Business Management Executive Q&A
Sept 12, 2007
By: Amanda Marsh, Associate Editor
During the real estate boom, many real estate and development companies were growing at such a fast pace that the lagged in tracking and managing internal costs. Russ Panks, a CPA who specializes in construction and real estate accounting with Florida-based accounting firm Kaufman, Rossin & Co., spoke with CPN Associate Editor Amanda Marsh on the effects of such poor monetary planning and management.
CPN: Where did fast-growing companies go wrong in tracking and managing internal costs, and what has been the effect?
Panks: Many of these fast-growing businesses focused on operational needs and getting the projects completed, rather than developing the infrastructure needed to support and monitor the growth or even the profitability of the growth. Businesses should control their rate of growth by making sure that margins grow faster than internal costs. In the current competitive market, the companies that do not have controls over their internal costs can underbid projects and end up taking an unnecessary loss or (overbid and lose) a profitable project.
CPN: How can companies affected by poor monetary planning and management turn their businesses around again?
Panks: It will take time to change things. Pull the team together and discuss goals. Bad habits can be hard to break--it will require discipline and commitment from the top. Create budgets and hold people accountable. During the boom, companies threw money at problems to correct them. Staff may have been overpaid just to get a warm body. Now is the time to establish performance measures to determine whether or not value is being delivered. Perform an overhead burden analysis, review this information and maintain focus on margins rather than revenue. Forecast a break-even point and communicate the information to the estimating department.
CPN: What can these businesses further do to protect and improve on their financial planning for both market downturns and booms?
Panks: Healthy growth. A company should not necessarily take on every project that is presented to it. Understand that a business’s infrastructure has to grow as the business does. A comprehensive strategic plan that focuses on where the business is going as well as what it will take (from a infrastructure standpoint) to get it there will assist a business with these decisions. Stick to what you do best. Businesses need to be agile and able to adapt to changes quickly. Continually look for new ways to cut costs, no matter what the market conditions are. There has to be a top down attitude that waste is not acceptable.
By: Amanda Marsh, Associate Editor
During the real estate boom, many real estate and development companies were growing at such a fast pace that the lagged in tracking and managing internal costs. Russ Panks, a CPA who specializes in construction and real estate accounting with Florida-based accounting firm Kaufman, Rossin & Co., spoke with CPN Associate Editor Amanda Marsh on the effects of such poor monetary planning and management.CPN: Where did fast-growing companies go wrong in tracking and managing internal costs, and what has been the effect?
Panks: Many of these fast-growing businesses focused on operational needs and getting the projects completed, rather than developing the infrastructure needed to support and monitor the growth or even the profitability of the growth. Businesses should control their rate of growth by making sure that margins grow faster than internal costs. In the current competitive market, the companies that do not have controls over their internal costs can underbid projects and end up taking an unnecessary loss or (overbid and lose) a profitable project.
CPN: How can companies affected by poor monetary planning and management turn their businesses around again?
Panks: It will take time to change things. Pull the team together and discuss goals. Bad habits can be hard to break--it will require discipline and commitment from the top. Create budgets and hold people accountable. During the boom, companies threw money at problems to correct them. Staff may have been overpaid just to get a warm body. Now is the time to establish performance measures to determine whether or not value is being delivered. Perform an overhead burden analysis, review this information and maintain focus on margins rather than revenue. Forecast a break-even point and communicate the information to the estimating department.
CPN: What can these businesses further do to protect and improve on their financial planning for both market downturns and booms?
Panks: Healthy growth. A company should not necessarily take on every project that is presented to it. Understand that a business’s infrastructure has to grow as the business does. A comprehensive strategic plan that focuses on where the business is going as well as what it will take (from a infrastructure standpoint) to get it there will assist a business with these decisions. Stick to what you do best. Businesses need to be agile and able to adapt to changes quickly. Continually look for new ways to cut costs, no matter what the market conditions are. There has to be a top down attitude that waste is not acceptable.
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