5 Steps to Get More From the Software You Already Own
Written By: BRIAN M. ANDREW
Copyright: CFMA Building Profits 2009
Traditionally, economics is defined as, “The study of the allocation of scarce resources between competing wants.”
In today’s tough economy, this definition couldn’t ring more true. For CFMs, the “competing wants” in the current economic climate are the owner’s need to have better, more timely information vs. the CFM’s desire to produce that information with greater efficiency.
The “scarce resources” in this scenario are the limited funds available to make these two things happen.
Pushed to do more with fewer resources, CFMs must make the best use of the tools they already have – specifically, their current software programs. Yet, many contractors don’t recognize that software is an essential financial management tool.
While field employees use service trucks, backhoes, and other traditional construction tools, CFMs rely on accounting software and supporting programs to manage their companies’ day-to-day financial operations.
A Useful Discovery Solves the Economics Conundrum
After working for (and with) numerous contractors over the past 20 years, I’ve discovered that most companies are not fully utilizing the software they already have in place.
Sometimes this is related to personnel or training issues. But, more often than not, employees just aren’t aware of all the functionality available in their company’s existing software. This discovery is good news for CFMs. Why? Because not only is it possible to use their current software tools to deliver better, more timely information, but it’s also possible to accomplish this feat more efficiently – and within a limited budget.
This article outlines five steps to get more from the software you already own. Beginning with an internal audit and ending with a plan for continually improving utilization, you’ll learn how to identify areas of inefficiency, the factors that can affect your efforts, and where to put your company’s resources for maximum impact.
Step 1: Take Inventory of Your Current Software Solutions
The first step is to conduct an internal audit and take inventory of what you have. During this process, you should make a list of your current software, check to see if you’re running current versions, and investigate new hardware developments.
Make a List
To perform a thorough audit, document every software program your company has purchased. Record how many people are using each program, what modules are being used, which versions are installed, and if all maintenance agreements are current.
In general, CFMs have a pretty good idea what programs are deployed across their companies. But, if you’re not sure what’s being used for estimating, project management, service work, and so on, get input from each department manager. If your company has an in-house IT staff, ask them to ensure that your list is complete. If you use outside IT consultants, find out if they’ve already created a software inventory list for your company.
As you construct this list, keep in mind that owning software doesn’t guarantee that it’s being used. If you identify a solution that’s not being used, find out why. Maybe the program was purchased, but training wasn’t, so nobody knows how to use it.
Or, perhaps you own multiple user licenses for a system, but the program is installed on just one computer. This idle software has the potential to provide real benefit if implemented.
Check for Current Versions
Once you’ve identified your current software solutions, check with each vendor to see if you’re running the most current version of their application.
When an outdated version is being used, it’s not uncommon to conclude that it should be replaced by something newer and better. In reality, the software you already own may have all the features and functionality you need.
Investigate New Hardware Developments
When taking inventory of your company’s software, it’s important to consider recent hardware developments, since new technologies and platforms are released on a regular basis.
Functionalities that weren’t feasible from a hardware perspective a few years ago (such as mobile field technology, document imaging, and remote timecard entry) may be very cost effective today.
Step 2: Evaluate Current Software Use
Once you’ve identified your current software solutions, the next step is to evaluate how well those solutions are being used to support your company’s vital construction management processes.
To get started, let’s look at job costing, document management and workflow, service management, project document control, and executive dashboard reporting.
Job Costing
Job costing is the heart and soul of most construction companies. While virtually all construction accounting packages have job costing capabilities, they aren’t always used by those responsible for controlling costs and job profitability – the PMs.
UTILIZATION QUESTIONS:
Do your PMs use your accounting system to run their own job cost reports?
Are they taking advantage of drill-down features and custom reporting capabilities to gain further insight into costs and profitability?
Are critical job cost details being tracked in spreadsheets and re-entered into the accounting system after the fact?
To get the most benefit from your job costing software, it’s vital to understand where inefficiencies (such as duplicate data entry) come into play. Once these inefficiencies are identified, you can take the necessary steps to streamline workflow and track information in real time.
Document Management & Workflow
Within most construction companies, information is shared by routing paper from person to person. But, electronic document management is emerging as the new industry standard for managing paper. If your company hasn’t adopted a document imaging system, it’s probably not managing paper as efficiently as it should.
UTILIZATION QUESTIONS:
How much time does your department spend each month manually filing, retrieving, and refiling paper documents?
Are documents and invoices ever lost or misplaced, only to show up after the job has been closed?
Do you ever find yourself printing e-mails and placing them in job files?
Many construction accounting software products have document imaging capabilities that allow contractors to incorporate electronic workflow into their day-to-day operations. Adding document imaging to your accounting system, and developing specific workflows that leverage electronic information sharing, are great ways to get more from the software you already own.
Service Management
CFMs must often respond to multiple departments, particularly when their companies perform service work. For example, upper management wants timely reports on service profitability, accounting needs work order details for invoicing, and service managers need tools to better serve clients.
UTILIZATION QUESTIONS: Are work orders being tracked in a separate system?
Is service work being billed in real-time or is there a time lag?
Has your company ever lost service revenue due to under- or unbilled work?
Over the last few years, significant advances have been made in service management solutions. State-of-the-art scheduling and dispatching systems are now available, along with mobile field communication technology. Exploring new options for service management with your current vendor will allow for greater efficiencies within your existing solution.
Project Document Control
Managing project documentation is typically considered a field responsibility; however, when disputes arise, CFMs need access to this information to help defend their companies’ position. Poorly tracked documents (or those only accessible by the PM) can put a contractor at risk if a project ends up in litigation.
UTILIZATION QUESTIONS:
Are your project documents tracked electronically, or are your processes still paper-based?
How quickly could you access documents like RFIs, submittals, and transmittals if faced with a dispute?
Are your daily field logs kept up-to-date, thereby creating accurate histories of jobsite conditions throughout each project’s life cycle?
In today’s litigious society, it’s vital for CFMs to have visibility into project details. Finding ways to incorporate project document control into your current software should be a top priority.
Executive Dashboard Reporting
An executive dashboard provides an aerial view of your company, complete with drill-down capabilities. Once reserved for top management, today’s executive dashboards can be deployed across various levels of your company to provide instant updates to accounting, operations, service management, etc.
UTILIZATION QUESTIONS:
Do you have an early-warning system that notifies you of job cost overruns or A/R invoices that are 60 days past due?
Is your accounting system set up to automatically generate specific reports at specified times?
Do your overview reports visually represent all included data? Can you drill-down to details on-screen?
By supplementing your standard reports with a dashboard display that includes key performance indicators (KPIs), graphical elements, and user-defined alerts, you’ll be better positioned to make smarter, faster business decisions.
Develop templates that incorporate all of these utilization questions. Evaluate every process in your company, including procurement, A/P workflow, equipment management, change order management, estimating, and resource scheduling.
When you’ve completed this step, refer to Exhibit 1 on page 60 to help pinpoint where your company falls on the utilization scale, and to identify areas that need special attention.
Step 3: Consider Factors that Affect Utilization
Once you’ve taken inventory of your current software and discovered where its utilization could be enhanced, it’s time to consider what factors might affect your company’s ability to implement a plan for improvement. This will include a review of the following:
Size & Type of Business
In general, a smaller contractor may have less sophisticated software needs than a contractor with hundreds of employees across multiple locations. Larger companies also tend to have more human and financial resources to put toward their software programs and better internal support when working to improve software utilization.
Technological Competence of Your Staff
How your employees view technology plays a big role in software utilization. A service manager that avoids computers at all costs, for example, will limit your company’s ability to automate service operations. But, a technology-savvy employee (one who grew up with computers, video games, and cell phones) will eagerly embrace the latest software advances.
Management’s Desire/Need for Information
When company owners and/or management really want better information and greater efficiencies, software utilization will improve . However, if they’re happy with the way things are, the argument for better software utilization may fall on deaf ears.
Financial Resources for IT Implementation
While this factor relates somewhat to the size and type of contractor, overall company profitability also comes into play. Adding modules to your accounting system requires an upfront investment, as well as training and higher maintenance fees.
So, a profitable company (no matter what size or type) will be better positioned to afford the transitional costs necessary to reach greater software utilization.
Sophistication of Your IT Infrastructure
Having in-house IT staff will usually make it easier and less costly to roll out new software or hardware. If you use outside IT consultants, paying by the hour can stall a software utilization plan if these costs aren’t in the budget.
Motivation to Improve Processes & Efficiency
If you’re motivated by the need to create better information more efficiently, taking steps to get more from your software will become a priority. For less motivated CFMs, performing a simple cost-benefit analysis can provide the impetus for change. To see how the numbers add up, let’s look at three possible scenarios:
1) The use of spreadsheets to manage various accounting tasks adds two hours of manual data entry time per week, or 104 hours a year. At a conservative, fully burdened rate of $30 per hour, manually performing these tasks costs $3,120 a year.
2) Each PM spends four hours per month (or 48 hours per year) doing cost projections by hand. With five PMs, that amounts to 240 hours per year. At a conservative, fully-burdened rate of $50 per hour, performing projections by hand costs $12,000 per year.
3) Lack of timely information on job costs, change orders, procurement, and equipment management decreases the ability to control profitability. If just one project goes sideways as a result of poor information, the profit loss can equal at least $10,000.
Step 4: Develop an Action Plan
Saving your company at least $25,120 each year is a pretty compelling reason to take this step. At this point, you should know where your company’s software utilization can be improved and what factors might impact its efforts. Now, you need to develop an action plan for getting more from your software.
To accomplish this, you will need to:
Re-Engineer Your Processes
In Step 2, you identified areas where your current software is underutilized. Next it’s time to examine the contributing processes – and to re-engineer those processes to make better use of your software. If you’re managing purchasing in spreadsheets, for example, and your accounting software has a purchase order module, why aren’t you using it? Do you own it, but don’t know how to use it? Or have you never added it to your system?
Develop additional policies and procedures to fill the gaps and document these standards in a software handbook. Review the online help guides for your software systems and add notes specific to your company’s established procedures.
Finally, schedule training to ensure that the use of your software supports your new standards.
Get Current & Evaluate New Modules
Upgrade to the most current versions of your software programs and update lapsed maintenance agreements. Evaluate modules that your company doesn’t own and consider how these pieces of functionality can support your re-engineered processes.
As in the previous examples, doing the math can help determine whether investing in new modules will pay off. Does the amount of time your staff spends filing, retrieving, and refiling paper (and the risk associated with missing documents) outweigh the cost of implementing electronic document management?
Would automating field service management (which decreases back-office data entry, speeds billing time and makes collection easier) be more cost effective than continually chasing service information? These are the types of cost-benefit questions to ask.
Consider Custom Programming
Sometimes, minor customizations to your current software can increase efficiency and deliver more effective utilization. For example, if you’re not using your software’s AIA billing feature because the printing format doesn’t meet your needs, a custom report could solve this dilemma quickly and cost effectively.
Hint: If you’re using Excel to do any type of reporting, you’re not getting the most benefit from your software.
Develop a Strong Internal Support Team
Build a strong internal support team to handle issues, find improvement opportunities, and build confidence around your software systems. Take a “train the trainer” approach and create subject matter experts (SMEs) on everything from job costing and payroll to estimating and project management to minimize downtime and unnecessary costs.
Step 5: Establish Procedures for Continued Utilization
If you’ve made it through Steps 1-4, give yourself a pat on the back – you’re well on your way to getting more from the software you already own! Your final task is to establish the following procedures for continued progress:
Stay Current & Get an Annual “Check-Up”
Getting more from the software you already own is an ongoing effort that requires revisiting these five steps at least once a year. One of the biggest mistakes clients make is not recognizing that new features are included with every upgrade. So, schedule an annual software check-up that includes an on-site trainer to ensure your software is current and that you’re aware of all new features. If onsite training isn’t available, the next best option is to perform your check-up online. Many vendors also offer low- or no-cost Webinars that cover new functionality, which is a great way to stay current.
Keep Up-to-Date on New Module Development
As new technologies emerge for the construction industry, software vendors develop new modules to leverage those technologies. Charged with delivering better, more timely information with greater efficiency, CFMs should stay up-to-date on these developments. This means reading e-mail alerts and newsletters from your vendors, and periodically visiting their Web sites.
Participate in Conferences & User Groups
Finally, attending annual users conferences and participating in regional users groups will help you learn tips and tricks from other users in a non-competitive environment.
Networking also helps you discover new ways to utilize your current software and gives you the opportunity to investigate the real-world benefits of new modules before adding them to your system.
A Clear Path to Success
After walking through these five steps, you should have a clear path for producing better, more timely information with greater efficiency – and on a limited budget. Remember that you’re not alone on this path. You have a group of partners with a vested interest in your success – your vendors that develop, support, and maintain the software your company already owns.
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Brian M. Andrew is the Product Manager for Construction at Jonas Software, a leading developer of fully integrated construction accounting, project management and service software solutions. His 20 years of experience in the construction industry includes seven years as the CFO of an Atlanta-based electrical contractor and six years as a construction software trainer and consultant. Brian holds a Bachelor of Business Administration degree in MIS and Accounting from the University of Georgia.
Phone: (888) 789-9073
Direct: (770) 338-5310
Web Site: www.jonas-construction.com
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Copyright 2009 by the Construction Financial Management Association. All rights reserved. This article first appeared in CFMA Building Profits. Reprinted with permission