measuring performance and production, and give the historical data for future estimation.

In general, Regular Accounting is measuring a company/department performance; however, the Construction Accounting is measuring a job, group of jobs, or a particular Cost Code.

Regular Accounting is dealing with all aspects of revenue and costs, including overhead and admin costs; however, Construction Accounting is dealing more with Direct Costs.

Regular Accounting usually reports in an accounting period (monthly, quarterly, or yearly); however, Construction Accounting will reports on job-to-date in addition to specific periods per job, which can cross over multiple financial/fiscal periods. An example being a construction project that needs a few years to complete such as high-rise buildings, bridges, etc. 

Construction Accounting is generally built upon  Regular Accounting, which shares the same basic financial reporting for the operating and growing a business and preparing the annual company tax returns and allows the management to make business decisions. 

On top of it, Construction Accounting adds many complex layers of reporting mechanisms to show the contractor where their best customers are within the market segmentation boundaries.

Additional reporting needed for Construction Accounting are Job Costing Report, Job Profitability Report, Earned Value Report, Work-in-Progress Report, Estimate vs Actual Report, Payment Application, etc.

In order to provide a reliable Construction Accounting Reporting, various Accounting Method that will be used are Cash, Accrual, Completed Contract, and Percentage of Completion, which needs to records on-time invoicing, and on-time expenses records for a specific job in the bookkeeping, so that it only able to provide the management with the actual progress of the job, job costing, and job profitability.

Are you looking for an Accounting System for your construction company? We have a solution for you. Contact Us.

By SYH. 

ICT End of Life (EOL) Equipment

Nothing lasts forever, especially technology. As much as you love your gadget, all good things must come to an end. As much as a company needs to minimize hardware replacement costs, it is inevitable to spend sooner or later. That brings us to a crunching question: How long do they last?

As a company, struggling with machines well past their prime negatively impacts your bottom line. And although there is nothing wrong with keeping older computers, it's important to beware of the fact that all ICT hardware has an expiry date (End of Life).

An average lifespan of a desktop computer (PC) is around 5-7 years. While many computers can remain operational several years after their projected lifespan; the accumulation of files, software, and updates takes a toll on the hardware. This is when degradation comes in, too many background processes/applications running puts pressure on the CPU, which leads to overheating. Under most circumstances, the computer's cooling unit mitigates this, but over time it can suck in dust, clog up vents, and limit air circulation. The excess heat produced will then wear out internal components and affect overall performance.

Laptops are not as sturdier as desktops, not to mentioned rough handling, hence, the average usage is 3-4 years.

Smaller (and more easily damaged or misplaced) mobile devices are short-lived compared to desktop. Average usage for smaller mobile devices: 2-3 years.

While the hardware may still work beyond the recommended lifespan, this common "if it ain't broke, don't fix it" preception could lead to reliability and security issues down the road, especially if firmware or operating systems are no longer updated to patch security vulnerabilities.

What is the typical lifespan of ICT assets?

Typical lifespans can vary and will depend on how well your assets were deployed (environment and usage factors) and maintained throughout their lifetime. Below are some general guidelines for an ICT End of Life (Equipment) refresh/replacement.
  • Workstation/PC/Desktop: 5-7 years
  • Laptop: 3-4 years
  • Mobile Devices (Smartphone/Tablet): 2-3 years
  • Servers: 7 years
  • Network Equipment: 7 years
  • Printer: 7 years
  • UPS: 5-7 years
  • Fiberoptic cables: 15-20 years
  • Standard software: 3 years
  • Customized Software: 10years

When is the time for a hardware refresh?

Performance Issues. New applications with more complex features put stress on aging hardware, resulting in performance problems and system lag. Performance issues typically lead to decreased productivity from frustrated users

Sunset Products. As hardware manufacturers and software providers sunset/discontinue products, they will no longer support or upgrades for them. Operation without this support can cause vulnerability and security risks.

Cost factors

The easiest way to determine whether you should replace your computer is by weighing the costs. One good rule of thumb is if the cost to maintain existing hardware reaches 66% of the price of a new computer, you should opt for a new one.

And while it may seem wise to use an old computer until its dies, that's often not the case. Eventually, processors will give out and the replacement part will not be available, this could cause downtime for your workers.

High-end vs budget-friendly: What type of devices are organizations buying?

For mission-critical servers that power important services employees and customers rely on, company should invest in new, higher-end hardware. But for everything else, company can have a slight preference for new, budget-friendly devices over new, higher-end devices.

ICT EOL Refresh Policy

Company should also have an ICT EOL Refresh Policy to establish and define a Refresh policy for all equipment used in the company. This is intended to provide a balance between optimum use and on-going maintenance costs to enable staff to use the latest software with ease, without impeding the productivity and efficiency of their department. The purpose of the policy is to minimize risk(s) from (but not limited to):
  • The vulnerability of out-dated or obsolete hardware and software systems to external and internal attacks.
  • Inadequate security and authentication functions for obsolete systems.
  • Unavailability of security fixes and vulnerability patches for obsolete systems (e.g Windows 96, Windows XP).
  • The lack of technical support and defensive measures available to obsolete systems (e.g 4GL, DOS).

Future-proof your ICT Infrastructure

Wide Area Network with older CAT cables may need to be replaced with fiberoptics. WIFI may need to be replaced with 5G cellular coverage. Off-site backup may need to be complemented with cloud backup. Supporting environmental devices such UPS may need to be replaced with Smart-UPS, air-cond and lighting may need to be replaced with energy-saving units.

Disposal of EOL equipment

Instead of sending the EOL equipment to the landfill, you may want to dispose of it properly as e-waste where certain parts can be scraped or recycled safely. If EOL equipment is still functioning, it can also be donated to the needy. 

However, regardless of the EOL Server/Desktop/Laptops are to be disposed or donated, the company data/files in the hard-drive must be removed to protect the company data breaches. EOL equipment should be donated with new hard-drive, while the old hard-drive must be destroyed properly.