Computer System Basics
By Tom Inglesby
Just using computer programs doesn't make a company productive; using the data that moves through those systems can, however, add significantly to the bottom line.
"It's in the basics that we can find the answers to even the most complex questions." We'd like to attribute that quote to some great philosopher but, frankly, we just made it up.
"You've got to start with the basics; that's where the first level of help is going to come from." That quote, on the other hand, comes from Brad Mathews, vice president of Dexter + Chaney, Seattle, Wash. Mathews was explaining where you can get the quickest "bang for the investment dollar" in choosing software to run your company.
And what are the basics? "What we think of as the core accounting functions," Mathews says. "You've got to have a general ledger, that's obvious. Then you need a payables module to pay to your vendors, a receivables and billing module so you can track your contracts and manage all the billings ? and hopefully get paid once in awhile ? plus payroll."
Beyond the basics are the programs that control the business functions that can make or break a company. Mathews continues, "The one that's really going to make a difference to a mason contractor is the job cost module. If somebody isn't utilizing a good job cost system that's fully integrated with their accounting ? and that means they're not getting the kind of information a system like that can provide ? it will be an eye opening experience when they do."
Job costing will give you very important tools to help keep jobs on budget, and you know it's critical to keep to your projects on budget. By utilizing your job cost system properly, a mason contractor should develop an understanding of unit costs on the type of work they're doing, and also understand their productivity at those types of jobs. "By having good, detailed job cost information, you'll really be able to develop a good understanding of what your costs are and hopefully do a better job of estimating," claims Mathews.
While some contractors are comfortable using a spreadsheet like Microsoft Excel to do costing, there are much better systems available. Dexter + Chaney's product, Forefront, can integrate with Excel, using it as a "search and sort" tool. According to Mathews, "Because Forefront is accessible to Excel, it is very easy to have Excel query the data directly in the Forefront database. Excel can grab data directly out of Forefront to build charts and graphs, and to plot whatever kind of trends you wanted to see."
Maybe you want to look at what happened to unit cost on a particular activity. You've got standard phases ? bricklaying, for example ? and you want to develop a job-to-job comparison of what the unit costs were. Forefront can produce that data and if you want to create a chart of those reports, you can build it in Excel. "That information is going to be very important to do a better job, not just for managing the jobs currently open, but for estimating future projects," Mathews says.
Another item that's important, especially as the company is growing, is to be able to produce a good work-in-process (WIP) schedule. You may know it as a bonding report or a contract status report. It gives you a picture of your revenue, costs and profitability on every job you have running and puts it together in a format that allows you to reconcile your financial situation at any time.
The traditional revenue recognition model for construction is on a percentage completion basis, not on how much you bill. You may have billed $10,000 so far on a job, but because of the amount of work you've done your actual revenue might be $15,000. You need to understand and be able to reflect that difference in your financial statements and if you don't have a good job cost system, you're not going to be able to do that accurately.
"A lot of people do this in some manual fashion," Mathews notes. "They do it in a spreadsheet, for example. They pump data in and spend a significant amount of time each month trying to assemble a WIP schedule so they can make entries into their accounting system. It's a time consuming and inaccurate process.
"Instead, it should be as simple as hitting a button and producing the report that tells you what the current situation is so you can review each job, review where it stands in terms of it's billings, revenue, cost and profit. The system you use should allow you to see all of that on a single report and give you the information you need to really understand the financial position of your company in each accounting period."
One of the reasons it is called a bonding report is because bonding companies want to see this information and see that you consistently produce as you say you do. If you can provide this information, you're going to have a much easier time getting bonded for additional work and be able to grow the company. Without a good WIP schedule, you really cannot have an accurate financial picture of your company. If you're doing it manually, the accuracy is going to be questionable.
Estimating the difference
Fred Ode, CEO of Foundation Software, Brunswick, Ohio, agrees with Mathews that job costing is at the top of the list for contractor specific software. But he adds, "As with any construction trade, mason contractors have unique technology requirements. A mason contractor should have both a job cost accounting and estimating system in place, ideally ones that are trade-specific. These two programs are critical to their business."
On the estimating side, Ode recommends a product from another company, Tradesman's Software. "Tradesman's Software was developed for masons and allows quick and efficient bidding on jobs," he says, "On the accounting side, programs like Foundation for Windows can substantially increase productivity and bottom-line results. Foundation is specific to the needs of labor-intensive contractors and will facilitate timely and accurate reporting of job cost and profitability. In addition, marketing savvy mason contractors may also want to consider a separate contact management system to facilitate the marketing and sales processes."
Since Ode brought them up, we called on Bill Pacetti, president of Tradesman's Software, Orland Park, Ill., to give us a rundown on how their product differs from other estimating systems. At the top of his list was the visual nature of the product. "It's masonry estimating software in 3D," starts Pacetti. "We can integrate with accounting packages but we don't supply an accounting package. Numbers are numbers, but masonry estimating gets complicated real fast. When you figure a job, you better come up with the right number or the money comes out of your pocket."
Tradesman's system is an estimating program that allows you to see the actual project as you do your takeoffs. This gives you an instant visual feedback. Pacetti says, "Some products will show lines like you're looking at a floor plan. They show different color lines that represent certain things. This is good, visual feedback. We went 10 steps further ? we put it into 3D."
You see a representation of the actual wall, its material, colors, bonding, openings, offsets, slopes and so forth. This helps eliminate mistakes. "There's not a mason contractor out there who hasn't made a mistake," acknowledges Pacetti. "And the result is money out of his pocket. It could be a couple dollars, or a couple hundred thousand dollars. It could be enough to put a person out of business. There are contractors who'll spend a couple of days doing an estimate, then a couple more having a second estimator to go over the first estimator's takeoff."
That's certainly not conducive to increased productivity. Pacetti offers an alternative, saying, "You takeoff the project with our 3D estimating and you can view that total project; grab it with the mouse, spin the building around, see it and zoom in on the sections of interest. You can use our walk-through viewer and walk through your finished takeoff and see the money items ? is there a glazed tile base or bond beams in the wall that need to be filled up with grout and rods. Our program will calculate and show you those pieces."
Tradesman's also offers a program for design/build. "It's good for doing mock-ups on the fly," claims Pacetti. "You can create a mock-up of a prospective building in 15-20 minutes. Then you have something ready to show prospective customers. You also have a bottom-line bid price in 20 minutes. Some of our customers are taking a laptop and putting a project on the screen so the architect and owner are impressed."
But impressions aren't the only thing that wins jobs. Pacetti continues, "Then the architect or owner starts with a series of 'what if' questions. 'What if we make this change?' Click on the program, make the change, and they're viewing the material items added into the project and instantly getting a bottom line estimate update."
On a quest for success
Using visual software is a very easy way for contractors not only to cut down the time they spend estimating but also to make sure what they estimate is accurate. Another visual estimating program geared for mason contractors comes from Quest Solutions, Sarasota, Fla. Quest spokesman Spencer Fleury explains, "Quest provides takeoff and estimating software intended to provide a one-stop solution from the takeoff all the way through the cost estimate to printing out the reports and taking it to the bid stage. The core product, Estimator, is used by a number of mason contractors ? masonry is a good market for us."
He adds, "One way that we customize it for mason contractors is with our visual assembly technology. It creates assemblies of some of the more common components that mason contractors have to estimate ? brick or block walls, for example ? and rolls them up into an assembly. As they're adding, subtracting or altering the cost items that go into these walls, they'll see the graphic component, a picture of a block wall, and they'll see the quantities change, all on the fly. We feel this helps provide a visual checklist to contractors so they won't ever forget to add some feature, say the vertical rebar. They'll see it right there on the graphic."
And while Dexter + Chaney's Mathews believes that Excel spreadsheets are here to stay, Fleury disagrees. Quest Solution's Estimator works with Excel, along with Dexter + Chaney's Forefront or Timberline Gold, "almost any big accounting package you can think of, we work with it," Fleury claims. "But we tried to build Estimator in such a way as to render Excel spreadsheets obsolete. We think that our technology offers contractors a much more powerful and easier way to do all that they currently do with Excel. That said, we know that some of our users are comfortable with Excel and prefer to stay with it, so we allow them that option as well."
Getting back to basics
Foundation Software's Ode suggests that company management take a long, hard look at business basics as well as their basic systems. "The two biggest mistakes made by contractors today is that they don't take a good look at their business operations as a whole and they under utilize the software and technology tools that are supposed to help them succeed."
Ode's guidelines to avoid the common pitfalls a mason contractor, regardless of company size, might make includes:
Perform reviews of your business practices. It is wise to perform a regular review of your business practice to ensure that the software systems you have in place are working for you. This could be accomplished in a number of ways such as attending annual user conferences. In addition, he highly recommends a semi-annual or annual checkup. This checkup would include a review of all processes and procedure in place with an emphasis on how to better leverage your business through more efficient and effective use of your software.
Have technologically current hardware. As the cost of hardware continues to decline, even a contractor with limited funds can afford to update computer systems regularly. This investment will increase the company's productivity, as older computer systems tend to take longer when processing.
Invest in training. Software can increase your productivity and provide tons of business essential information. Unfortunately, it can't do these things if the people aren't using it correctly. An investment in training is critical. Why invest thousands to purchase a program and then fall short on the training aspects.
This is especially important when turnover is involved. A typical scenario is when the only person that knows how to run the system leaves. A new person is thrust into the position without a bit of knowledge or guidance. This can be frustrating for all involved. Ideally more than one person should be trained upfront. And continuing education on advanced system functionality is highly recommended to really reap the benefits of your systems.
"For smaller companies, money for training can be an issue," Ode admits. "However, there are still ways to work around this. Determine what the most critical aspects of your business are and create a training schedule based on those needs. This way you avoid a large upfront expenditure and can break out different segments over time."
He sums up the issue saying, "When looking to improve your business systems, research is critical. Prioritize what is most important to your business ? accounting, job costing, estimating, Internet access ? and once you've settled on the area you're going to focus on, list everything you would like the system to do. Categorize these items into 'must have' and 'wish list.' Solicit the ideas and suggestions of the people using the system on a daily basis ? your staff. Establish a budget. Utilize the Internet to research what products are available in the market. Contact vendors and collect product information. Perform thorough reviews and schedule live demonstrations.
"And finally, don't forget about taking a hard look at the company providing the software. You will have to work with this company for, hopefully, a long period of time, so it is important to have common business practices."
And that, as they say, is very basic to your success.
About the Author
Tom Inglesby is a San Diego-based freelance writer whose work has appeared in numerous online and print publications. He is the winner of the Construction Writers Association's 2002 Boger Award for Special Reports.