5 Insights into Outstanding Electric Work Order Accounting
- Apr 8, 2021 7:22 pm GMT
Electric work orders are the not-so-secret sauce that drives electric rates. Using work orders for projects is the industry best practice. Still, if all costs are not recorded, the customers will not fully reimburse your electric utility or cooperative for the total costs of capital replacement. Cash flow will suffer, directly impacting customer service and system reliability.
Basic system insights
Here are some insights into what goes into a great work order process:
1. Include all cost types in each work order to ensure proper cost recovery. The four significant costs are:
- Outside contractors
2. Overhead costs can account for twice as much as other construction costs. All overheads represent the cost of doing business in the utility. These costs include:
- Labor overheads
- Cost of capital
- Administrative and general support
- Materials management
3. Overhead costs should be reviewed and adjusted annually. Adjusting more frequently thank that may skew construction costs during the year.
4. The flow of information from the field to the office, and the office to the field is a common bottleneck. Map key processes, train your construction crew and finance team to understand what the other group does and minimize unnecessary information clutter.
5. Standard units are the foundation of an effective work order close and unitization process. Where the costs are classified drives how they are included in customer rates.
These insights are a high-level starting point for evaluating your electric work order systems. Digging into the details is the next step in determining effective processes and best practices.
Russ Hissom is the owner of Utility Accounting Education Specialists (UAES), a company that offers online, on-demand, and custom utility accounting and finance business process courses; and thought leadership. You can reach him at firstname.lastname@example.org. The puaes.com website has a wealth of classes, articles and other online resources that will benefit your utility’s accounting and customer ratemaking strategies.
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