The ability to deliver quality work in your trade doesn’t guarantee your business will profit. You could be the best carpenter, plumber, electrician, etc. in the entire world, but still go out of business if you aren’t managing your jobs properly. So many excellent contractors miss this very point, which is why construction businesses have such a low survival rate. Continue reading
The success or failure of any construction job is based on profit. Profit margins are razor-thin in construction. Job costing helps you project job expenses to identify problems before they impact profit. Can work be completed with the money and budget available? What are the risk factors on the job? What do you need to do to be successful? Continue reading
Any contractor knows that successful project management hinges on labor. That’s not to say that smart material purchases and inventory control don’t also play a role in job profitability. However, unproductive labor will always kill profit, which is why knowing your real-time labor costs can improve your bottom line. Continue reading
Do you question whether the equipment in your construction fleet is profitable or if you should be renting equipment as needed instead? Do you have a piece of equipment that often sits idle for months and don’t know whether to sell it or hold onto it – just in case? Continue reading
A great writer once said, “Beginnings are always messy,” and this is often true in the construction industry. Some of our most trying events happen at the beginning of a new project, which can make the whole project messy from day one. However, with the proper plan, potential pitfalls can usually be avoided. Continue reading
To appreciate how construction firms can make a greater profit on projects, you first need to recognize that one of the most common way to lose money is with unproductive labor. Downtime, overtime and reworking a project will kill profits – and oftentimes, morale. Continue reading
The construction industry is a difficult one – full of strategic planning, tight deadlines, demanding customers and lean margins. In some projects, just 2-3 percent can be the difference between profit and loss.
However, construction companies that navigate this industry expertly have learned to surround themselves with others who understand the business – especially their CPA firm. You look for subcontractors who have experience in a particular type of work; your CPA firm shouldn’t be any different. Don’t settle for just any old number-cruncher. To be on target in this business, you need a CPA that understands construction. Continue reading
In the construction industry, cash flow is essential to staying viable in a competitive market. Even some of the most profitable construction firms have gone out of business because of poor cash flow management.
Perhaps the reason cash flow is so difficult in construction is that by the time a job is awarded, significant resources have already been invested into it – from the time spent on the lengthy bidding process, to manpower on the job site, to purchasing materials and renting equipment. Often, these expense are incurred months before ever seeing a payment. Continue reading
Section 179 Deductions and Bonus Depreciation have been used extensively in the construction industry. Both grant your company big savings on taxes as a result of any major equipment purchases you’ve made in the tax year. Accounting and project management software is included in the equipment that qualifies, and it’s been one of the most popular routes that contractors have taken to seize this opportunity. Continue reading
Many contractors delay purchasing new construction accounting software because of the resulting growing pains, but successful software implementation is similar to a successful project: thoughtful planning coupled with skilled execution results in greater profitability for your company. Since you already know how to build profitable projects, applying basic construction logic to your software implementation lessens the pain so you can move forward with anticipation instead of dread. Keeping the construction process in mind, here are seven tips for a successful software implementation.
1. Define Success Up Front
The project estimate defines success by establishing a budget with an anticipated profit margin before the job contract is even won. Although defining success as it relates to your software implementation isn’t so straightforward, it’s still important to establish guidelines for measuring success. If you don’t define the meaning of success, how will you know if you’ve achieved it?
The easiest way to define a successful software implementation is to identify existing procedures that aren’t working and outline how you will improve them. For example, if you have a labor-intense, spreadsheet-based work-in-progress (WIP) reporting system, one of your definitions of success could be to replace it with an automated process that eliminates duplicate effort and takes only a few seconds to complete. In this case, success is easily measurable.
Invoice approval is another example. If you’re replacing manual invoice routing with an electronic invoice approval system, success might be defined as achieving approval 50 percent faster while eliminating lost or misplaced invoices. This same concept can be applied to all of your procedures, whether they are related to jobs, employees or equipment.
2. Spend Time Up Front Planning Your Coding Structure
Pre-planning is an important part of both a construction project and a software conversion. A new software implementation is the perfect time to establish a more logical and standardized coding structure for your jobs, general ledger, vendors and customers, especially if you are migrating from a legacy system with limited flexibility or a generic accounting program that offers little to no structure.
A standardized coding structure allows you to gain greater business insight through your software’s reporting system. For example, with a departmentalized general ledger structure, you can quickly access specific information on a single department, such as your service department. Standardized codes also let you compare data across all jobs, because account #100 will always signify the same thing, regardless of the project.
3. Clean Up Your Data
You wouldn’t start a new project with old information, so why would you start using new accounting software with old data? Before migrating existing data to your new system, take some time to clean it up by eliminating duplicate vendors, purging old information, evaluating outstanding payables and receivables and getting accurate inventory counts.
This step helps you start with a fresh and timely dataset in your new system. If you have receivables that are outstanding by 120 days or more, ask yourself why they’re present and what you can do to collect the money? If you have outstanding credits with little-used vendors, consider requesting refunds instead of carrying those credits forward. Perhaps it’s time to archive data for employees that haven’t worked for the company in years. For current employees, this allows you to identify whether you have current W-4 forms on file and if any critical licenses or certifications have expired.
4. Create a Schedule with Milestones
Treat your software implementation like a construction project by creating a schedule with specific milestones. Assign a project manager on your end and ask for a designated PM on your software vendor’s side.
To achieve software implementation success, you’re going to need some accountability for the things that must be done. Make the two PMs ultimately responsible for driving the project toward completion on time and within budget.
Let your company’s size and the complexity of your software system dictate the schedule, but try to set a firm go-live date. Like many construction projects, unforeseeable delays happen during software conversions. It’s okay to make adjustments to your schedule. But be aware that, if you keep pushing your deadline further into the future, you risk losing momentum and creating costly delays.
5. Implement Your New Software in Phases
Every construction project is completed in phases. Why should your software implementation be any different?
A phased implementation eases the adoption of new software by allowing your staff to become comfortable with the basics before you add more complex functionality.
Phase 1 builds the foundation. Implement basic functionality that replaces and improves upon the procedures you were doing before. The focus during Phase 1 should be on core accounting, including job cost and payroll.
Phase 2 adds the framework. Implement functionality that your company wasn’t utilizing before, but is vital for improving operations. Processes like inventory management, purchasing, equipment management and custom reporting fall into Phase 2.
Phase 3 adds custom finishes. This is your technology “wish list” that will revolutionize your operations. Electronic document management, remote timesheet entry and a field service system fit into this phase.
6. Establish New and Improved Procedures
Just like you implement new procedures for improving things like job site safety, you should use your software implementation as a way to establish new procedures that improve accounting processes.
Better processes make your accounting staff more efficient and keep important details from slipping through the cracks. Some examples include creating collection policies for past due invoices, scheduling payables to take advantage of vendor discounts and using triggers or alerts for insurance expiration dates or to flag missing employee information.
7. Set a Profitable Training Mindset
It takes time and money for an apprentice to become a journeyman. Likewise, it takes time and money to become proficient in your new software. Instead of viewing training as an expense, look at it as an investment and budget accordingly.
If you neglect training, your new software becomes a disposable tool. With proper training, however, your software becomes an investment that delivers a positive return over time. Achieving a successful accounting software implementation can take up to two full years. The first year is spent rolling out the system and the second year is spent fine-tuning your processes. It’s generally a good idea to allocate a portion of your budget for training at three, six, nine and 12-month intervals. Free resources offered by your vendor can help as well, including newsletters, e-mail updates, a knowledge base, online help, Webinars and conferences.
Mandating Change from the Top Down
Change is vital, but for most people, change isn’t easy. Because of this, the motivation to implement new software needs to come from the top of your organization. Set the expectation that your new tool will not only make your company more profitable, but will also increase efficiency and make your employees’ jobs easier. By being one part dictator and one part motivator – and by following the seven tips outlined above – your software implementation will be a successful endeavor that delivers a high ROI.