Cutting Expenses: The New Paradigm for A&E Firms

WAYLAND, MA—Architecture and engineering executives are looking to keep a tight rein on operating expenses through 2010 as their firms struggle to rebound from the recession.

A survey held by The Zweig Letter, professional services firm ZweigWhite's flagship publication, in mid-January found that 74 percent of respondents cited the desire to control expenses more efficiently as their cash management priority for 2010.

Executives generally listed a confluence of factors—falling revenue streams, difficulty in obtaining credit and slow payments—as forcing their discipline in the months ahead. They said that cash management initiatives such improved accounts receivable practices will contribute to attenuate the trail of negative impacts left by the recession.

"Present times call for tightening the belt, eliminating dead wood, refocusing the business and living within the budgets you create," says Kevin Phillips, CEO of FPM Group Ltd., a Ronkonkoma, NY, full-service environmental services and engineering firm. With rare exceptions, most of the 27 survey participants told a similar tale, one of a business environment in 2009 marked by lack of work, difficulties in collections, ceasing credit lines and faltering cash flows that forced staff reductions and other cost reductions.

"We lost our line of credit in October 2009, so have been dependent on positive cash flow since then," says Michael Smith, president and CEO of Earth Systems Inc., a San Luis Obispo, CA-based geotechnical engineering firm. "This forced us to improve our collections process and our prequalification process for new clients. It has also caused us to be more diligent in obtaining change orders prior to providing additional services, rather than trying to get paid after we are over budget."

Respondents said controlling expenses will help maximize cash flows, maximize earnings and strengthen bottom lines in 2010.

Full results of the survey are published in the January 25 issue of The Zweig Letter.

About ZweigWhite

ZweigWhite is one of the nation's leading sources of business management services for architecture, engineering, and environmental consulting firms. The ZweigWhite team consists of experts in strategic business planning, business valuation, ownership transition, human resources management, finance and administration, mergers and acquisitions, market research, marketing, project management and project delivery methods who collectively produce a comprehensive suite of products and services, including newsletters, industry reports, executive training, business conferences, and advisory services covering virtually every aspect of firm management. The firm is headquartered in Wayland, MA, with additional offices in, Chicago and Washington, D.C.

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