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No. 4: Fine-Tune Project
Management Reports
KEEPING UP WITH JOB DETAILS BECOMING PAINFUL?
IT’S ALL IN YOUR HEAD.
Editor’s Note: Following is part four of our eight part series called “Better Next Year,”
by Fred Ode, CEO, chairman and founder of Foundation Software.
It’s a common problem shared
among busy construction
owners—working hard to
manage all the details of their
jobs leaves little time to tell
which projects are working.
Duke, for example, is your typical
(yet fictional) contractor. When he
first started his excavation company,
Duke kept the details of every job in
his head. He knew exactly how much
dirt he could move and how many men
it would take. Gradually, however,
Duke’s jobs began to increase. And
now he finds it increasingly difficult
to handle all the details that he once
managed. The problem is . . . it’s all
in his head.
Just as it’s important to understand
and use management-level summary
reports (see “Better Next Year No. 3”
in last month’s issue and on the web
at www.constructionbusinessowner.com), construction owners also need
to be aware of project-level details
that contribute to their company’s
overall success or failure. Where
management-level reports generally
provide one-line-per-job summaries
for a bird’s eye view of operations,
project-level management reports
provide owners and managers with
greater decision-making details.
Specifically, these reports provide
a narrower focus to help owners and
managers:
1) Identify where the job stands today
2) Predict where the job is headed
3) Create a database of history
And though they vary greatly from business to business,
project-level management reports generally help
all contractors with job evaluation and future bidding.
In addition, these reports help project managers stay
on track and stay accountable throughout the life of a
project.
So, where exactly do these project-level management
reports come from? Ideally, contractors start with
good job costing processes that break down their costs
by tasks, activities, phases or whatever makes the most
sense for their business. Next, they use accurate methods
for collecting job data. And finally, they rely on strong
job cost accounting systems capable of managing the data
and automating these essential reports.
Which Reports Should Contractors Use?
The type of work a contractor does and the length of their
projects both affect the type of project-level management
reporting needed. Excavating contractors, for example,
will probably want to run significantly different project-level
reports than electrical or mechanical contractors. In
addition, because of unique business practices and owner
preferences, no two contractors—regardless of trade—are
likely to run the same project-level reports.
Unfortunately, it is often at the project level that construction
firms realize their general business accounting
system cannot produce the kind of reporting needed
to analyze jobs. Why? Because these systems were not
designed to work the way contractors work. They have no
way of transforming job data into essential reports that
answer the how, why, where and when details of every
job.
Without the ability to see job details, many contractors
dump their job data into spreadsheets and attempt to
create their own project-level management reports. Soon,
however, way more time is spent managing and updating
their disconnected spreadsheets than analyzing the data,
which is often outdated.
Construction-Specific Software Provides
Much-Needed Details
Flexible reporting, therefore, is something that contractors
desperately need from their job cost accounting
system. Fortunately, there are good construction-specific applications available that offer not
only standard reports but also customizable
report writers capable of
creating an infinite combination of
reports. Most importantly, a good job
cost system’s reporting features will
be capable of showing cost breakdowns
on many levels—from total
job costs to labor costs per task, to
costs per cost category, to costs per
units of measure, labor productivity
and so on.
Using a sophisticated system with
flexible reporting capabilities means
contractors get to define exactly which
type (or combination) of project-level
management reports to produce on a
regular basis. A mechanical contractor,
for example, may elect to produce
a project-level production report that
tracks costs per unit worked (i.e.,
$5.34 per linear foot). Meanwhile, a
heavy highway contractor may decide
to create a report which tracks labor
productivity by the ton or cubic yard
per man hour worked (i.e., 10.4 cubic
yards per man hour).
A contractor’s job costing system
should not only have the capability
of handling budgeted, committed and
actual costs by job, phase, cost code
and cost type, but it should also be
capable of maintaining and reporting
both the original budget and
the revised budget (original budget
plus change orders). For accurate
job costing and reporting at the
project level, a contractor’s software
should—at a minimum—allow for
multiple levels of costs (jobs, tasks,
phases and classifications, such as
labor, materials and equipment).
Attention to detail, they say, is
the hallmark of any great craftsman
(or scientist, cook or software developer
for that matter). Without the
answers to the how, why, where and
when details of every job, how can
a contractor even hope to succeed
in today’s competitive construction
market? And without access to accurate
and timely project-level management
reports, how can a contractor
possibly become better next year?
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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