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July 10, 2024

Lean and Mean: Controlling G&A and Improving Cash Flow in the Current Climate

by Phong Starzewski

Over the past several months, I’ve been on leave to help a dear friend in need. Since I had some downtime, it allowed me to step back and look at the business and financial landscape from the outside in. It was done initially as a diversion, but also to figure out what my professional community – colleagues, peers, clients – are dealing with so I don’t drift too far from what I’m good at.

In keeping up with trends and looking at public financials, it’s clear that many organizations are out of the revenue slump that came with the global pandemic. But even for those savvy enough to be on the positive side of revenue growth, year-over-year results look a lot different now than they did pre-pandemic. I should note here that my community is primarily GovCon services, so that’s where I keep my focus.

Before the pandemic, money was cheap. The world had been riding a prolonged wave of low interest rates, which was great. The purchasing power of the dollar was strong, and it also meant that borrowing was an attractive tool. And for many of my clients, cheap money meant cheap(er) mergers and acquisitions (M&A). Revenue growth pre-pandemic was fueled in large part by M&A when looking at the financials of public GovCon corporations over time. Before the pandemic, it wasn’t uncommon to see year-over-year revenue at 10%, 20%, or even 40%. But post-pandemic, with higher interest rates, revenue growth so far appears to be mostly organic.

Some companies had positioned themselves to be able to acquire during the pandemic, as rates were still low, and organizations with coveted assets and less financial flexibility may have experienced distress due to the pandemic. But until rates cool – and government procurement picks up – M&A of pre-pandemic times, or more specifically, the golden age of historically low interest rates, is probably a bit further down the road. And that means that costs need to be better controlled to maintain profitability. And the first place you look to contain costs is on the indirect side of the shop, like G&A.

So, what have companies done to hold the line on G&A? Again, in looking purely at public financials, the companies that seem to have done the best are the ones that have been able to maintain or reduce G&A spending while showing steady increases in revenue and sustained profit margins. In the inflationary world we’ve been living in, we’ve seen a higher cost of labor and higher prices for goods and services we rely on to run our businesses. To manage G&A spending, this could mean making tough decisions on staffing, deferring capital expenditures on upgrades, reducing or eliminating G&A improvement projects, and more. Now more than ever in the past two decades, those who live in the G&A space need to work smarter.

But how?

Much of what we do at Kinetek is marry systems to process: to design and/or configure systems and solutions to meet the growing needs of our clients and put them in a position to leverage those systems and repurpose precious labor hours to more qualitative functions like analyzing current operations and predicting what comes next. Humans shouldn’t need to do repetitive activities week after week, or month after month when they know in advance what needs to be done and there aren’t any unknown variables. It’s just a waiting game. And humans shouldn’t have to spend valuable time correcting errors. It costs money and hurts cash flow. Designing solutions to tackle these challenges properly saves real money. And if implemented properly, they can have a direct and positive impact on cash flow.

All of Kinetek’s clients have systems to manage their businesses. That’s a necessity. And since we partner with both Deltek and IBM, those systems are Costpoint and Cognos Analytics, which have increasingly become more valuable as those organizations release new functionality and new technologies to help our clients manage their businesses and provide the platform to provide valuable insights into what has happened and what they expect to happen so they can monitor and adjust as necessary to what will happen.

With Costpoint, Deltek has done a fine job over the past several years of adding functionality that makes it more flexible to those who use it. It’s one thing for a piece of software to satisfy the requirements of the organization, like recording time and expenses, paying employees and suppliers, allocating expenses, invoicing customers, receiving cash, booking revenue, and on and on. But equally important is how to accomplish those things, and Costpoint today offers much more flexibility in terms of bending to the needs or habits of the individual user. Starting with Costpoint 8, Deltek brought a new user experience that brings new ways for each person who uses Costpoint to configure their experience to match how they use it.

Equally important is the inherent acknowledgment that while Costpoint is one solution, the unique needs of the organizations that use it may vary. To that end, Deltek has provided a method for users to satisfy those needs through Extensibility, an application that allows organizations to alter the user experience further or capture additional information for things like projects or employees or even to create new functionality and new applications (“screens”) in Costpoint to perform tasks unique to a particular organization.

At Kinetek, we’re seeing more organizations embrace Extensibility beyond the simple things like adding a field to a screen. We’re seeing our clients take it in a much more powerful direction to improve management, reduce costs, and positively impact cash flow. We’ve been fortunate enough to have clients that trust us to work with them to identify the requirements of what needs to be done and how it needs to be done and develop these extensions for them.

Three of the most impactful extensions we’ve developed for our clients underscore how organizations are using their systems to control expenses and improve cash flow:

1. Labor Accruals. We work with some clients that have unique customer invoicing requirements that must be done by calendar month as opposed to fiscal month. In some cases, these customers also have fixed deadlines to submit the invoice by a certain date, like ten days after the end of the calendar month. None of this is an issue if the company’s fiscal schedule with aligned with the calendar, and the company records time on a semi-monthly basis. But the problem is most companies aren’t aligned that way. Many companies operate on a 4-4-5 fiscal calendar, and record time weekly in Time and Expense.

In this case, we developed a configurable extension with one new application (screen) and added functionality to Import Journal Entries for our client to automatically generate a labor accrual for unposted time so they can meet the invoicing requirements of their customer and keep cash flow moving in the right direction.

Import Journal Entries Deltek Costpoint Kinetek

2. Revenue Accruals. Some organizations find themselves in a situation where certain contracts book revenue based on a predetermined schedule. They know the amounts to book each month at the start of each contract year. But they don’t have a good way of managing this in Costpoint according to how they do business.

In this case, we created new applications (screens) in Costpoint to configure the extension and manage revenue schedules. It includes optional functionality to optionally require approvals and tie them to project roles, review and approve the setup, and the ability to report on future fixed revenue as part of their business analytics using Costpoint Enterprise Reporting or Cognos Analytics. This type of “set and forget” functionality reduced the cost of holding this information offline and waiting each month to record the revenue amounts while providing enterprise-level transparency and provided insights into things like Daily Sales Outstanding (DSO) much more quickly.

Revenue Accruals Deltek Costpoint Kinetek

3. Work Authorizations. We’ve seen more than a few clients that struggle with managing time. In some cases, we’ve had customers identify labor corrections as their number one issue in not only closing the books on time but more importantly, negatively impacting cash flow. Labor corrections slow down everything: indirect rates, revenue, customer invoicing, and receivables, to name a few.

In this case, we created new applications (screens) in Costpoint for two of our clients to configure and manage work authorizations that authorize what person may charge what project to what PLC (or PLCs) during specific time periods, and communicate what they’re supposed to be doing. These work authorizations are then enforced for clients using Deltek Time and Expense to either restrict charging to the period of performance of the work authorization, conditionally allow charges outside the period of performance during the timesheet period but require it before signing, or ignore it altogether. Changes to work authorizations are logged and transparent, and notifications are sent to employees to formalize the timekeeping policy with regard to notifying employees of the proper charge codes for future floor checks and audits. And to make it easier for the employees a list of work authorizations is available to them from within their timesheet, specific to that timesheet date, so they don’t have to cross-reference to somewhere else.

Work Authorization Extension Deltek Costpoint Kinetek

Our clients have said that extensions like these have provided real and positive results to their organizations, and in one case said, It is the single best thing to come out of this project [a much larger process improvement project] so far. Solutions like these provide real cost savings and positive cash flow impact when implemented thoughtfully and properly.

We’re fortunate and proud to work with our clients to help them achieve their goals, and we’re equally as fortunate and proud to work with partners like Deltek and IBM to help our clients achieve those goals. And since our clients already have these systems in place, it only makes sense to leverage what we already have in place to maximize the value of every dollar spent and get cash in the door as quickly as possible. And this is one way how.

At Kinetek, innovation and efficiency are at the heart of everything we do. By harnessing the power of partnerships with industry leaders like Deltek and IBM, we ensure that our clients not only meet but exceed their strategic objectives. Our commitment to leveraging existing systems means optimizing resources and accelerating financial returns with precision and speed. By continuously refining our strategies and embracing cutting-edge technology, we empower our clients to stay ahead in a rapidly evolving marketplace. This synergy between expertise, technology, and dedication is what sets us apart, ensuring sustainable growth and success for our clients.

Ready to maximize your financial potential? Contact us today to explore how our tailored solutions can accelerate your business growth and streamline your operations. Let's achieve your goals together!

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