While the agent may have wide authority on site, the large sums of money he commits his firm to spending must come under the control of the contractor’s head office. For supply of materials in regular use the system described in the previous section is used, that is, head office places the contracts for supply as agreed with the agent and pays the suppliers’ invoices for deliveries as checked by the agent. In this manner the agent does not have to handle large payments himself.
But the agent will also need to open a local bank account, into which head office transfer funds for a variety of cash payments – for fuel for vehicles, a variety of consumables and for the wages of labour taken on by the agent.
These payments have to be handled by the site accountant and his pay clerk on site. The paysheets are made up by the pay clerk on the basis of time sheets sent in to him by the men on site, the section foremen or gangers certifying the timesheets of men working under them. From time to time an accountant from head office may visit the site to audit the local paysheets and cash disbursements by the agent.
On overseas projects the large sums of money which have to be expended locally mean that a fully staffed accountant’s office, under the charge of an experienced site accountant, will need to be set up.
The monthly returns of local expenditure sent by the agent to head office are then added to all the payments and charges met by head office and debited to the job. These will include not only invoices paid for materials delivered to site, but also all other relevant expenditure, such as salaries of those working on the project, cost of any equipment purchased for it, hire charges for plant, insurances, etc. and such head office oncosts that the contractor currently applies to projects in hand. Head office should keep the agent informed of the figure of total expenditure to date; but this figure inevitably lags behind the actual expenditure commitment to date because of the time delay between ordering materials and entering payment for the same in the books. Hence a prudent agent may keep such an assessment going himself because of the importance of controlling the overall expenditure on the job. His system may not be exact, but his better knowledge of what expenditure is currently committed may give him a useful guide as to how the job is progressing financially.
Most accounting in a contractor’s head office is now done by computer using codes for different sites and classes of expenditure. Such a system can be advantageous if it shows costs for different elements of a job or types of work, which can help in building up a record of unit costs which can act as a guide for future bids, or may be useful in formulating any claims. In practice, however, such systems seldom have sufficient definition for this purpose, but are predominantly used to show the current profit or loss on a job.