Putting Data to Work with Construction Software
Software may be more sophisticated and the Internet has revolutionized communication. But the needs of the construction industry are about the same as they have been for decades.
“The things that people want has really changed a whole lot in many cases. People are more and more anxious to get information while they are in the field and get it into the accounting system,” says Walter Mathieson, owner of Mathieson Consulting of Glendale, Ariz.
And while construction ranges through some diverse sectors—homebuilding, heavy/highway, general construction, mechanical/HVAC — all need information to flow quickly and accurately between the job site and the company’s accounting software.
And one arena emerges as crucial to all, job costing, with the specific issue of recognizing the information from changes, at the top of the minds of construction company executives. How well this process works can make or break the profitability of a job.
“There is a large percent of the market that wants to get control of change orders,” says Jim Bowman, president of Signature Business Solutions of Woodbridge, N.J. Job site workers often forget to send change orders to the accounting department or forget to bill the changes. Bowman, whose organization sells Dynamics SL continues that, “They are not watching their margins percentage. They are not alerted to their increasing costs.”
Areas in which technology can make a big impact include electronic reporting of data and document management. In fact, the latter can provide significant improvements in the approval of documents, along with cost-cutting since without having these in electronic form, contractors spend a lot of time and money using cars and trucks to carry them back and forth from the field.
And despite the discussion of mobile features, the real demand is for document management, says Robert Sandelands, managing director of Accordant, a Whippany, N.J.-based firm that sells Sage Software’s MasterBuilder and Timberline construction packages.
“Companies are buying because of operational efficiencies, not just to update accounting,” he says. In this case, Accordant offers Timberline for integrated document management, which can be used to send invoices to and from job sites and offices.
“They can be proofed for reviewing in the field,” he says. And while most scanning occurs in offices, there is some scanning going on in the field. “We have a couple clients who are scanning and are using Citrix and Windows Terminal Server.”
Just as organizations in the construction business range from very small to large, the applications that can be utilized in their businesses range from basic packages to very sophisticated.
Many small firms use QuickBooks and Peachtree for their operations. Or more commonly, they use Microsoft’s universal software tool, Excel.
“For the less sophisticated staffs, we recommend Peachtree and QuickBooks,” notes Sandelands. “But if you have too many spreadsheets, you should be upgrading.”
In fact, owners will often trust the numbers kept by project managers more than those kept by accounting, says Sandelands, who sees companies with multiple spreadsheets as prime candidates for MasterBuilder, Sage’s off-the-shelf package.
The Low-end Gang
Intuit, which has several industry-specific editions of QuickBooks, offers QuickBooks Premier Industry Edition, Contractor, which starts at $379 for a single user, and QuickBooks Enterprise Solutions: Contractor, starting at $3,000.
The Premier version is aimed at general contractors “as well as at the smaller jobs guys such as plumbers and smaller home builders,” says Shane Hamby, QuickBooks senior product manager.
Important features include the ability to create estimates and the inclusion of change order documents.
One of the most critical elements involves the job costing center, although what that means to some business is not clear, says Hamby.
“They want to do job costing, but they are not too sure what it means and where they find it in QuickBooks,” notes Hamby. The software can also provide reports on expenses that have not been assigned to any job.
The Contractor edition, which handles up to five users, does not directly handle time entry and tracking, which is accommodated by the online QuickBooks Time Tracker. Employees can enter data into timesheets and that data can be downloaded into QuickBooks. The tiered pricing starts at $10 per month and ranges up to $200 a month for 101 to 200 users.
Nine KPIs for Construction Firms
With Microsoft providing support for construction firms via its Dynamics SL package, it is also offering information on performance for the wide range of businesses that operate in the construction space.
The following key performance indicators and discussion were prepared by Sabine Hoover and Nick Schubert of FMI’s Denver Research Group and is available at www.microsoft.com/dynamics/industry/constructionanderp.mspx
1. Liquidity: Determine how much cash work in progress is generating or consuming, by monitoring key current asset and liability balance sheet accounts.
2. Cash flow: Understand whether individual projects are generating or consuming cash can better identify execution problems on projects. Consistent attention to cash flow also helps to promote timely billing and collections.
3. Labor productivity: Managers can separate jobs within a project to identify discrepancies between actual labor expenditures and estimates. This helps managers and field supervisors forecast cost-to-complete, establish daily performance goals, address current problems, and improve future estimating and bidding accuracy.
4. Schedule variance: Contractors must be able to identify and monitor schedule variance to deliver projects on a timeline that satisfies owners’ demands. Effectively managing schedule variance also helps construction firms maintain a competitive advantage against other firms that often fall behind schedule.
5. Margin variance: Compare gross margins to business plan objectives by monitoring overall margin variance. Investigate gross margins on particular projects, relative to the project estimate, to determine whether the project is achieving expected profitability. This lets all parties make corrective changes necessary to keep individual project margin variance to a minimum and the overall gross margin stable.
6. Unapproved change orders: Reduce financial exposure by identifying and diligently pursuing unapproved change orders.
7. Committed cost: Firms must track uncommitted costs to increase the proportion of committed costs where possible and, where necessary, to incorporate factors such as price escalation and contingent cost terms into their committed costs in order to limit financial exposure.
8. Backlog: Properly tracking backlogs and the expected gross margins on backlogged work, allows construction firms to avoid the problems associated with insufficient work and profit fade.
9. Customer satisfaction/scorecard: Track a firm’s ability to meet owner expectations by compiling and analyzing qualitative feedback. Examining past projects identifies potential deficiencies.
The QBES Contractor edition, designed for five to 20 users, adds the ability to adjust inventory, delete list items, and change sales tax rates in multi-user mode. The system also provides business performance reporting via profitability, sales and profit and loss dashboards.
“Most of the problems in this space come down to communication,” says Hamby. And one of those areas frequently subject to breakdowns is the capturing of change order information.
While Intuit utilizes a Web-based time tracking system, Xora, based in Mountain View, Calif., captures time through cell phones.
Systems equipped with Xora give supervisors the ability “to see on the map where all phones are and to generate reports that show what workers did throughout the day,” says marketing director Michael Berger. Installed at the construction company's office, Xora relies on GPS features of cell phones to pinpoint worker locations.
With Xora, “you don’t need a laptop. You don’t need an expensive PDS. You can use ruggedized handsets,” says Berger. He notes the system is priced at $11.99 per phone per month. There is also a $24.99 one-time cost. Xora interfaces with packages such as MasterBuilder, Timberline and QuickBooks and will send payroll and job information directly to ADP.
Changing Information
Change orders are a critical part of the construction process as they report the changes to plans authorized by customers. Failure to capture this data can kill a job’s profitability.
“Ever since Moby Dick was a minnow, the collection of data and the tracking of work in the field has been a problem,” says Brad Mathews, vice president of marketing for Dexter+Chaney, a Seattle-based company whose Spectrum Construction Software has 30 modules.
These include modules for project management, construction accounting, service equipment management, human resources, document imaging, remote connectivity and data sharing.
Many new features are incorporated in Spectrum Mobile, which can be used to capture signatures — very important in dealing with disputes about work authorized by change orders.
Spectrum Mobile runs on handheld devices, laptops or PCs, and supports scanning employee badges in real time.
The system “has all the codes and numbers to record employee codes and job numbers. What you are recording does not need any interpretation,” says Mathews. The data collected is transmitted to the person doing payroll while all the costly manual steps have been eliminated.
Because contractors run on tight margins — the reported industry average for net profit is 2 percent of revenue — a 2 percent savings in labor costs can have a big impact on the bottom line, Mathews continues. He notes that one customer that employs about 400 people will save $170,000 a year by eliminating tasks such as typing in time cards and detecting and correcting errors.
“The things that people want has really changed a whole lot in many cases. People are more and more anxious to get information while they are in the field and get it into the accounting system,” says Walter Mathieson, owner of Mathieson Consulting of Glendale, Ariz.
And while construction ranges through some diverse sectors—homebuilding, heavy/highway, general construction, mechanical/HVAC — all need information to flow quickly and accurately between the job site and the company’s accounting software.
And one arena emerges as crucial to all, job costing, with the specific issue of recognizing the information from changes, at the top of the minds of construction company executives. How well this process works can make or break the profitability of a job.
“There is a large percent of the market that wants to get control of change orders,” says Jim Bowman, president of Signature Business Solutions of Woodbridge, N.J. Job site workers often forget to send change orders to the accounting department or forget to bill the changes. Bowman, whose organization sells Dynamics SL continues that, “They are not watching their margins percentage. They are not alerted to their increasing costs.”
Areas in which technology can make a big impact include electronic reporting of data and document management. In fact, the latter can provide significant improvements in the approval of documents, along with cost-cutting since without having these in electronic form, contractors spend a lot of time and money using cars and trucks to carry them back and forth from the field.
And despite the discussion of mobile features, the real demand is for document management, says Robert Sandelands, managing director of Accordant, a Whippany, N.J.-based firm that sells Sage Software’s MasterBuilder and Timberline construction packages.
“Companies are buying because of operational efficiencies, not just to update accounting,” he says. In this case, Accordant offers Timberline for integrated document management, which can be used to send invoices to and from job sites and offices.
“They can be proofed for reviewing in the field,” he says. And while most scanning occurs in offices, there is some scanning going on in the field. “We have a couple clients who are scanning and are using Citrix and Windows Terminal Server.”
Just as organizations in the construction business range from very small to large, the applications that can be utilized in their businesses range from basic packages to very sophisticated.
Many small firms use QuickBooks and Peachtree for their operations. Or more commonly, they use Microsoft’s universal software tool, Excel.
“For the less sophisticated staffs, we recommend Peachtree and QuickBooks,” notes Sandelands. “But if you have too many spreadsheets, you should be upgrading.”
In fact, owners will often trust the numbers kept by project managers more than those kept by accounting, says Sandelands, who sees companies with multiple spreadsheets as prime candidates for MasterBuilder, Sage’s off-the-shelf package.
The Low-end Gang
Intuit, which has several industry-specific editions of QuickBooks, offers QuickBooks Premier Industry Edition, Contractor, which starts at $379 for a single user, and QuickBooks Enterprise Solutions: Contractor, starting at $3,000.
The Premier version is aimed at general contractors “as well as at the smaller jobs guys such as plumbers and smaller home builders,” says Shane Hamby, QuickBooks senior product manager.
Important features include the ability to create estimates and the inclusion of change order documents.
One of the most critical elements involves the job costing center, although what that means to some business is not clear, says Hamby.
“They want to do job costing, but they are not too sure what it means and where they find it in QuickBooks,” notes Hamby. The software can also provide reports on expenses that have not been assigned to any job.
The Contractor edition, which handles up to five users, does not directly handle time entry and tracking, which is accommodated by the online QuickBooks Time Tracker. Employees can enter data into timesheets and that data can be downloaded into QuickBooks. The tiered pricing starts at $10 per month and ranges up to $200 a month for 101 to 200 users.
Nine KPIs for Construction Firms
With Microsoft providing support for construction firms via its Dynamics SL package, it is also offering information on performance for the wide range of businesses that operate in the construction space.
The following key performance indicators and discussion were prepared by Sabine Hoover and Nick Schubert of FMI’s Denver Research Group and is available at www.microsoft.com/dynamics/industry/constructionanderp.mspx
1. Liquidity: Determine how much cash work in progress is generating or consuming, by monitoring key current asset and liability balance sheet accounts.
2. Cash flow: Understand whether individual projects are generating or consuming cash can better identify execution problems on projects. Consistent attention to cash flow also helps to promote timely billing and collections.
3. Labor productivity: Managers can separate jobs within a project to identify discrepancies between actual labor expenditures and estimates. This helps managers and field supervisors forecast cost-to-complete, establish daily performance goals, address current problems, and improve future estimating and bidding accuracy.
4. Schedule variance: Contractors must be able to identify and monitor schedule variance to deliver projects on a timeline that satisfies owners’ demands. Effectively managing schedule variance also helps construction firms maintain a competitive advantage against other firms that often fall behind schedule.
5. Margin variance: Compare gross margins to business plan objectives by monitoring overall margin variance. Investigate gross margins on particular projects, relative to the project estimate, to determine whether the project is achieving expected profitability. This lets all parties make corrective changes necessary to keep individual project margin variance to a minimum and the overall gross margin stable.
6. Unapproved change orders: Reduce financial exposure by identifying and diligently pursuing unapproved change orders.
7. Committed cost: Firms must track uncommitted costs to increase the proportion of committed costs where possible and, where necessary, to incorporate factors such as price escalation and contingent cost terms into their committed costs in order to limit financial exposure.
8. Backlog: Properly tracking backlogs and the expected gross margins on backlogged work, allows construction firms to avoid the problems associated with insufficient work and profit fade.
9. Customer satisfaction/scorecard: Track a firm’s ability to meet owner expectations by compiling and analyzing qualitative feedback. Examining past projects identifies potential deficiencies.
The QBES Contractor edition, designed for five to 20 users, adds the ability to adjust inventory, delete list items, and change sales tax rates in multi-user mode. The system also provides business performance reporting via profitability, sales and profit and loss dashboards.
“Most of the problems in this space come down to communication,” says Hamby. And one of those areas frequently subject to breakdowns is the capturing of change order information.
While Intuit utilizes a Web-based time tracking system, Xora, based in Mountain View, Calif., captures time through cell phones.
Systems equipped with Xora give supervisors the ability “to see on the map where all phones are and to generate reports that show what workers did throughout the day,” says marketing director Michael Berger. Installed at the construction company's office, Xora relies on GPS features of cell phones to pinpoint worker locations.
With Xora, “you don’t need a laptop. You don’t need an expensive PDS. You can use ruggedized handsets,” says Berger. He notes the system is priced at $11.99 per phone per month. There is also a $24.99 one-time cost. Xora interfaces with packages such as MasterBuilder, Timberline and QuickBooks and will send payroll and job information directly to ADP.
Changing Information
Change orders are a critical part of the construction process as they report the changes to plans authorized by customers. Failure to capture this data can kill a job’s profitability.
“Ever since Moby Dick was a minnow, the collection of data and the tracking of work in the field has been a problem,” says Brad Mathews, vice president of marketing for Dexter+Chaney, a Seattle-based company whose Spectrum Construction Software has 30 modules.
These include modules for project management, construction accounting, service equipment management, human resources, document imaging, remote connectivity and data sharing.
Many new features are incorporated in Spectrum Mobile, which can be used to capture signatures — very important in dealing with disputes about work authorized by change orders.
Spectrum Mobile runs on handheld devices, laptops or PCs, and supports scanning employee badges in real time.
The system “has all the codes and numbers to record employee codes and job numbers. What you are recording does not need any interpretation,” says Mathews. The data collected is transmitted to the person doing payroll while all the costly manual steps have been eliminated.
Because contractors run on tight margins — the reported industry average for net profit is 2 percent of revenue — a 2 percent savings in labor costs can have a big impact on the bottom line, Mathews continues. He notes that one customer that employs about 400 people will save $170,000 a year by eliminating tasks such as typing in time cards and detecting and correcting errors.
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