Download
this construction software article
|
 |
| |
 |
See why contractors use FOUNDATION as their construction accounting software!
(click here) |
|
 |
|
| |
 |
| |
|
Taking Advantage of Accounting
Tools
Deborah Rogus,
Contributing Editor
To get useful information out of your accounting
system, you have to put useful information in, which
means changing the way you look at software and
your company.
Like anything in life, software is what you make of it.
On its most basic level, software is a tool that solves
problems, but it could and should be so much more.
For most companies, the accounting department has
the most tangible problems, and accounting software
will solve basic needs like payroll, accounts payable,
and accounts receivable. If you simply learn the
basics, an accounting system will speed up those
processes. But you have to ask yourself: Did you really
pay thousands of dollars and spend countless hours in
the implementation process for a glorified bookkeeping
system?
Most companies aren’t taking full advantage of their
accounting software. They’re satisfied because they
simply don’t know what they’re missing. Yet the real
benefit of accounting software is the information you
can get out of it. Of course, to get useful information
out, you have to put useful information in, which
means changing the way you look at software and
your company. Why? It’s one thing to know what
software can do, but another to put the practices into
place. Until you go beyond basic bookkeeping, nothing
really happens. Don’t just pay bills; use your software
to manage your company.
Grow With Your Software
Everything gets old—everything except software.
Software companies update their products and release
new versions as technology advances. That’s great,
but it also means you have to continually learn what
the software can offer. “People tend to get new
software and then use it the way they used their old
software,” explains Brad Matthews, vice president of
sales and marketing for Dexter + Chaney, Seattle,
Wash. “You need to set clear goals and see what the
software can do differently. How can it help you? You
need to take the next step. It’s really easy to stop at
the initial implementation, but you have to keep
going.”
Too many companies stop learning after the initial
implementation, which means they’re only using a
fraction of the software’s capability. Some companies
continue to use spreadsheets when the software can
write a report with just a few mouse clicks. Or they
manually enter information when that information can
be pulled from the database. Fred Ode, owner of
Foundation Software, Brunswick, Ohio, recommends
that a few months after implementation you set up an
utilization and effectiveness review. Just think ROPE.
Research and question—ask key people questions and
gather information. Organize—prioritize your
information. Plan—go through the system to make
sure you can get out of the system what you need.
Execute—go and actually do it.
“Don’t accept the status quo,” explains Ode. “Make
technology a part of the budget. If you continue to
improve your use of technology, your company
becomes a well-oiled machine.”
Enclos Corp., Bloomington, Minn., a commercial
contractor, has done just that: Technology and
education are built into its budget. “One year ago we
started Enclos University,” says J.B. Niday, CFO of
Enclos. The company uses technology from Penta
Technologies, Brookfield, Wis., developers of financial
and project management enterprise software.
Each project manager at Enclos will have to put a
certain number of hours of study at the university each
year, learning everything from best practices overall to
performance management and knowledge
management to the latest software features.
“The short-term cost of not having a project manager
on a job for five days [because he’s at the university]
is far less costly than not having experience down the
road,” explains Niday. “It’s a short-term sacrifice. You
need to commit time and money to make it happen.
But in the long term, we need more people who are
trained and won’t make mistakes.”
Southern Maryland Cable Inc., Tracy’s Landing, Md.,
recently invested in additional training on its
Foundation Software. “When you first get set up,
you’re using only the basics because it’s
overwhelming,” says Joy Toews, controller. “You
probably miss 50% of what’s in [the software],” says
Toews. “Once you get comfortable, it’s good to have
them come out to get that advanced training and learn
about new features. I would really like to do it every
year, but every two years is probably more realistic.”
Software isn’t the only thing that changes over time,
so does your business. “A lot of contractors have been
at it for years. Over the years things have changed,
and some have never taken another look at their
systems to see what’s changed,” says Dick Werner,
president of Shaker Computer, Latham, N.Y.
As companies grow, so do their software needs. Dan
Buffington, owner of Buffington Homes, Seabrook
Island, S.C., started his business using Quicken and
spreadsheets. Last month as you will recall
Constructech interviewed Dan and he explained that as
his company grew he realized he wasn’t able to get
things done. “It became very cumbersome. We were
two months behind on reports and numbers, and we
didn’t know what was going on,” he says. He realized
he needed a software package tailored to the
construction industry, and when a friend mentioned
that Intuit, Mountain View, Calif., makers of Quicken
acquired Master Builder, he knew he didn’t need to
look any further. “It was painful, but if we were going
to do it, we wanted to do it right.”
Since implementing Master Builder in 2002, Buffington
has continued to train through his pro advisor—a
consultant that Master Builder provides each customer
to make sure that users are getting the most out of
their software—and is looking at adding on new
modules in the future.
Processes
You can buy all the cool software you want that has
more features than you can count, but you have put
the practices into place to make sure everyone uses
them. How your software is used should be driven by
business practices. One way to start is to form a best
practices steering committee or task force. “Think of
the company as a whole and not as separate pieces.
The committee or task force should identify and
propagate the use of best practices,” says Kurt Koenig,
vice president of Penta Technologies.
Niday realized that as Enclos was growing, it spent less
time mentoring and training the younger staff and that
everyone was doing things their own way. “There was
an entrepreneurial spirit,” says Niday. “When we got
larger, the weaknesses came through, and we realized
that we had to set up standards, a knowledge base,
and procedures.”
The project managers are now committed to the idea
of sharing knowledge and setting standards. Niday
realized the younger project managers were really
frustrated with older project managers for not sharing
their knowledge. Enclos realized if it want to grow to
the next level, it need to institutionalize its best
practices.
“The older project managers are feeling better about
this. They were really threatened at first,” says Niday. “But now they’re starting to embrace that this is a
legacy they’ll leave behind. Ten years from now,
people will be using their models; people will still be
learning from them.”
Terry Lewis, controller for Donley’s Inc., Cleveland,
Ohio, uses Foundation Software and realized that
having everyone work and record in the same way
would reduce errors. “We standardized the cost code
system,” Lewis says. “Now we can compare costs from
job to job because all the codes are the same. It’s
been very helpful and cuts down on keying errors.”
Always Job Cost
Software is your early warning system. Matthews says
that may sound obvious, but many companies aren’t
using it that way. They’re not getting a forward look at
the job in time to make adjustments. Just doing job
costing isn’t enough either; you need to have accurate
and up-to-date numbers so you can get accurate
projections. “If a project manager can’t look at those
numbers and know they’re accurate, they lose faith in
the system and start doing things on their own,” he
says.
Werner says that most systems break down in being
able to keep track of the original budgets and the
revised budgets, so project managers and owners can
see how they’re doing with respect to the original
budget.
The last year or so has made job costing that much
more important. “Last year, the economy downsized
our company for us,” says Buffington. “Accounting
became that much more critical to stay on top of
expenses. We’re always looking where costs are. Our
numbers are up to date, so we know where we are all
the time. There are no more guessing, no more
questions. Before we did job cost through
spreadsheets, and it was never up to date, and
mistakes were made, or formulas got messed up.”
Now Buffington knows exactly where his projects are
and where his costs are so he can make educated
decisions, not guesses based on two-month-old
numbers.
Every month, Jonna Masek, controller for M&S
Construction, Lincoln, Neb., user of software from
WennSoft, New Berlin, Wis., runs cost vs. estimate
reports. “We have to keep everything separate. Each
house in a development gets its own job number. We
need to know how each specific job is doing and the
actual cost vs. the estimated cost,” she says. Since
switching to WennSoft, running reports is much easier
and her numbers are more accurate. “With DOS it took
me 14 minutes to run one report,” she says, “now it’s
a matter of seconds.”
Percent-complete reports don’t just help you make
decisions or keep track of your costs, they help you
stay in business. “If you tell the bonding company that
you’re going to make $1 million and you only make
$500,000, then they won’t trust you, and you won’t
have bonding, and you don’t have a business,” says
Lewis.
Visible Orders
Change orders continue to be a concern for many
companies—how do you track them and make sure
you get paid for them. Your software can and should
help you track change orders. Dexter + Chaney came
up with a solution three years ago. Using Forefront, it
allows users to make distinctions between change
requests and change orders and track them in various
stages throughout the job.
“We can log a pending change request, and any
documentation can be scanned in and attached to that
request,” says Adam Pinsky, CFO of SME Inc., Seattle,
Wash., and user of Dexter + Chaney’s Forefront. “All
those pending change requests are visible. When we
get a change order, we match change requests to
actual change orders so we can make sure we don’t
lose them.”
Pinsky has benefited from this tracking on several
occasions. “Once, we started with a $25,000 job that
ended up at $1 million. We had a lot of changes. When
we went back through the pending change requests
after the job was done, we found a $5,000 pending
change request that didn’t go through. If we didn’t
have this tracking, we wouldn’t have found it.”
When it comes to change orders, you need to know
how it will affect your costs and how much you need to
charge your client. “You can lose track of change
orders and who they’re suppose to go to,” says Jim
Wenninger, owner and president of WennSoft.
“Some are in limbo, and you don’t usually realize you
have that many. A lot of change orders fall through the
cracks because it comes down to time and priorities.
It’s the little ones for $200 or $500 that get forgotten.”
According to John Kinney, controller for Charles A.
Gaetano Construction Corp., Utica, N.Y., and user of
Shaker Computer software, change orders represent
dollars out until they come in—which means you’re in
a deficit.
“Controlling change orders at the owner level is one of
our problems. Where do we stand? What did we
actually perform? How can we better control change
orders?” Kinney will implement a change order control
under Shaker with the company’s next project.
Document Imaging
We all dream of a paperless world—no filing, and
documents at the click of the mouse. But in
construction, it’s not just about less paper, it’s about
more timely numbers and a more accurate financial
picture. Waiting for invoices to be approved so they
can be put into the system can take days or even
weeks. If you’re waiting for FedEx to deliver your
approved invoices, then you’re waiting to update your
job cost report. Using document imaging, invoices can
be scanned in so they immediately become part of the
accounting software. The invoices are then approved
electronically, and you can see the invoice right on
your screen. All invoices could be within the system in
24 hours, which give them visibility, and the project
manager can use those numbers immediately.
Pinsky uses document imaging, saving him time and a
whole person. “The amount of paper coming into this
office is staggering, and it would all need to be filed. I
saved basically a person because I considered hiring a
person just to file. I opted for document imaging. The
module has paid for itself 10 times over. It’s one of the
easiest transitions we ever did. We started with
invoices to see how it would go. People were leery
about throwing away paper. So I let them keep the
invoices they scanned in a box for a month to make
them feel more comfortable. After 30 days, no one
ever had to go back in their box. In our growth from
$5 million to $15 million we added only one
administrative person, and I attribute that to software
doing the things we want it to do.”
It may seem scary to throw away paper, but you don’t
have to do everything at once. Matthews suggests
doing a pilot project. “Start with invoices. See how well
it works and then add on. Maybe do time cards next,
then change orders, then RFIs. Understand what it can
do for you, that’s the first step. Then build a success
story. Start with some projects and show what it can
do. Make it real for people,” he says.
Know your labor and subcontractors. Construction is a
labor intensive business, and you have to know more
about your employees than the hours they worked—
the job is filled with potential danger and risks.
Controlling those risks and managing them is
important. Software can help you track training,
certificates, worker’s compensation, drug testing, and
more.
Pam Hicks, accounts manager for Buffington Homes,
tracks her worker’s compensation and certificates on
Master Builder. She used to have to track it manually. “I would keep all the information in a book and spend
two to three weeks calling insurance companies and
subcontractors if I didn’t have proof,” says Hicks.
She’s also been able to save the company thousands
of dollars for its worker’s compensation and general
liability insurance. “We used to do monthly reporting
and base it on the highest cost code and pay the
premium on that,” she says. “Now I can break it down
by cost code and worker’s compensation code. When I
input it, the program gives me the correct pricing.”
Leslie Shiner, senior advisor for Intuit Master Builder,
agrees tracking this information is essential. “Our goal
is to make it important to everyone. Not only does the
system perform accounting tasks, it stops you from
having huge penalties and fees.”
Build Relationships
Finally, make a relationship with your software
company. Master Builder uses pro advisors to build
relationships with its customers. The pro advisors help
the customer get the software implemented and helps
to teach the basics, but he or she also helps the user
understand how to learn more about the software to
increase profitability and better manage their business. “We’re trying to be in contact, communicate, and
partner with the customer,” Shiner says.
User conferences can also be beneficial. Not only will
you learn about new features, the latest versions, and
upcoming changes, you’ll also be able to give the
software company your feedback and communicate
your needs. And you’ll be able to talk with other users
to learn what works for them and how they’re using
the software.
“The user conference is great,” says Pinsky. “That’s
where I was finally convinced to do document imaging.
I wanted to do it, but it’s very expensive, and I wasn’t
sure I was going to get my investment back. I talked
to someone else using it and took a class on it.”
Penta works to have a multitiered dialogue with its
customers—at the executive level down to the day-to-day
users. “We want to know what your key business
strategies are and how you are dealing with market
conditions and how those conditions have affected your
business,” says Koenig. “We take feedback and
incorporate it into our project strategy. We put people on
site with you.”
|
