You have a pretty slick cost estimating system. Your estimators generate bids quickly and accurately, complete with line item quantities, costs, and even "what-if" scenarios. You have no problem pricing out different floor plans, elevations, and options. Your accounting department upgraded from Quickbooks a few years ago and is running smoothly. Sounds like a pretty efficient operation, right? Not always. The only way to know for sure is to examine how well the two departments are working together. And if you are still using Quickbooks and spreadsheets, the answer is a no-brainer.
Let's assume the original estimate looks great. But when it gets passed to accounting, how do they handle all the detail? You have one job cost code for "interior framing", but your bid contains 14 line items for lumber of different sizes, trusses, joists, and hangers. So what does your accounting department do? Someone probably goes through each line item, figures out its corresponding cost code, consolidates the data, and then manually enters it into the job costing module. The alternative - consolidating all the data on the estimating end before sending it to accounting - is hardly more attractive.
While this might be manageable for a handful of homes, increase the volume of your projects and then start dealing with plan changes and different elevations. And what about tracking budgets throughout the project process? It becomes difficult and time-consuming very quickly. All this double-entry takes time, requires a lot of extra thought, and creates risks that your system was supposed to eliminate. Estimate information easily gets allocated to the wrong cost code, a line item is overlooked, and the result is a final job cost that is not much more than a shot in the dark. The solution is integrating your two systems, or going with one system that does both.
However, unless your estimating, job costing, and accounting systems truly speak the same language, your "integrated" system is nothing more than pipes of different sizes duct taped together. At some point it will start to leak.
Let Employees Do What You Hired Them to Do
Residential construction executives typically have employee efficiency at the top of their minds. Efficient employees who are on top of their tasks are well on their way to creating profitable projects. If they are instead spending lots of time on double entry, cutting and pasting data, and arguing with the other department, that's money lost.
Estimators tend to require more flexibility, while accounting staff members are more roles-based. Software that allows one department to estimate in apples and the other to track receivables in oranges would be best. An ideal system would also be able to make sense of the two different data types without error-prone human intervention in the middle.
This is the level of flexibility and intelligence that truly integrated systems provide. Estimators can still create fully line-item-detailed bids, generate purchase orders, and send data over to the job costing module. During this exchange of information, the software automatically figures out which CSI code corresponds to which job cost code.
Since the software does all the heavy lifting in the middle, nobody has to consolidate data or enter it twice. The information that the estimator enters is tracked all the way through the system, eliminating back-and-forth behaviour between departments. The result is employees spending more time on their jobs and less time picking up the pieces. This saves time, prevents headaches, and ultimately protects your bottom line.
Make Sure Your Data Counts
Knowing your bottom line is a top priority. So why do you look at reports with skepticism? Why do you assume a five to 10 per cent level of uncertainty? Most likely because your accounting department is working with (or creating) fuzzy data. In addition to data loss occurring between estimating and accounting, what about between project management and accounting? When data comes in from the field, labour costs tend to get consolidated to conform to cost codes. It becomes increasingly difficult to sort through the hours spent on punch out, clean up, and other miscellaneous tasks.
With technology that receives data from multiple sources, brings it together coherently, and then displays it in easily accessible reports, integrated systems protect your financial information throughout all phases of the process. By taking in data from sources that are speaking their own language, you don't have any more guessing on how to code a change order. And when the software is further extended with an integrated project management system, costs reported from the field are correctly allocated.
Conclusion
As most builders grow, software integration usually is not the first item on the table. Fortunately, it is never too late to step back and implement an integrated system. Once the software is in place, it essentially starts paying for itself by improving employee efficiency, presenting accurate reports on company performance, and allowing you to manage your operations in real time.
If you are still looking at your reports with skepticism, get on the ball and integrate your software. Your employees and your bottom line will thank you.
Don Fornes is Founder & CEO of Construction Software Advice, a Web site that helps home builders find the right software for their businesses. E-mail Don at don@softwareadvice.com or visit www.softwareadvice.com/construction.
