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No. 1: Avoid Spreadsheet Dependency!
Editor’s Note: This is the first article in an eight part series called “Better Next Year,”
by Fred Ode, CEO, chairman and founder of Foundation Software.
We learn over and over
again that too much
of a good thing can be
a bad thing—case in
point: spreadsheets.
For many small contractors, spreadsheets
are the first and only technology
solution needed to get their companies
up and running quickly. They
can be used to create and track job
estimates, billings, payroll, job costs,
financials and more. As a company
grows, however, so do the spreadsheets
associated with each of these
functions… not to mention the
amount of time required to maintain
them all.
Contractors intent on becoming “better next year” (i.e., taking the
steps needed for long-term success)
need to take a long and hard look at
their spreadsheet use. Like any business
tool, spreadsheets excel (excuse
the pun) at specific functions, but
should not be used for every imaginable
purpose.
Recognizing Spreadsheet
Abuse
In business, there are always painful
processes that scream “INEFFICIENT!”
Owners will generally waste no time
seeking solutions to these in-your-face
problems. But over reliance on
spreadsheets is usually not like that;
it sort of sneaks up on you one day.
In construction, the scenario generally
goes something like this: The
small contractor uses spreadsheets
for estimating jobs and invoicing
clients. Because spreadsheets are
flexible and easy to use, the contractor
creates more and more worksheets
to analyze job costs as needs
arise. Soon, however, the contractor
has “islands” of data that cannot be
linked. He ends up spending much
more time building and maintaining
the spreadsheets than analyzing the
figures themselves. And as the volume
of data grows, it takes longer and
longer to maintain the spreadsheets,
and reports (or billings or payroll!) fall
behind. Soon the data is outdated,
and the owner no longer has a clear
picture of the company’s financials.
In its day, spreadsheet technology was leaps ahead of manual methods.
Back when the first program was
introduced (more than twenty-five
years ago), construction owners were
amazed at how fast and efficiently
their estimating, job costing and
accounting tasks could be accomplished.
Since then, however, newer
and more sophisticated software tools
have become available at costs even
small business owners can afford.
More importantly, good construction-specific applications offer owners
the tools they need—such as instant
access to consolidated data—to
compete in today’s highly-competitive
construction environment.
Spreadsheet Dependence
and Off-the-Shelf Construction Software
Contractors using inexpensive generic
applications, such as small business
accounting software, also tend to
suffer from spreadsheet sprawl. Why?
Because these off-the-shelf applications
do not offer contractors enough
flexibility or formatting capabilities
for job costing or specialized reporting.
Owners complain they cannot see
their data the way they need to see
it. As a result, they spend even more
time re-entering and manually updating
data into spreadsheets.
Without the ability to integrate
data between general ledger,
job costing and other modules, for
example, it becomes impossible to
manipulate data and see numbers in
different ways (such as aging reports
by project manager, Production
reports by geographic region or financials
by job). In exchange for greater
reporting detail and flexibility, these
contractors come to rely on a series of
disparate worksheets that offer virtually
no data validation or protection
against errors.
Database Construction Software
Outperforms Spreadsheets
Spreadsheet software is great at performing
complex calculations, linking
to worksheets, performing ad hoc
queries, what-if scenarios and so on. It
has serious drawbacks, however, when
used for data storage, retrieving data
from beyond the simplest of queries or
accommodating multiple users. Adding
large amounts of data to spreadsheets
can quickly deteriorate the integrity
and usability of spreadsheets.
In contrast, most job cost accounting
programs, as well as other construction-specific applications, are
built upon secure databases, designed
to handle large amounts of data and
multiple users. These applications can
easily handle millions of records, and
reports can be shared among users
without concern for tampering or unauthorized use.
In general, the larger the size of
your data or the more challenging it
is to organize, the more likely you
are to need an integrated construction-specific application built upon a
database management system. Think
of it as the storage place where all
company data can be seen all at once
and examined in hundreds of ways.
Each transaction is entered once and
flows to other areas or modules where
appropriate. In addition, date-sensitive
applications tie every transaction
to their entry date so that reports can
be run for any time period—monthly,
weekly, daily...or even prior years.
Good construction-specific software
also features hundreds of standard
construction accounting reports,
as well as customizable report-writers,
so that contractors can recreate their
spreadsheet reports without re-entering
data. And in those instances
where contractors need to manipulate
or extrapolate their data outside the
system, many good construction-specific systems provide seamless interface
with third party report writers or
spreadsheet applications.
Have You Outgrown Your
Spreadsheets?
There will always be a role for spreadsheets
in construction. In fact, for the
small contractor or start-up company,
these desktop applications may be
the only technology required for their
financial and reporting needs.
However, as contractors grow in
size and project volume, there will
come a time when the business can
no longer rely on spreadsheets for collecting,
consolidating, reporting and
analyzing data. As a tool for estimating,
job costing and financial reporting,
spreadsheet technology has
simply outlived its usefulness. Fortunately,
construction-specific software
systems built upon powerful
database engines now offer what
spreadsheets don’t: A comprehensive
data warehouse of up-to-date,
accurate information and unlimited
reporting possibilities.
Fred Ode is the CEO/chairman of
Foundation Software, developer of construction
job cost accounting software
called FOUNDATION for Windows. For
further information on FOUNDATION
for Windows, visit www.foundationsoft.com. Fred Ode can be reached directly
by phone at 800.246.0800 or e-mail
fred@foundationsoft.com.
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