Dear Dave,
Thank you for the great presentation you gave recently for the Engineer’s Club of Philadelphia. It was such an eye opener for me just starting my own business, and I hope the club invites you back soon to deliver the second half of your presentation.

I took your advice to heart about upgrading from generic financial software. After your seminar, I see the value of and need for industry-specific software. You mentioned both Axuim and Deltek as options for me. I reviewed each of their websites, saw some canned demos, had their representatives do web-demos for me, checked with my accountant to see if he was comfortable switching, and received quotes. I just wanted your input one last time before I made the purchase. I understand that your opinion is only that, but I was impressed with your knowledge and experience, and since this will be a relatively significant purchase, I want to make sure that I’m doing the right thing.
J.H., Pa.

Dear J.H.,
Thank you for the kind comments. I’m glad I was able to inspire you and get you moving ahead with developing your management tools.

As I mentioned in the seminar (or should have, if I did not), I try not to favor one software over another. Each package has its own "personality," and it’s important for each user to look at all the choices to find the one package that feels most comfortable. Unfortunately, because of significant consolidation among providers during the last few years, the firms you checked out are the only two viable choices available to smaller firms at this time.

As a caution, be aware that numerous firms, regardless of which package they choose, will likely become frustrated by the process of getting their software set-up and doing what they want it to do. The level of complexity of either of these software programs can be daunting. Often, firms rush through implementation and fail to discover and take advantage of the wide array of features they have paid for, or they fail to set the software up in a fully functional way.

Before beginning the implementation process, it is critically important to take the time from 30,000 feet to figure out how best to organize and run your firm. Decision making during implementation should involve senior level firm management, as well as project management personnel, at each stage of the process. It should not be seen as purely a task to be left to the administrative folks to complete. Knowing up front how you wish to track projects, assign responsibilities, and exact accountability will help to ensure the software will be set-up to report back in a way that complements how you intend to manage your firm. Often, firms take great pains to make the new software reflect exactly the way they currently operate without first stepping back, taking a deep breath, and reflectively asking the truly key question: Is there a better and more effective way to organize and manage the firm in the first place?

There is a steep learning curve with either package. Be sure to take the time to thoroughly understand the set-up process and don’t cut any corners getting yourself up and running and you will be fine. Use your CPA throughout the process to guide you in making decisions pertaining to how you will organize your financial statement formats and reports. Take advantage of the vendor’s training classes, demos, telephone support, et cetera at every opportunity. Finally, check with your vendor to see if there is a users group of firms for their software in your area. If so, become an active participant. Users groups can be valuable in sharing tips and ideas to help you get the maximum return for your investment.

Job costing labor

Dear Dave,
Once a project has reached its contract limit and additional project labor charged to the project would be un-billable to the client, would it be appropriate to instead charge that additional project labor (over the budgeted amount) to general office or some other indirect labor account since the payroll will never be billable? When a salaried employee works more than 40 hours in a week on projects, should only the first 40 hours be charged against projects since that employee is not being paid for hours worked in excess of 40 hours in any week?
J.K., Utah

Dear J.K.,
The classification of payroll labor as being either direct or indirect has nothing to do with whether or not that labor is actually ever billed to a client. Any and all payroll incurred on projects should always be recorded as direct labor, without regard for budget or billing status. It is never appropriate to re-classify direct payroll to indirect payroll.

To be technically correct, when a salaried individual works more than 40 hours in a week, each hour is charged to projects, but the hourly job cost rate for each of the hours worked that week is ratcheted down by dividing the weekly salary by the number of hours worked to spread the salary evenly over the total hours worked. For internal project management purposes, as a matter of policy, many firms prefer to skip this prorating step and continue to charge a standard fixed rate for each hour worked.


Get answers to your questions about design firm and project management, finances, marketing, and related topics by sending them to Q&A c/o: CE News, 330 N. Wabash, Suite 3201, Chicago, IL 60611, or faxing them to CE News at 312-628-5878. Include your name and telephone number in all correspondence. Your name will not be used in connection with published questions.

David Wahby is president of Wahby & Associates (www.wahby.com), a management consulting firm serving A/E clients. He can be reached at 616-977-9756 or via e-mail at wahby@wahby.com.