Is Your Construction Software a Profit Center or an Overhead Expense?

In the competitive world of construction, profit margins are tight. Jobs, service calls, employee productivity, and even your business tools must contribute to company profitability. This article highlights several critical capabilities that will help you determine whether your current construction software is a profit center or just another overhead expense.

Job Cost
The core of a profitable contracting business is job costing. The more accurate your cost in-formation is, the better you will be at managing your jobs for profitability.

Capabilities checklist:

* Job cost projections are easy to produce on a regular basis
* Provides early warning system for jobs that are off track
* Real-time access to actual costs is readily available

Project Management
Project management is all about detail tracking. Let a few RFIs or change requests slip through the cracks and you might find your crew working for free. Automated construction project management software will ensure that changes to the original contract are documented, approved, and invoiced for profit.

Capabilities checklist:

* Tracks job details in a single, easy to access database
* Change orders are tracked from initial RFI or directive to invoicing
* Forms provide turnkey production of submittals, RFIs, change requests, and more

Service Management
For contractors that perform service work, technology is readily available to support technician performance, enhance customer service, and automate billings. Taking advantage of this technology can produce a significant ROI while enhancing your company’s reputation as a cutting edge service provider.

Capabilities checklist:

* Dispatching allows for greater technician efficiency
* Streamlined billing for fast payment turn-around
* Advanced technology such as GPS tracking of service trucks or mobile communication with technicians that allows for real-time data exchange

Reporting
How well does your software deliver the information you need to make critical and timely business decisions? Catching problems such as cost over-runs early is imperative to maintain profit margins. Reporting should provide easy access to real-time information and offer the flexibility to customize delivery to meet your unique business objectives.

Capabilities checklist:

* Comprehensive standard reports and inquiries
* Custom reporting options to meet specific needs
* Owner/management overviews available for at-a-glance job assessment, with drill down to detail

Integration
Solid communication between your accounting, operations, and service staff is the glue that binds construction to profitability. Integrating your core technologies makes this communication possible.

Capabilities checklist:

* Single database equals single data entry, flexible reporting
* Allows for enterprise wide collaboration between accounting, service and operations by putting everyone on the same financial page
* Lowers administrative overhead

Profit or Expense: You Decide
Take time to evaluate how well your software streamlines work flow, automates processes, and provides real-time job information for informed decision making. If your program doesn’t provide you with many of the capabilities listed here, it may be time to consider whether your construction management software is a profit center or overhead expense.

5 Hidden Construction Software Costs

The cost for new construction software is not as obvious as you might think. While the price for the software itself is usually stated up front, there are a number of “hidden” costs associated with buying new software that aren’t always talked about. These costs, which can be hard dollar expenses or less tangible economic expenditures, should be factored in to arrive at your true cost for new software

1. Training and Implementation Costs
Construction software buyers are often naive about training and implementation costs, which are usually a 1:1 ratio to the software cost. (This means that a $10K system will probably cost about $20K by the time training and implementation expenses are added in.) The more complex the software system is, however, the higher the ratio will be. The ratio for these costs can go as high as 1:5 for systems on the highest end of the complexity scale. One of the biggest mistakes made, especially by smaller companies, is to try and save money by skimping on training and implementation assistance. Not planning for this cost almost always comes back to haunt you.

2. Staff Upgrades
Although existing employees are usually expected to operate new construction software, sometimes it’s necessary to hire people with greater skills to run the system. If this happens to you, expect increased payroll expenses. As part of the software evaluation process, you must evaluate your staff capabilities carefully if you wish to avoid this “hidden” cost. Who seems confident and ready to take on a new system and who is frightened or holding back? The competence of your staff and their willingness to learn the new system are every bit as important as the software itself.

3. Ongoing Maintenance Costs
Once you buy construction software, you will most likely incur an annual fee by your vendor for maintenance. Annual software maintenance fees usually cost between 18 and 24 percent of the software price. But there are other, “hidden” maintenance fees to be aware of such as paying to having custom reports written. Put money in your budget for these items so you’re not taken off guard when the bill comes in!

4. The Cost of Buying Wrong/Less-Than-Optimum Software
Although buying the wrong software, or a system that is less-than-optimum for your needs, is not a true out-of-pocket, measurable cost related to construction software, it is a real expense. Suppose, for example, that certain types of ongoing transactions are very cumbersome to perform in your new system and take an extra hour per week to do. This drags down staff efficiency and adds to their frustration. Another example would be running a project management system that’s not integrated with accounting. This will require duplicate data entry to keep both applications synchronized. Consider these “hidden” costs and avoid them if possible.

5. Spreadsheets
Another “hidden” cost of construction software relates to employees using special spreadsheets to manage data because they don’t like the way the new system performs. For example, if the equipment module lacks certain features for maintenance scheduling, your staff will be tempted to use a spreadsheet as a workaround instead of trying to make the software work. Another common example is using a custom spreadsheet for estimating rather than an industry-specific estimating program. Work toward eliminating spreadsheets.

No Cost Surprises
Taking a realistic look at the true costs associated with new construction project software will save you from surprises down the road. Training pays for itself very quickly and various maintenance costs protect your investment. Wean employees off their favorite spreadsheets and focus on using your new software to increase efficiencies throughout your organization.

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/