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Revenue by Department - Need best practices

Jumaane Dyson's Profile

I would like some input on what other companies are doing with regard to tracking and measuring revenue by department. We are currently using Quickbooks so I am aware of "class" but it does not work to the level of detail that I would like. Revenue is currently tracked by item (labor category). If two employees are assigned to the same item but separate departments/class...it is difficult to capture. Any ideas? Also, what is the typical business rule for assigning employees to departments. Assume the department director/managers have to generate revenue...so it becomes very important to track employees by department so revenue can be measures accurately. Do most companies assign the employee to one department? I am interested to know what if the employee works for another department (on-loan). Which department gets the credit? Thanks,

Answers

Topic Expert
Christie Jahn
Title: CFO
Company: Prime Investments & Development
(CFO, Prime Investments & Development) |

"Revenue is currently tracked by item (labor category). If two employees are assigned to the same item but separate departments/class...it is difficult to capture"

Hey Jumaane,

I'm trying to wrap my brain around what you say in this statement so I am thinking it about how my husband runs his construction company to see if it parallels. He may have a Labor Class 2 (e.g.) and has two employee's assigned to labor class 2, but they would work on two different classes. Is this similar to what you mean? If so, I think I have an answer but wanted to clarify first.

Topic Expert
Jaime Campbell
Title: Chief Financial Officer
Company: Tier One Services, LLC
(Chief Financial Officer, Tier One Services, LLC) |

The department utilizing the employee's services gets the credit. This is because financial reports need to answer the question: "How much does it cost to run this department?"

Why does class tracking not give you the detail that you need?

Jumaane Dyson
Title: Chief Financial Officer
Company: Consulting Firm
(Chief Financial Officer, Consulting Firm) |

I would like to thank you both for the response and interest.

Here is the Item setup.

Job 1:Task 2:Task 2A:Project Specialist

QB will only allow me to assign one class to the Project Specialist item. So if 5 people from 5 different department/classes charge to the "project Specialist" item...it would be difficult to run a report to capture revenue by class. Every would be assigned to one department. Im I missing something?

The Labor category items are used to create an invoice in QB using the "add Time/Cost" feature, thus, booking revenue in QB. If only one class can be assigned to one item and 5 different departments charge to that item there is no way to run a report to segregate the revenue by department/class.

Does this make sense?

Christie...that is what I mean. Does he use quickbooks?

Jamie...why wouldn't the revenue follow the employee who assigned to a department?

N. Codo
Title: FX & Int´l Cash Management
Company: Codo Adviser
(FX & Int´l Cash Management, Codo Adviser) |

We can and are tracking the product (item), revenue by following levels:
- Cº - Branch > Group > Area (dept) > Employee > item.
If one employee are moved from one to another area, we can set the date when that occurs, so it´s possible to measure the initial and end dates that employee worked for a specific area. The same occurs with product (item). We´re using "BI2Know" system.

Topic Expert
Christie Jahn
Title: CFO
Company: Prime Investments & Development
(CFO, Prime Investments & Development) |

Yes we use Quickbooks too. We use a Payroll Item List and set up categories, such as Labor 10, Labor 11, Foreman 1, Project Manager 1, for example. When we fill in the time sheet: If in one day the employee works four hours at one job and moves to a second job later we would allocate hours to Labor 10 class Job X, then 4 hours would be Labor 10 at class Job XP.

I think this may work for you, but the time sheet would just need to be split so you can allocate to the second class. If I am still off track, let me know.

LOIS PHILMAN
Title: OFF MGR
Company: AVALANCHE AIR COND & HEATING
(OFF MGR, AVALANCHE AIR COND & HEATING) |

We are an HVACR company with construction business. We use QuickBooks Enterprise and I assign the tech the payroll item for the type of job that he's working on. The revenue is tracked in the item as to the labor cost, the purchase of materials (service/mechanical/construction/plumbing) and the class is the business of the customer (apartment/residential/commercial/commercial preferred-special rate/construction). The payroll item will break down on a Estimate vs. Actual cost report for the job, that is providing you enter the estimate with the quoted costs to the customer vs the actual costs to your company. When the P&L is run, you can see the type of business income.

Topic Expert
Paul Benedetto
Title: CFO, Director of Finance, Consultant
Company: Nextwave Software, Rethink Fabrics
(CFO, Director of Finance, Consultant, Nextwave Software, Rethink Fabrics) |

I would vouch for Christie’s suggested approach, with one addition – develop a coding system within “classes” that are based on project/job code: for example, 1401 could be job 1 this year, 1402, etc. When creating each class, you can then have them assigned to a particular “parent” department by clicking on the “Subclass” box and choosing your particular sales division.

Once you have this structure in place, you should be able choose class at the top of each individual invoice when billing customers and then add in your payroll or other service/product related line items.

With this project\job class code in place you can then run P&L reports with customization to choose individual or groups of class fields, thereby generating views of revenue, full project and/department/division financials. Finally, memorizing reports with these custom settings can make your life easier for future analysis and monthly financial reporting packages.

It make take some trial and error to ensure first that your input, and second your reporting, are capturing all your costs and revenue components to specific projects. However, in the end you get a much better picture of profitability by these various segments to drive your business.

Topic Expert
Christie Jahn
Title: CFO
Company: Prime Investments & Development
(CFO, Prime Investments & Development) |

Yes Paul that is correct! Thanks for the addition. My husband does a lot of work for the same person and we had to start doing that as well to keep properties separate. We typically run P&L by Class and then look at profitability(loss) by individual project.

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