Construction Contractors and IT Systems: Time for a Tune-Up or an Overhaul?
To say that that the construction industry is dynamic is an understatement. After struggling to stay afloat during the recession, many construction contractors are now dealing with increased customer demand, rapid revenue growth, and new regulatory and compliance requirements. Inefficient manual processes for billing, job costing, and project management may have been tolerable in the past, as a way to conserve capital and focus on covering overhead. As project activity increases, however, consider the compounding effect of inefficient processes on your profitability, scalability, and sustainability.
- “Why do we have mountains of data, but lack the information needed to make timely management decisions?”
- “Why must the same information be entered so many times?”
- “Why do our project managers struggle to manage their project costs?”
Develop consistent processes
With few exceptions, it is not the accounting and operations software that causes reports to be inaccurate, incomplete, or untimely. It is poor data collection practices and the failure to develop consistent processes that have limited the usefulness of the accounting and operations software to that of transactional general ledger accounting. Any circumstance where the same data is entered more than once and any job cost or production analysis that must be completed outside the system are strong indicators of inefficiency that must be rectified.
Other symptoms include the following:
- Estimates are not converted to budgets and loaded into job cost by phase.
- Job cost reports from the accounting and operations system are considered unusable by project managers for monitoring and managing cost.
- Certified payroll cannot be produced from the accounting and operations system.
- Equipment cost is not allocated to jobs through an internal use charge.
- Compliance reporting or time and material billing cannot be produced from payroll records.
- Accurate job (or work in process) schedule cannot be produced within the system.
As you identify the weaknesses in reporting, remember that a system includes people and processes, as well as software. Often the software is capable of meeting the needs of the business, but the people may lack the training or business acumen to use the software as intended. Consistent processes must be developed and implemented to take advantage of all the software can offer.
Once you have diagnosed the extent of systemic weaknesses, a strategic decision must be made.
Tune up or overhaul?
Can a simple tune up of the current systems be sufficient to achieve your objective? A tune up would improve workflow, better define processes, enhance the use of applications, or add training.
If the current system is deficient to a point where a major overhaul is necessary, it should include replacing any accounting and operations software that is approaching end of life or no longer fits the size and nature of your business. An overhaul might also include the purchase of an estimating or mobile data collection solution that would interface with the system.
Committing to change
Whether you decide on a tune up or an overhaul, leadership must commit the organization to change. A financial investment will be required and internal resources must be allocated to implement solutions. If you expect efficiency and reporting to improve, it will. If leaders establish ambitious milestones and demonstrate a willingness to invest, better operations management will become a priority for the entire organization. Then it is up to your software to keep up. Why not push on the accelerator and see what that baby will do?