Using Construction Software to Get from ‘90% Complete’ to ‘100% Complete’ and Remain on Budget

The business is pretty simple.  There are two principal tasks: 1) get the projects; and, 2) do the projects.  Successful companies have productive business development programs and efficient project execution teams.  Although simple, the business is not always easy and can be subject to a variety of common problems.

One typical problem seems to be completing projects within budgets.  Getting from 90% complete  to 100% complete often consumes more than 10% of the allotted resources.  Reasons (or excuses) vary widely but a troubled project should never come as a surprise to management (although often they do).

To avoid going under water at the end of a project, budgets and variances need to be set and tracked properly.  This requires:

1. Making realistic and detailed initial cash flow/spending/invoicing projections, and

2. Monitoring the project’s financial performance and making proper adjustments

An effective construction accounting software system will tell the Project Manager how much of the budgeted costs have been expended.  However, without a good projection, the Project Manager will not know if the percent expended is correct at any given point during the project.

Variances need to be recognized early so the proper adjustments can be made.  Too late, and the best you can do is damage control.  It is critically important to understand the contract scope of work and, in particular, the client’s expectations to recognize when out-of-scope work should require an amendment or fee adjustment.

A number of construction software programs are available to establish and track project budgets.  These programs are often integrated with the company’s financial accounting package.  One key is to balance program complexity with simplicity.  The project tracking program must be capable of breaking the project down into components for an accurate projection.  For example, shop drawing review during construction happens long before development of record drawings.  However, the programs can’t be overly complex or they won’t get used.  Resource allocation programs used by construction project managers are generally too high powered for engineering applications.  Acceptance and effective use of the programs requires the right balance between program capability and simplicity of use.  A sophisticated spreadsheet approach can work, but without integration into a financial system.

As is often the case, completing the latter stages of a project while staying within budget depends on early planning, variance tracking and making the right course corrections early enough to be effective.

Special thanks to David F. Edson, P.E., Sr. Vice President of Hoyle, Tanner & Associates, Inc. for his assistance in writing this post.

How to Select your Construction Software Champion

You’ve decided your company needs new construction project software and have started looking at options. The question is: Have you designated someone in your company to be the software champion?

Every company, large or small, needs someone to lead the charge for improved efficiencies through better software. This software champion must have certain traits to ensure that the company achieves the expected return on investment.

Here are 5 critical traits that your software champion needs to have.

1. Experience in Software Implementation
Learning the ins and outs of software evaluation and implementation on-the-fly will jeopardize your initiative. That’s why your construction software champion must have prior experience evaluating and implementing software. Keep in mind that the scope of previous experience needed to make a sound decision increases with company size and complexity of operations.

2. Knowledge of Company Operations
Your construction software champion must understand how your company operates. If he/she doesn’t, taking the time to learn the processes and operations well enough to know what questions to ask vendors during demos is crucial.

3. Full Support from Management
Choose a construction software champion you can trust. Committing time and money to a complex evaluation, selection, implementation and training process is not a place for wishy-washy management that doesn’t fully trust their champion to complete the project successfully. When full support is provided to the champion, you won’t be tempted to pull the plug when the going gets rough (which almost always happens at some point in the project).

4. Respect of Peers
Without the respect and confidence of his/her peers, the construction software champion won’t get the cooperation needed to gather information and data to move to a new system. Choose a well-respected individual.

5. An Advocate for Change
Most people don’t like change and implementing new software is about as traumatic as it gets for the company’s accounting, project managers and IT departments. Your construction accounting software champion should have the skills to properly prepare and motivate personnel for change, while helping them feel less threatened by the new system. This requires sensitivity to people’s needs within the new software environment, as well as the ability to make the evaluation, selection and implementation of new software a team effort. Without a sense of participation, many employees will not “buy into” the new software and may even try, in subtle ways, to sabotage the initiative.

Summary

Your construction software champion is critical to a successful software implementation. He/she is the person with the most software experience and, once chosen, deserves full management support while leading to a final decision. There are many potential pitfalls along the way; trust your software champion to know where the mines are buried and how to avoid them every step of the way.

More Construction Software Conversion Tips

This article highlights more elements that are vital to getting your software up and running quickly and effectively. Following these guidelines and the guidelines posted in the previous construction software conversion tips post  before conversion provides the framework for your implementation and gives you control over the entire process.

Converting Your Data

There are two basic options when it comes to data conversion: manual and electronic. The choice you make will depend on the services offered by your vendor and how much data you want to bring into your new software.

Manual Data Conversion
This option entails manually re-entering specific data into your new software. A time and labor-intensive task, using a team approach can help, especially if your entire staff tackles the data entry with gusto. Some companies choose to bring minimal data over to the new software, keeping their old system around for look-up purposes. In this case, manual data conversion is adequate.

One caveat of manual conversion is data entry errors. Long hours and tight deadlines are a breeding ground for mistakes. Make sure you implement quality control procedures to verify the accuracy of entered data.

Electronic Data Conversion
Electronic data conversion involves the use of technology to bring your existing data into the new software. This option is ideal in many cases and for a multitude of reasons. Less labor-intensive than the manual method, the electronic route benefits smaller conversion teams or more aggressive timelines.

If electronic data conversion is available through your software vendor, give this tool serious consideration. Guidance on how to retrieve your data from your old system should be provided, as well as a listing of acceptable import formats.

Data quality, validation and formatting are key issues with electronic data conversion. Make sure you fully understand what your vendor can and cannot do, what your responsibilities in the process are and what procedures are in place for error checking.

Although electronic data conversion can import master files, job cost history, customer information, vendor details and open invoices in a very short period of time, it does require some technical knowledge. If this is a problem, your vendor may offer technical consulting or services to handle your electronic data conversion for you.

Data Cleanup
The “garbage in, garbage out” principal applies to data conversion. The quality of your converted data will only be as good as the source you import from – whether that import is done manually or electronically. Taking steps to clean up your data prior to conversion gives you the opportunity to:
• Standardize your data (capitalization, abbreviations, acronyms)
• Identify missing or duplicate records
• Purge unnecessary data
• Reformat your data if necessary
• Evaluate for corrupted information
• Test your data’s validity when exported

Testing
Testing your converted data is just as crucial as data cleanup. Manually or electronically entering data into a test database on your new system gives you the chance to evaluate critical processes and review vital reports for accuracy.

Think of testing as a practice or dry run for the real thing. Verifying data integrity, running queries and comparing reports in the new construction accounting software with those from your old system are just a few safeguards gained by testing. The end result? Issues can be identified and corrected before going live.

Tip: Consider hiring temporary help during your conversion to assist with data entry or to provide day-to-day business support during this time.

Training

Once your software is installed and your data converted, training is the next phase in your implementation. Do not cut corners on training. Adequate instruction on the functionality and features of your new software will lay the foundation for continuous improvement in your workflow processes.

On-site training will be your best option for hands-on learning using your own data. Start with training on the core modules such as job cost, payroll, accounts payable and accounts receivable. Once these fundamentals are mastered, you can begin to roll out your additional program modules.

Follow-up training can be done on the phone, via e-mail or perhaps another on-site training session. Proactively improving knowledge of your new system will result in a more complete implementation, providing a strategic advantage to enhance your construction management processes. In any case, heed your vendor’s recommended training guidelines for the system you have purchased.

Tip: Consider on-site training “refreshers” once a year, when you upgrade to a new version of your software or when you experience staff turnover.

A Continued Partnership

Long after your go-live date has passed, your relationship with your vendor will continue. Nurture that relationship whenever possible. Communicate enhancement requests to the development team. Offer to be a reference for prospective clients. And if regional or national user conferences are planned, attend them if you can.

Construction accounting is a complex environment. The time and monetary investments made in a new management system are commitments to your long-term profitability. Building a partnership with your vendor will contribute to your ongoing success.

Choosing Between Construction-Specific Accounting Software and Generic Accounting Software

Trading up from a small business bookkeeping package to a full construction accounting software system is going to ask a lot from you in terms of time and expense. The issue comes down to – do you want to go from simply recording job data into your accounting system or do you want to proactively manage jobs, deadlines, and costs using software specifically designed for your industry?

Here are some questions to ponder before you take the leap.

In addition to the capital expenditure required to purchase mid-market construction software, are you committed to providing the resources required to be properly trained on the new software? That means spending the money and having staff who have the right attitude and skills to learn the new system.

Furthermore, are you committed to getting all the requisite job information into the system to give you the output needed to better manage your jobs?

What is driving your initial interest in construction-specific software? Is just because you think you need it ?  Or do you have job experiences that went bad because you did not track your estimated costs to your committed costs? Or have you just been lucky so far ? Does your current job costing system not recognize costs at the time of commitment but only when you receive the bills or when you pay your labor?

How do you handle your Progress Billings? Do you create your Progress Billings separately from your accounting system?  Where do you maintain your schedule of values ? What system do you have in place to ensure that all costs incurred are actually billed?

What type of job purchasing controls are in place to ensure that committed costs do not deviate from your estimated costs? Is your purchase order and subcontract system allowing you to job cost at the time of commitment?

How does your estimating process work? Do you have dedicated construction estimating software or is it all spreadsheet based and very specialized? Do you have a handle on tracking estimating costs and revisions against your job ledger?

Where do you store all of your job file information and documents? Do you see any advantage in maintaining all of this in a construction software package? What is your litigation exposure for incomplete job files?

Has new management been added? One of the key drivers for seeking out new software is new management. A new CFO or Controller may recognize the need for better information systems and may even have been brought in for that purpose.

Is your company growing? Growing companies will stretch and eventually break the boundaries of a small business package in terms of transaction volumes and functionality. A classic example is the need for integrated project management and document control. What needs to be in place for you to manage the performance of your projects?

Finally, and perhaps most important for many, is the surety issue for performance bonds. Surety coverage demands detailed metrics for job costs and job progress. In many cases, this type of detail simply cannot be provided without a robust  industry package.

How much can you justify spending? Some metrics suggest that you can afford 2 – 3% of net revenues but if you are struggling to manage your business due to the lack of realtime information, you may be able to justify more.

How will you find the most appropriate options? If you surf the web you may identify dozens of products that look like they might work for you.  You now have a two step challenge; identifying who to put on your shortlist and then making a final choice between them. This is not a simple task. Often, users actually become more confused as they go through their research instead of less due to all the claims and counterclaims of competing vendors. That means you need someone on staff that has the time to invest and knows how to navigate the muddy waters.

Who is in charge of the search?  Sometimes the person(s) tasked to find the new system may be selected simply because they are the most convenient, least cost choice. A bookkeeper/accountant or office manager usually does not have the breath of experience to handle a major project like software evaluation and selection.

The best choice to lead the project is someone who understands all the operational and accounting aspects of the business, has strong communication skills and who has the full confidence of the decision makers.

Identify Your Construction Software Champion

This construction software article has been removed.  Please see ‘How to Select your Construction Software Champion‘ at:

http://www.constructionsoftwareguides.com/2008/09/how-to-select-your-construction-software-champion/

Construction Software Integration Issues – Contractors who Manufacture

It is not uncommon to find contractors who manufacture the products they install for customers. Some examples include structural steel, custom cabinetry and furniture, and various kinds of low voltage products. Prospective buyers of software with this profile will often have fabrication and assembly job shops that design the products to the customer’s specifications and then have an installation department to install it at the customer’s site. Providing professional design services and providing estimates and quotes are something that contractors and manufacturers often have in common.

Having one piece of construction accounting software that will cover both ends of the business seems like a sensible way to approach a new software solution. After all, both involve job cost, only one is job cost for manufacturing and the other is job cost for construction. Unfortunately, even though both have job cost tracking needs there are many other issues that make it very unlikely that a single software solution can run both aspects of the business successfully.

First, scheduling manufacturing jobs involves a different set of constraints than construction. You are usually dealing with machines and work centers as well as individuals.  Jobs shops often have rush jobs that have to be inserted into the job queue.  In turn, the software has to show how other jobs are affected by the change in priorities. This is not something that is feasible for most construction jobs which involve much longer lead times and many more variables (such as using subcontractors).

Second the cost accounting is different. Manufacturing job costs include direct labor, direct materials, and some kind of overhead allocation.  In manufacturing, work in process costs should be accumulated as the job moves from one work center to another.  These costs are assets on the balance sheet until the job is completed and shipped. Thus, inventory costs change as the job progresses. Furthermore, manufacturers need to know job progress and be able to project a promise date to the customer.

In construction, revenue and costs can be recognized on a percentage complete or completed job basis.  A general contractor often will not record costs until he is invoiced by the subcontractor.  He will be most concerned that costs to date on the job are in line with the total projected costs to complete the job, as well as over or under billings on the job based on total projected estimates and actual costs to date.  This kind of cost breakdown is not practical in a manufacturing operation.

Construction software records jobs, phases, and cost types in a linear fashion as jobs progress.  It is possible to capture costs on a real-time basis as they occur with the right software and processes.

The construction side of the business usually has to deal with project management issues like change orders, RFIs and submittals, which are not relevant for manufacturing.  Construction management software may also record retainage for jobs and do progress billing, which manufacturers don’t do.

Finally, manufacturing quoting will often involve a multilevel bill of materials which is not normally done for a construction job.  Engineer to order manufacturers want to keep track of engineering change orders, revision history, and associated drawings which is not covered by construction software.

In conclusion, although  the term jobs and job costs are used in both manufacturing and construction, the fact remains that the nature of the businesses is different.  We recommend that each aspect of the business use software specific to its specific needs and pass any transactional information between the  two as though they were completely independent businesses. Any intercompany transactions would be eliminated upon consolidation.