Reducing operating costs is a tough task for the owner/manager, especially when employees must work at job sites away from the head office.

Establishing ground rules for accountability of job site disbursements will help you save money, cost future jobs more effectively, and prevent misunderstandings between staff and management.

Monitor Travel Allowances

Travel costs are a major expenditure of companies that must reimburse employees working at a job site. When travel allowances should start is sometimes a contentious issue. One company handled the situation by setting the mileage expense as the difference between the distance from the employee's residence to the office and the distance from the office to the job site.

Establish Expense Guidelines

Set reasonable limits on employees' expenditures when they must work out of town, such as:

• Limit the meal allowance to a set amount per day.
• Set a range for the amount to be reimbursed for accommodation.
• Provide a set rate for reimbursement of car travel, for example 25¢ a kilometer.
• Request that detailed expense reports with attached receipts be completed and submitted on a regular basis before reimbursing the employee.

Monitor Advances

Account for advances within the payroll system. At the end of a contract or in the event of termination, the final pay would then be adjusted to recover any outstanding advances.

Establish Purchasing Procedures

To maximize volume discounts, control cash flow, and limit unnecessary expenses, ensure that all purchases of supplies over a specific amount are authorized.

Assign the responsibility for purchasing to specific employees.

Inform suppliers that all purchases that are charged or ordered must be authorized by a signed company purchase order to control job costs and prevent unauthorized purchases.

Provide Cash Floats

Employees who may need to purchase supplies in the field should be given a cash float:

• Make the float large enough for the purchase of miscellaneous items, but not so large as to allow major purchases that would be more economically handled through the office.
• Unlike the owner/manager, employees may not monitor expenditures carefully and purchase supplies or small tools without regard for costs or bookkeeping. Control these miscellaneous expenditures by making sure purchases are documented and receipts submitted.

Limit Blank Cheques

Sometimes on-site workers require a series of signed cheques without the payee or the amount filled in to cover expenses such as supplies delivered directly to the site C.O.D.

• If it is necessary to provide "blank" cheques to employees, limit the amount payable, for example, by indicating "NOT TO EXCEED FIFTY DOLLARS ($50.00) on the front of the cheque".

Control Fuel Consumption

Manage company fuel tanks carefully to avoid unauthorized use that could add substantially to the company's overhead:

• Assign responsibility for fill-ups to one or two employees and issue security keys or cards for their use only for filling company vehicles.
• Keep records of usage for each vehicle and monitor on a weekly basis.
  Reconcile fuel usage with the amount of fuel purchased.
• Follow up on any discrepancies.

Encourage Early Start-up

In addition to these cost saving measures, encourage employees to arrive a half hour before starting time. Setting up and preparing to start the day cuts into productivity as workers power up equipment, chat with co-workers, or finish their first cup of coffee. Arriving a half-hour early to be "ready to work at 9" will increase productivity and reduce operating costs.

Review Project Costs Annually

Make sure your business is receiving a fair price for its services. Keep on top of job site expenses, schedule an annual analysis of costs by project and adjust quotations for future projects accordingly.

Logan Katz LLP would be happy to assist you in setting up a job cost system and ensuring that your financial accounting system accumulates the required information.

The above provides general information only. It should not be regarded or relied upon as accounting or taxation advice or opinions. Logan Katz LLP Chartered Accountants would be pleased to provide more information or specific advice on matters of interest to you.

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