Software: Contract Costing

Pegasus CIS is our contract costing solution which provides complete control over all spects of contracts management, from costing and timesheets through to payment applications, VAT invoicing and cash receipt matching. It is fully integrated with the Sales, Purchase and Nominal Ledgers, Cashbook and Payroll in Opera 3 and conforms to the requirements and regulations of HMRC’s Construction Industry Scheme.

Pegasus CIS recognises the complex business requirements of the construction sector, offering an unparalleled level of management control over contracts and subcontractors. It also integrates with Opera II, Sage 50 and Sage 200.

Controlling the costs of a project can be a daunting task. Not only does a company need to track the costs of purchases, there may be sub-contractors who need to be paid under HMRC’s Construction Industry Scheme regulations, as well as raising and chasing payment applications to clients. Has a payment application been certified? How much is the main contractor discount? When is the retention due for payment? How much profit did you make on that job? These are just some of the typical questions asked, but getting the answers quickly can be a problem when running a construction project.

Effective cash management is key to making a profit in a contracting environment. Pegasus CIS has been specifically designed to give instant access to up-to-date information that allows you to manage your contracts. Knowing what is owed and when it is due and who needs to be paid and when, are critical issues. Pegasus CIS addresses these and many others as part of helping you manage your contracts effectively.

Pegasus CIS has been specifically written for small to medium-sized (SME) contractors in the construction and allied industries. It eases the administrative burden of running construction projects, whilst providing all the management tools necessary to ensure that all critical information is readily available to the management team.

The system allows direct costs to be input against a contract, as well as costs derived from labour timesheets, purchases, stock and sub-contractors. A wide range of analysis reports are available, offering views of the current status of contracts, including job performance and detailed profit analysis reports.

Pegasus CIS includes a self-contained Contract Sales Ledger that works in conjunction with the accounts Sales Ledger. The Contract Sales Ledger maintains details of the current Payment Applications, together with all previous Applications; it also contains information on current and cumulative revenue values together with retention, main contractor discount, contras etc.

Contract Sales Ledger

Payment Applications can be printed and certified, payments can be recorded, invoices generated and retentions tracked. When the payment is received it can be entered in batches and allocated to one or more Applications. For Applications, VAT is taken into account at time of payment. It is also possible to create standard invoices, where the VAT is recorded at the date of invoice.

Knowing when payments are due is critical to successful management of cash flow within any organisation. Pegasus CIS comes with comprehensive aged debt reporting features to allow these payments to be monitored.

Subcontractors Ledger

Pegasus CIS includes a Subcontractors Ledger that combines the functionality of a Purchase Ledger with the regulatory requirements of HMRC’s Construction Industry Scheme. With Pegasus CIS you can verify new subcontractors both manually and online. Once verified, the system knows whether the subcontractor is paid gross or net, and if net then to deduct tax at either the lower or upper rate. Pegasus CIS also allows you to produce the CIS 300 monthly report and to submit this manually or online.

Subcontractor Applications for Payment can be entered, detailing both current and cumulative values of net, gross, discounts and retentions for the specified contract. When a Subcontractor Application for Payment is approved, it is possible to produce a Payment Certificate that can be sent to the subcontractor with the payment. There is also a separate posting routine for timesheet only subcontractors.

Labour costs

It is possible to enter employee timesheets directly into Pegasus CIS, post these costs to the contract and post these timesheets into the Payroll so that payslips are produced. The timesheet data-entry routines are fully optimised for fast entry of data, ideal for companies that need to process large data volumes. For companies that prefer to enter timesheets in the Payroll, it is possible to export them out of the Payroll and post them into Pegasus CIS.

Once the Payroll has been run it is possible to post the ‘on-costs’ into Pegasus CIS. This means that additional costs such as National Insurance, Pensions, CITB Levies etc can be posted back into the contracts. It is therefore possible to post labour to a contract as a charge-out rate, or as net or gross costs.

Contract purchasing

Pegasus CIS includes a Purchase Order Processing system that allows committed costs of a contract to be monitored by raising purchase orders against that contract. As deliveries are received and invoiced the purchase order is updated, maintaining an accurate picture of the committed costs. It is possible to arrange for deliveries to be made directly to site, knowing what is still to be delivered; all of which contributes to better site management.

The system is flexible, so that it’s possible to turn off the Goods Received Notes section and simply raise purchase orders and match to the incoming purchase invoices. Purchase invoices that do not need to be directly related to a contract can be allocated directly to a nominal account. The purchasing fully supports multi-currency, allowing you to raise purchase orders in currency and receive currency purchase invoices.

Procurement control

This is used to co-ordinate the purchasing of goods across the entire company, potentially against multiple Jobs and multiple Suppliers. Goods purchased using Procurement Control will be assigned to one or more Purchase Orders depending on the options selected.

This is intended to be used to process large volume orders quickly for delivery to a Job Site Address, Phase Site Address or Warehouse Address. If the Procurement is raised against a Bill of Requirements, this allows buyers to review the entire list of Job requirements and tag items (in full or partially) to be bought. This provides a rapid Job purchasing routine for buyers.

Plant hire

Purchase Orders can be raised for Hire of Plant supplied by external suppliers. Plant can be ordered against Jobs, which posts committed costs to that Job. It is possible to record “On Hire” and “Off Hire” dates so that plant does not remain on site unless required.

Impressive functionality

Pegasus CIS is an application that covers all the requirements of contract costing: handling all the revenue and costs associated with running a contract, controlling materials, purchase orders and purchase invoices, through to the regulatory requirements of HMRC’s Construction Industry Scheme. Fully integrated into the accounts system and payroll, Pegasus CIS truly transforms a company’s ability to profitably manage contracts.

Powerful reporting

Pegasus CIS also integrates with award-winning Pegasus XRL, an intuitive tool that allows Microsoft Excel access to live data at the click of a mouse. It seamlessly integrates your financial information into Microsoft Excel in a couple of simple steps, so you don’t have to copy and paste, re-key or work out formulas.

The MIS features in Pegasus CIS also include export features to Microsoft Excel, providing powerful and adaptable access to the information held within both Pegasus CIS and the accounts system. This means Pegasus CIS delivers fast and accurate information and enhanced analytical power, which assists and simplifies even the most complex decision-making process. Purpose-built functions allow dynamic access to data in the Pegasus CIS system to populate Excel worksheets.

Sophisticated and flexible analysis

The Management Information System (MIS) features of Pegasus CIS easily adapt to the analytical requirements of a business. They make it easy to analyse key information, such as costs or revenues, by Contract, Project, Analysis Codes, Cost Head etc. Budgets and estimated costs can be specified at Cost Head level while the system will maintain the Opening, Actual, WIP, Committed, Other Costs and calculated costs to completion. The financial position is always available and can be analysed and interrogated using the highly configurable and user definable dynamic View screens.

Linking Pegasus CIS to your accounting solution

The following diagram details the main data flow between Pegasus CIS and Opera 3. It is also possible to integrate Pegasus CIS into Opera II, Sage 50 and Sage 200 accounting systems.

Nominal Ledger integration

Pegasus CIS fully integrates with the accounts system; the prime requirement is to eliminate double posting of transactions so that no manual posting is required. All transactions posted to the Nominal Ledger are stored in an audit file for analysis and reporting.

Purchase invoices entered into Pegasus CIS are posted to the contract and to the accounts Purchase Ledger, handling both the Nominal Ledger and VAT allocations. Similarly, sales invoices produced within the Contract Sales Ledger are posted to the account Sales Ledger. Other transactions posted to a contract, including timesheets, will raise an entry in the Nominal Ledger. A transaction posted into Pegasus CIS that has an effect on the P&L, Balance Sheet, VAT account or Cashbook has a Nominal Ledger Journal created, using the default Nominal Ledger account codes which come with the system.

Stock Control

Integration between Stock Control and Contract Purchasing allows stock to be ordered from suppliers against contracts. Stock can be Allocated, Reserved and Issued to a contract, posting relevant costs to the contract. When allocating stock to a contract it is possible to nominate the period in which that allocation is required. This is extremely useful where there is a requirement to plan stock issues to a contract based on when it will be required.

Stock can hold up to three dimensions (such as length, breadth, height) which can be used on the purchase order to calculate and allow ordering in, for example, square metres. The stock system is multi-warehouse and multi-location, so it is possible to look at all stock in a warehouse or at a site.

Monitoring stock levels, knowing where stock is located and knowing what needs to be ordered and when, are all elements managed within the Pegasus CIS Stock Control module.

Site Requisition

This option tracks requests coming in from site and allows available stock to be issued to the Job with an accompanying delivery note. Site Requisitions have an added advantage over standard Stock Issues in that stock can be issued from multiple locations for the one Job. These Site Requisitions can be entered, picked and approved. Once approved, they can be used to post the related stock issues and generate the Delivery Note for passing to the issuing stores. This provides a powerful yet controlled method of allowing stock to be requested from the site office.

For any construction company, it is critical to adhere to the rules of the Construction Industry Scheme; getting it wrong can be costly in terms of deductions and surcharges. This is even more important with the increased scrutiny from HMRC as part of their efforts to recoup the £130m they believe should be collected in extra taxes from the construction industry.

Employment Status

One of the first things that needs to be reviewed is the employment status of subcontractors. Can you tell the difference between one of your subcontractors and one of your employees? It is necessary to decide whether a person works under a contract of service (employees) or under a contract for services (self-employed, independent contractor). There is no statutory definition of these terms, it is the relationship between the parties that matters. You can find useful information on employment status by visiting the HMRC site at www.new-cis.com.

This is important, because under the new CIS system the contractor will be signing each monthly return to say that this has been done. If the information is incorrect this could potentially put the company at risk of penalty for each return submitted.

Monthly Returns

It is critical to get the CIS300 Monthly Return in on time because you will face penalties for a late return. Contractors who miss the deadline will be charged an automatic £100 penalty. If the return shows more than 50 subcontractors paid in a month, there will be an additional £100 penalty for every 50 subcontractors. These penalties will be changed for each month that the return is late. Even a late nil return will incur a £100 penalty.

In addition to the penalty for a late return, there will also be a £3000 penalty for an incomplete or incorrect monthly return where the omission or error was caused by negligence or intent. This can include subcontractors or payments being omitted from the return, or incorrectly entered. There is also a requirement to provide net paid subcontractors with a statement of the deduction for each payment or on a monthly basis. Failure to produce these documents will also incur a £3000 penalty.

If a contractor receives gross payment for any work carried out as a subcontractor, then failure to adhere to the new CIS rules can put this gross status at risk. This compliance test is similar to the current system, but the qualifying period is 12 months to the date of application for gross payment, not 36 months as at present. There are no renewals of this application, but HMRC can cancel a company’s registration for gross payment with only 90 days notice. The reason for cancellation might include making more than two late monthly submissions or two late payments of PAYE/NICs/CIS deductions: a costly oversight!

What should you do now?

Some things that you should look at:

• Decide who is going to be responsible for ensuring the employment status of your subcontractors is correct and that there is no false self employment.
• Decide who will be responsible for signing the declaration section of the CIS300 Monthly Return.
• Decide who is going to be responsible for managing the transition from the old to the new CIS system.
• Evaluate software that can help with the management of your subcontractors and that adheres to the new CIS rules.

It is fair to say that a lot of these requirements form part of both the current and the new CIS system. The main difference is that you will now have to handle two rates of tax that can be deducted from your net paid subcontractors. You must collate the data together and ensure that the new monthly return is submitted on time, plus you must sign a declaration stating that you have verified the employment status of all subcontractors paid that month and you need to produce payment certificates to each of those subcontractors. Remember, that taking on any new subcontractors will require you to verify their tax status with HMRC, if they cannot be verified then HMRC will issue a unique Verification Number that must be included on the monthly returns.

How can Pegasus CIS help?

Pegasus CIS ion comes with a Subcontractors module that allows you to setup subcontractors details and assign their CIS status. When a Payment Application or subcontractor timesheet is recorded, the system will automatically calculate their tax liability based on this CIS status. Should you decide to certify and pay a subcontractor, Pegasus CIS will produce the payment certificate together with the cheque or BACS output. When it comes to producing the CIS300 Monthly Return, Pegasus CIS will accurately give you all the details of the payments and deductions made to subcontractors in that month. This data can be submitted electronically to HMRC or you can take the figures and enter the information online or onto the paper return. You need never be late with this return when using Pegasus CIS!

Pegasus CIS Subcontractors focuses on controlling all aspects of subcontractor administration, enabling any company that operates under the HM Revenue & Customs Construction Industry Scheme to efficiently manage payments, tax and retention while covering all of the legislative requirements.

Pegasus CIS Subcontractors is an ideal solution for contractors who use subcontract labour on their Jobs and need to efficiently handle HM Revenue & Customs (HMRC) legislation that governs the use of these subcontractors. Pegasus CIS Subcontractors controls all aspects of subcontractor administration from subcontractor verification, invoice / timesheet / application entry and payment, through to generation of the figures required on monthly returns to HMRC & submission of these via the online services.

Using Pegasus CIS Subcontractors not only offers control over payments and handles the tax requirements of the Construction Industry Scheme, but also calculates and submits these on the monthly returns to HMRC, ensuring returns are accurate and made on time. The time saving, accuracy and online submissions are key to any company that operates under the HMRC Construction Industry Scheme.

Pegasus CIS Subcontractors not only manages all aspects of using subcontractors, but also integrates into the Contract Costing system to provide powerful and comprehensive reporting of these subcontractor costs against jobs and customers.

Pegasus CIS Subcontractors fully integrates with Opera 3, Opera II, Sage 50 and Sage 200 and links with the Nominal Ledger, Cashbook and Customers.

What’s the difference between Pegasus CIS Subcontractors and the full Pegasus CIS Enterprise solution?
While Pegasus CIS Subcontractors manages the subcontractor element of contracts, Pegasus CIS Enterprise is a fully integrated Contract Costing system that manages all of the financial aspects of running a contract. In addition to the features offered by Pegasus CIS Subcontractors, Pegasus CIS Enterprise also allows the entry of costs from suppliers, direct labour, stock and other areas such as petty cash, together with sales revenue from both Invoices and Applications/ Certifications.

Subcontractors

The functionality in the Pegasus CIS Subcontractors application is identical in every way to the application included in the full Pegasus CIS Enterprise solution. It provides comprehensive facilities to automate the administration of subcontractor orders, invoices, timesheets, applications, certification and payments. Management information can be produced that details a complete analysis of monies owed, committed costs, retentions and discount taken, by Subcontractor and Job.

If using the Subcontractor Applications process then it is possible to record the current Application values, while having the ability to look at the cumulative Applications received on a per Job basis. In real life, contractors will typically use their main subcontractors on more than one job, each with different labour and material splits. For this reason, the Pegasus CIS Subcontractors solution also provides a comprehensive Contract Costing system.

Jobs
The inclusion of the Job Costing system in the Pegasus CIS Subcontractors solution acts as a contract management system for those contractors who subcontract most of their work.

Administration
The Administration system provides all the processes and commands required to operate Pegasus CIS Subcontractors as either a stand alone or as a fully integrated Subcontractors system.

Powerful Reporting

The intuitive Pegasus XRL, our eXcel Reporting Layer, allows Microsoft Excel access to live data at the click of a mouse, so you don’t have to copy and paste, re-key or work out formulas. For years, accounting system users have had to struggle with complicated and inflexible reporting tools that are supposed to make things easier. In fact, they make extracting data into Excel a real trial. Pegasus XRL brings such struggles to an end. Pegasus XRL seamlessly integrates your financial information into Microsoft Excel in a couple of simple steps.