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  • Writer's picturePeter Searle

Accounts and business development



The special relationship between the Management Accountant and Business Development team in a contracting company.


What constitutes a “Special relationship” can sometimes be a bit of a mystery. One such special relationship in a contracting company is the relationship between the accounts department and Business Development person, BD. For a contracting business to fully “know its numbers” and to be able to secure profitable work in the future, these two functions need to speak with each other at least monthly.


The accountants have the figures for what the gross profit is on the projects as they progress and what the out-turn profits are. They should provide this information to the BDs who can then compare the gross profit with their segmentation of the market. Trends for each segment can be reviewed and a decision made to adjust the work being targeted, based upon what the segment of the market is expected to do in the future. Whilst the accountant is looking backwards at profitability, the BD should be using the information to assist in identifying new opportunities. There is of course no guarantee that past performance of a market segment is going to be a reliable predictor of the future, but it is a starting place.

   

The BD’s role of looking into the future provides an insight into what income might be expected each month. At a minimum the BD should be providing a list of opportunities, expected start dates and project durations, from which a monthly income can be calculated. Given the existing overheads and the forecast income, the accountants can make recommendations as to what overhead percentage should be added to the direct costs of project estimates. That percentage might lower if there are expected to be many opportunities, or it might be higher if opportunities are drying up. If opportunities are drying up considerably then cutting the overheads might be a wise option, before the overhead costs start to make the business unprofitable.


The connection between accounts and the BDs represents the interface between past and future work. It is where the fine tuning of strategic decisions is made about which work is to be sourced and the level of overhead costs which can be sustained, which will lead to profitable and winnable projects.


If you are a contracting business owner and would like to find out more about how “Knowing your Numbers” better can lead to better profits, by coordinating your accounts and BD staff, then get in touch at Peter.Searle@ba4cs.co.uk for more information.

 

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