Case study · Monthly bookkeeping

Job-wise profit and ₹62 lakh of retention money found for an industrial maintenance contractor

Reporting tags gave job-wise profitability for 30 to 40 live sites. Retention money sitting in a suspense head became a customer-wise receivable, and audit field work dropped from about three weeks to six days.

Monthly bookkeeping
30 to 40 live sites
Retention and TDS

Client details and figures changed to protect confidentiality.

₹62 lakh
retention made visible: 30 to 40
active sites tracked: 3 weeks to 6 days
audit field work: 70
staff

Context and challenge

The situation

The contractor handles maintenance and shutdown work at factories. At any time 30 to 40 sites are live. Billing is by milestone, customers hold back retention money until completion, and most customers deduct TDS on the payment.

The owner knew the company made money. The question was which jobs did. Costs were booked to heads like site expenses and labour, and profit by job was worked out by hand once a year, after the audit.

The statutory auditors needed about three weeks of field work every year, mostly because schedules had to be built from scratch.

The books were kept by an in-house accountant who also handled payroll and statutory payments. He was good at getting the month done, but there was no time left to look behind the numbers, and the owner had stopped asking questions that could not get answered.

What to watch for

What made it tricky

Retention is tricky because the invoice is raised for the full milestone, the customer pays less, and the balance sits for months. If it is not tracked, it ends up in a suspense or miscellaneous account.
TDS deducted by customers has to be matched with certificates and with the Form 26AS figures. Without that, the claim in the return can be wrong or missed.
Labour, material and sub-contractor costs for a job come from different people at different times. A job report is only useful if everything is tagged when entered.
Milestone billing meant revenue and cost for the same job often fell in different months. Without a job-wise view, a month with a large invoice looked excellent and the next looked poor, and neither said anything about whether the work was profitable.

How it ran

What we did

1
Created a reporting tag for the job and tagged every sales invoice, purchase bill, expense and payroll journal against it. Site supervisors send a simple weekly sheet that is booked against the right job.
2
Opened a retention receivable account and a separate retention payable account for sub-contractors. Each milestone invoice splits the amount into the payable-now part and the retention part, so the retention builds up customer-wise.
3
Went through the old suspense head line by line. Most entries were retention held by specific customers on specific invoices, a few were advances not adjusted. Everything was reclassified with the owner and CA looking at the list.
4
Set up TDS receivable by section and customer, and reconciled to Form 26AS every quarter.
5
Prepared the schedules the auditors always ask for: debtors and creditors ageing, fixed asset movement, TDS, GST reconciliation and bank reconciliations, kept ready as the year goes.
6
Monthly close with a job-wise profit report and an ageing review with the owner.

Outcome

Results

Job-wise profitability is available through reporting tags. Two long-running contracts turned out to be breaking even, and pricing on repeat work was changed.
About ₹62 lakh of retention that had been in a suspense head is now a customer-wise receivable with invoice dates, so follow-up has a name and a date against it.
Statutory audit field work went from about three weeks to six days because the schedules came straight out of Zoho Books.

Operational impact

Before

Profit by job was worked out by hand once a year, after the audit.
Retention money sat in a suspense head.
Audit field work took about three weeks.

After

Job-wise profitability through reporting tags.
About ₹62 lakh of retention is a customer-wise receivable.
Audit field work takes about six days.

What the CA or owner gets now

The CA gets a trial balance with no suspense balance and schedules ready for the audit.
He can see retention and TDS by customer, and asks for certificates by name.
The auditors have fewer queries, because every figure traces to a document.
The owner reviews open retention with a customer name and an invoice date. Two large customers released money within weeks of being asked, with the invoice numbers in hand.

More reading: Tally vs Zoho Books: an honest comparison for Indian businesses

Client details and figures changed to protect confidentiality.

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