Updated on May 8, 2023

Costing improves profitability and is therefore of paramount importance for any business.

Companies are constantly evolving and will need to arm themselves better than ever to stay the course and consolidate their operations. Managers must have all the information they need to make informed decisions and ensure the company’s financial performance.

What is costing?

By definition, costing is the sum of all expenses needed for producing a good and finalizing a service. There are several advantages to knowing and controlling the cost of your services, such as:

• Determining the sales price of services;
• Making informed decisions about contracts (because in negotiations with the client, the manager is better able to understand the available margins);
• Recognizing the difference between profitable and non-profitable services.

In many companies, costing is a neglected management tool, either because of lack of time or lack of knowledge.

As a result, many managers navigate rough waters and cannot rely on costing in the many strategic decisions they must make.

Here are some points indicating that you would need to update or review your costs:

• Your costs were last updated more than a year ago;
• Significant changes were made within your business;
• Your range of services has increased and you don’t know how to price your new services;
• You’re not sure you included all of the relevant costs in your costing;
• Your profit margin does not reflect the estimated profit margin at the time of a tender.

Calculating costs

To evaluate the cost of a service, you have to understand that it is composed of several elements:

• Salaries;
• Subcontracting;
• Operating costs;
• Sales expenses;
• Administration expenses.

When determining your costs, one of the most common pitfalls is to evaluate a resource’s hourly rate based on hours worked rather than taking into account productive hours (vacation and other days off, breaks and training).

For example, if we take an employee with a $25 hourly rate including benefits, this is equivalent to an annual salary with benefits of $52,000 per year. This annual expense, based on the number of productive hours per year ($52,000/1,660 hours in our example), gives us a productive hourly rate of $31.33. It is this rate that should be taken into account when assessing a service contract and not the $25 hourly rate.

When assessing your services, you will be confronted with several traps . One of the most important ones to avoid is postponing the project or waiting for 100% accurate information to determine the cost price. Remember that, like your company, costing is a constantly evolving process.

Contact our experts to assist you in these challenging times.

Updated on May 8, 2023

Have plans to grow your business? Ready to invest? Here’s how to maximize your chances of obtaining financing.

After reviewing your business strategy, you’ve put together a plan that will enable you to achieve your growth objectives. For some it’s acquiring another company, while for others it could be constructing a new building, making Industry 4.0 upgrades or turbocharging their operational capacities. No matter what you’ve got planned, you’ll need a loan from a financial partner.

The application process may seem simple, but there are a few things you need to do first to make sure your application is properly supported and approved.

• Presenting your project
• Assessing all costs
• Getting to grips with numbers
• Evaluating your garantees

How to present your project to your financial partner

Discuss your project with your lender

The first thing you need to do is schedule a call with your financial representative. This simple step can help you gain helpful information on how to effectively prepare the rest of the process. The purpose of the conversation is to discuss the general outline of your growth plan and ask your lender what information they’ll want to see when analyzing your loan application.

Know what information to include in your request

Your lender should give you a list of information you need to provide. The level of detail will depend on your relationship with the lending institution. If you’re a long-term client and interact with your lender several times a year, they will mostly ask about the specifics of your plan. However, if you rarely contact them or you’re a new client, they’ll probably ask for information about your business and its history.

Set up a timeline

Your call with your lender is also a good opportunity to establish a timeline. Once you’ve submitted all the required information, find out how long it will take to complete the remaining steps, which include the financing proposal, final approval and disbursement of the funds.

If you have a well-structured plan and effectively respond to your financial partners’ queries, you’ll gain their trust and cut down processing times.

Small, medium or big project: assessing all costs

Consider all costs

The scope of your project is likely to influence the type of financial arrangement you obtain, and sometimes even the number of lenders involved. Therefore, it’s important to detail all the costs associated with your initiative, including indirect expenses. For example, if you plan to purchase new equipment, think beyond the purchase price. There’s also the cost of transporting and installing the new equipment, disposing of the old equipment and training staff on how to use it.

Plan for contingencies

To prepare for unforeseen events and ensure you don’t run out of funds part-way through the project, you should include a contingency budget. Generally, setting aside 10% of your project costs should give you enough leeway in the event you have to change course.

Getting to grips with numbers

Most of the information requested by your lenders will be financial in nature. That’s why it’s important to have a good grasp of your business numbers. There are two critical aspects that lenders tend to focus on.

“Be confident.” That’s the message of hope that Lucien Bouchard recently shared with business people attending an online meeting hosted by our firm.

Acknowledging that these are very difficult and uncertain times, the former Quebec Premier said he believes that entrepreneurs and the general public have every reason to be optimistic.

“The potential is there for a truly extraordinary economic reopening. If we create the right conditions, we’ll enjoy a full recovery,” said Mr. Bouchard during an exclusive conversation with Emilio B. Imbriglio, President and CEO of our Firm.

Without going so far as making predictions, Mr. Bouchard remains convinced that “a surge of enthusiasm” will occur once people are able to start socializing, going to work in-person, travelling, enjoying cultural activities and dining in restaurants. “This individual enthusiasm will be matched with an economic boom,” said Mr. Bouchard, who is a partner at Davies Ward Phillips & Vineberg, a law firm.

He offered a clear message to entrepreneurs and young people: be confident, be prepared and be ready to adapt. Emilio B. Imbriglio agreed that these qualities are key for overcoming the challenges that inevitably occur at some point in a business’ lifecycle.

Quebec and Canada are wealthy and full of promise, stressed Mr. Bouchard. “Things are looking very good for the future of our younger generations,” he said.

Even though both the provincial and federal economies are in a good position to bounce back, he acknowledges that the public finance situation is currently raising a lot of questions. The situation has changed due to the pandemic and achieving a balanced budget is no longer the top priority.

“As it stands, governments can’t predict when we’ll be able to return to balanced budgets. This means public finances will need to be managed differently. It is sure to be a delicate matter,” explained Mr. Bouchard.

“However, we should be confident knowing that, since 2008, the international financial community has learned to work together.”

At the same time, he’s urging governments not to jeopardize the economic recovery by increasing the tax burden on businesses and individuals.

A lesson in leadership

According to Mr. Bouchard, the COVID-19 pandemic has given us the opportunity to learn a lot about ourselves. It has also reminded us how important interpersonal relationships are. That’s why nurturing connections with family, friends and colleagues is essential. “Having good team chemistry is fundamental.”

The pandemic has also highlighted the importance of strong leadership. Mr. Bouchard praised Premier François Legault for confidently handling the crisis, which he describes as very different from the ice storm that occurred in January 1998, when he headed the Quebec government.

In his view, François Legault is “the man of the hour,” who was ready and able to lead through the current crisis thanks to his experience in the private sector and in politics. The former Premier believes that having a solid background, a strong work ethic and a practical approach are what made Mr. Legault an exemplary leader.

“The most important qualities for a business leader to have are to be very well prepared, to have outstanding communication and listening skills, and to be able to keep a cool head,” said Emilio B. Imbriglio, adding that using a strategic approach to overcoming difficulties is also important.

The convergence of several critical issues

The pandemic accelerated a number of trends that were already emerging within the business world, such as the transition to e-commerce.

“We’re going to see an increased reliance on digital technologies; it’s inevitable. But does that mean traditional sales will disappear completely? Not necessarily. We mustn’t overlook the importance of human interactions,” said Mr. Bouchard, who believes that consumers will always want to be advised in person and to view certain items with their own eyes before making a purchase.

During the webinar, Mr. Bouchard also discussed several other important issues, including Canada-U.S. relations. “We need to restore a friendly relationship [with the United States], and let that translate into economic benefits,” he said, recalling the good working relations that existed between Prime Minister Brian Mulroney and the Republican presidents in the 1980s.

Mr. Bouchard also confirmed that the environment is another critical issue. “We’ll need to make sizeable investments if we want to address environmental concerns.” However, there’s no easy way to meaningfully tackle climate change while pursuing economic growth at the same time. “We need to rely more heavily on science, because that’s the only way to develop truly renewable and economic energy.”

Diversity is another key issue. “We need immigrants. We need to accept interculturalism and manage it effectively,” he said.

With regard to women in decision-making positions, he sees progress being made and a real desire to give more opportunities to female leaders. That said, he’s not convinced that implementing coercive measures (such as quotas) is the most effective way to increase female representation. He believes that “the main driver behind gender balance will be the achievement of a critical mass of qualified women, a phenomenon that is undeniably occurring and extremely positive.”