Construction Software

Posts Tagged ‘David Kraft’

This article is based on a true story and is meant to show how software installations, despite management’s best intentions, can go wrong. The name of the company has been left out for obvious reasons.

Every day, I speak with various users of manufacturing and construction software who are disappointed with their current system. They come to me looking for advice in selecting a new package that will better meet their needs and will solve the problems that they believe their current system is creating. In most cases, their concerns are real and they probably will be better off with a new system. However, I would estimate that about 20% of the cases that I see are companies that are destined to be just as disappointed with a new system. Why? Because the software isn’t the main problem in the first place – the users are. In fact, you don’t have to be talking about construction software or manufacturing software specifically – the bottom line is that any software is only as good as the user that uses it.

Several years ago, I spoke with a medium sized electrical contractor that had a very short amount of time to complete several jobs. They were using a very old version of one of the more common construction management software packages that lacked some of the modern features of new software, such as allowing multiple people to be logged in to the system at the same time. This lack of functionality in their software was having a serious negative impact on the company’s productivity.

Of course, the first thing that popped in to their heads was to get new software that was more powerful and had the features that they needed. I spent some time researching various packages for them and finally arrived at a package that wasn’t completely state of the art, but was more than adequate for their uses. After viewing several demos, everyone concluded that the software looked like a good fit. The final step before purchasing and installing the new software was to have their primary accounting person sit down and try the software out since she would be the one using it the most. Since they were on such a tight schedule, this had to be done late at night and after normal work hours.

Several months passed without progress. Nobody in management positions for this company volunteered to help this lady out and since the assignment was difficult, it kept getting pushed back. Finally, after TWO years, the company decided to buy the software, install it, and do some basic training. The staff and end users were hesitant to use the new software and were not very technologically inclined themselves, so they decided to use both the new software AND their old software in parallel for a period of 12 months. Why? Because there was nobody in management positions that gave the time and effort to ensure that proper training was done and there was nobody overseeing the transition process. In turn, the company did twice the amount of work required for an entire YEAR due to fear and poor management. Undoubtedly, hours upon hours of productivity were lost, as was money!

This case, although funny in it’s own right, teaches us several lessons about the process of evaluating and implementing new construction or MRP software. First, managers need to be involved in every step – from the initial meetings to the training sessions to the implementation time line planning and so on. Second, if management is not fully committed to moving to a new platform, they will likely pass the job on to somebody in the company that is not qualified to complete it. In this case, the company learned later that several employees were skipping the training sessions put on the by the accountant because they knew there would be no supervising manager involved.

Therefore, if your company is in the process of selecting and implementing new software, make sure that you have the support and commitment of upper management. Managers need to know what resources will be required to get the system up and running in a timely manner and must be held accountable if those time frames are not met. It is imperative that the right people are selected to learn and train your staff on how to use new software, and if the management isn’t even committed to making that decision properly, is it realistic to expect positive results from the new software?

In industries like construction and manufacturing, it is extremely beneficial to have the best communication possible with customers since the customer base that you acquire and keep are crucial to the overall success of your organization. We’re all well aware of the old saying that it’s much cheaper to keep existing customers than it is to acquire new ones. Companies that do not have solid customer service and follow up are those that struggle to stay on top of the market.

Thankfully, much of the modern software designed for both the construction and manufacturing industries is designed to keep the communication flow between company and customers wide open. Advanced construction software, for example, is capable of constantly updating clients about the progress of their project, including changes in costs, completed milestones, problems resolved, and so on. The best part is that this communication can be completely automated, meaning the construction company can deliver better customer service without spending any additional man hours delivering it.

The communication features that you look for in your next software package are important to consider and must not be overlooked. If you find a software package that does not include a customer account management module, you’re probably better off looking elsewhere – even if you can get a great deal on it.

In addition to keeping customers abreast of the progress of their projects of jobs, some construction and manufacturing software packages can be used to schedule periodic contact for marketing purposes. Things like scheduled mailers or email blasts can be sent to existing and potential customers with the help of solid software that allows you to save valuable time.

These “friendly reminders” of your services can often be all that it takes for a past customer to remember your quality of work and decide to use you for any upcoming projects or jobs.

Another way that software can be used to improve customer relations and internal efficiency is in cases where companies have an ongoing contract with a customer. In these cases, software can be used to automate the billing and cost tracking so that overall contract reconciliation is a breeze when the time comes.

One thing to be aware of when implementing new software that will allow you to take advantage of improved customer account management is the “cleanliness” of the data that is put in the system at first. Companies using outdated account management software likely have the system clogged with a lot of useless information that doesn’t need to be in the new system. As such, it is important that all data is cleaned before being transferred to the new system, allowing you to have a “fresh” customer database.

Additionally, it is important to know the requirements for record retention in your state or jurisdiction. In some areas, contractors are required to keep old records for customers for a certain period of time, even if that customer is no longer an active client. Look for software that has the ability to manage and archive old records if you operate in one of these areas.

Finally, keep in mind that the entire system is useless if new (and old) data is not input correctly. The importance of adequate end-user training can never be understated and is an area where you need to invest the necessary resources if you want to get the most out of your new software.

Using construction or manufacturing software to improve customer relations and communication is one of the most cost-effective ways to improve the quality of service that your company provides. Since much of the communication can be automated, there is typically only a need for a “set it and forget it” use of the account management for each customer.

Purchasing new construction software for your business likely involves more costs than you are planning for. Beyond the price of the actual software itself, there are a number of hidden costs that many businesses do not plan for that become a part of the “true cost” to implement the new software. If you do not account for these costs prior to purchasing software, you may be in for a rude awakening when you go to implement the new package and realize that you do not have enough money to move forward.

The five most common additional costs incurred when implementing new construction management software are:

The Cost to Train New Staff and Properly Implement the Software: Many buyers understand that some money will be tied up in training staff and actually installing the software, but this number is often underestimated. In most cases, it costs at least as much to properly train staff and implement the software as it does to purchase the software. This 1:1 ratio can grow even higher for more complex systems. Some companies try to limit this cost by skimping on training, but this never pays off. Your best bet is to figure this number in to your budget from the get-go to prevent problems down the road. The last thing you want to do is have a great piece of software that nobody can use properly.

Cost of Hiring Staff with More Experience or Different Skill Sets: In most cases, your current staff should be able to learn the new software and operate it well. However, in certain cases where the software or company does highly specialized work, it may be necessary to hire a few new people to run the system. This will obviously result in higher payroll costs. Even if the new staff replaces old staff, since they have better skills, chances are that you will have to pay them more. Before purchasing new software, consider whether or not new software will require new people to operate it and make sure that you figure this number in to your budget.

The Cost to Maintain the Software: Most construction software vendors charge an annual fee to maintain the software. Generally, these costs are between 18 and 24 percent of the cost of the software and are paid every year. Beyond the annual fees, you also need to account for the additional costs for things like custom reports that you may have to have one of your vendor reps complete for you.

The Cost of Purchasing the Wrong Software: Some may argue that this cost should not be considered here, but the truth is that it is a real cost. If you purchase the wrong software and using the software takes more time than it should, that extra time is lost time that could be spent on value-added activities. This extra cost can add up over time, eventually making the true cost of the software more than the value that the software is delivering.

The Cost of Inferior Software: This cost is slightly different from the one above in that this applies to companies that buy software that is right for their company but that does not do all of the features that they require. As a result, employees will resort to using things like spreadsheets to manage the data that the software doesn’t. This creates issues with integration and also adds time to tasks that can be avoided by purchasing the right software up front.

To avoid any surprises down the road, make sure you look at all of the above and estimate the true cost that acquiring new construction software will have. Training will pay for itself over time if it is done properly and maintenance costs will protect your investment, so neither should be avoided – just accounted for up front.

In today’s world, it is fairly common to come across a contractor that also manufactures some or all of the products that they install for their customers. Custom cabinets are a common example, as are some structural steel and low voltage products. Companies that fall in to this category that are looking for new software often have assembly job shops that design custom pieces and a separate installation department that installs the products at a customer’s site. These companies especially can benefit from new construction software that allows for the most accurate estimating and quoting capabilities.

Unfortunately, finding a piece of construction accounting software that covers both sides of the business is not as easily done as it is said. Although both sides of the business deal with job cost, there are several issues that arise when trying to integrate the two sides with one piece of software.

For example, manufacturing jobs involve a separate set of constraints than construction jobs. In manufacturing, you often deal with work centers, machinery, and individuals that carry out the manufacturing process. These job shops often have to rush jobs, change schedules, or make other changes on the fly based on priority shifts. Having software that is flexible enough to deal with these sudden changes is imperative in a manufacturing situation. However, this is not the case with construction jobs. Construction projects generally involve longer lead times and have to consider variables such as subcontractor scheduling that make quick and extreme changes in plans very difficult, if not impossible to pull off.

Second, manufacturing and construction differ in the way that cost accounting works. Manufacturing projects track direct labor, materials, and a set overhead allocation when calculating job cost. These job costs are accumulated as the project moves forward from one work center to another. These costs are tracked on the balance sheet as assets until the job is shipped off, meaning that inventory costs constantly change as projects move along. Manufacturers also need to know the current progress of a job to tell customers when the project will be complete and delivered.

Construction projects, on the other hand, recognize revenue and costs on a percentage complete or job complete basis.

Most contractors do not record costs until they are actually billed for them, regardless of whether or not the labor has been completed. They are concerned with the cost to date of a project in relation to the estimated budget for the project and monitor under or over billing based on the percentage of the job complete and the percentage of the estimated cost incurred to date. This kind of cost break down simply does not work in a manufacturing environment.

Construction software will record costs in a linear fashion as the job moves along. These costs can be captured and tracked in real time with the right combination of software and processes.

Another difference between construction and manufacturing sides of a business is that the construction side often has to deal with project management issues such as RFIs, change orders, and submittals. These things are simply not relevant in manufacturing but must be accounted for in a construction accounting package. Construction software also allows for progress billing, which is not necessary in manufacturing.

Last of all, manufacturing jobs require quotes that involve a bill of materials which is not usually done in a construction job. Manufacturers like to use software to keep track of things such as change orders, revision histories, and drawings that are not covered by construction software.

Therefore, although manufacturing and construction companies both deal with ‘job cost,’ the term refers to different things in the two companies. As a result, it is necessary to separate construction software and manufacturing software.