Manage Finance and Budgets

Pre-amble

Custometal Pty Ltd has been trading since 1992 under a couple of different names before becoming a proprietorship in 1998. Since its conception in 1992 it has been with the same owner and trades today as a sole proprietorship.

Custometal's customers consist of the construction industry across Melbourne. Custometal is what is known in the industry as a metal work sub-contractor, with our scope of works basically consisting of custom fabricating all metal items excluding structural steel and items that can be mass produced.

Custometal's company structure consists of 1 general manager, 2 accounts staff, 2 estimating staff, 1 foreman, 2 leading hands and 16 tradesmen, 4 labourers and one apprentice. Being a trade based company; really what we are selling is the time and skills of our workforce more then a physical end product of their labour.

1.0 Introduction

Being a trade based company; Custometal's budgets are not as easy and strait forward as those of manufacturing, retail or even most services companies. Like most companies, we have sales targets, administration budgets, and services budgets that can be fixed, but our workshop budgets and production-based budgets rely heavily on the amount of contracts we have and the type of products we have to supply.

The flow of Custometal's budgets like most are circular, therefore it is difficult to talk about communication of budgets without talking about reporting procedures and how activities are controlled and monitored.

The production cycle of our products starts with the estimating department, once the contract is awarded, the estimating department communicates the budget to the production staff who intern communicate the budget to the tradespeople.

With the aid of the accounts staff, the production staff monitor and control the budget though the production cycle and report the outcomes back to the estimating department and the general manager and this analysis is used by the estimating department to refine quoting procedures and formulate estimates for simular jobs.

2.0 Roles of the departments

2.1 Estimating Department

The estimating department is responsible for formulating production budgets by providing quotes to Custometal's customers. By submitting quotes, the estimating department enters into a legal agreement with the customer where they are agreeing that if a contract is awarded to Custometal, we will undertake the works at the price stated. The quote and the documentation provided by the customer become legal documents stating the following:

* The product on offer - Tender documents are a package that includes a scope of works, written specifications of the product, requirements such as Australian standards to conform with and conditions that the product has to stand up to, detailed drawings and bills of quantities. It is not uncommon to receive a tender package with upwards of thirty drawings and one hundred pages of specifications that don't provide enough information to quote confidently. For this reason, a quote is provided with a detailed description of the product and quantity on offer.

* Price - The quoted amount. It is common practice when quoting a job not to include GST in the quote, as it is not a cost to the company, but a cost to the consumer. For this reason, all quotes carry the line "Prices exclude GST".

* Validity of the quote - Customers may require a quoted price to be firm for a stated period of time. Likewise, variable costs may make it impossible to firm up a price for extended periods of time, in which a clause will be added to the quote of "Prices are valid for 'x amount' of days. In many cases, the estimating department is quoting to a customer who is tendering for a job themselves; in this case it may be up to 6-8 months before a contract is awarded. In this case it is the acceptable practice for our customers, once they have been awarded a contract, to allow us to review our quote and adjust accordingly. Slight increases in price at this point are acceptable to update variable costs, but these costs are closely scrutinised by the customer for their validity.

* Exclusions - If the estimator has identified that there are variable costs that are either outside our usual scope of works or there is not enough information to formulate an accurate price, those costs will be written up as exclusions.

As quotes are a legal document, the more detailed the quote is, the more detailed the quote is, the less chances there are of being legally forced to provide a product that hasn't been allowed for.

2.2 Production department

The production department's staff consists of a foreman, 2 leading hands and the GM (general manager). It is the job of all four production staff to undertake the job of PM on several projects at once. Under the production staff are the tradesmen, labourers and apprentice.

It is the job of a project manager to manage a complete a project on time and on budget. As the scope of the projects that custometal undertakes is relatively small, a project manager at Custometal is expected to also fill the roles of contracts administrator and draftsperson. Due to the varied nature of projects undertaken, the choice of which PM is suitable for which job depends on experience and technical knowledge.

2.2.1 The Foreman

The foreman of Custometal is also the owner of the company. Being an experienced and qualified tradesman and possessing many years of project experience, the foreman is responsible for managing a high number of smaller jobs. The Foreman also undertakes the roll of workshop manager, overseeing maintenance and maintaining the stores required by the workshop.

2.2.2 The Leading hands

The leading hands are both tradesmen who have a combined roll as project manager and tradesman. The leading hands are mainly utilised as project managers on bigger jobs where large amounts supervision is required both in the workshop and out on site. On some jobs that are more complicated a leading hand may be teamed up with either the foreman or GM as a contracts administrator to lessen the paperwork burden.

2.2.3 The GM

Being a mechanical engineer, the GM is responsible for technical issues pertaining to design and drafting of complicated jobs. The general manager also undertakes the role of PM (project manager) on technically difficult jobs where his skills as an engineer are needed. The GM also wears the hat