Construction Business Owner, October 2007 

Can You Hear Me Now?

Like the cell phone user in the well-known (and over-played) TV commercial, wouldn’t it be nice if your contracting firm could stay so well-connected? Okay, maybe the hovering helicopters are a bit extreme. But surely everyone in construction understands the value that comes from two-way communication between the back office and the field. Or do we?

In the busy world of construction, it's easy to see how "one-sided" or "misguided" communication can become the norm. "Joe" the project manager, for instance, isn't thrilled about taking time from his busy workday to gather timesheets, track equipment usage and chase down change orders. After all, how important are these tasks to the job at hand? "Judy" the accounting manager, meanwhile, is busy preparing financial statements, surety bond documents and regulatory forms, among other things. But when it comes to relaying job cost accounting data to field employees, she often doesn't find the time. After all, how much detailed accounting information does the field staff need to perform their jobs? 

For construction owners to manage costs-and their company-they need to have a sound financial management system in place. They also need to understand cash flow, overhead expenses and which jobs are making or losing money...and why. Equally important, they need to communicate their plans and procedures to the entire organization to ensure that the business side of the business never takes a back seat to individual jobs. Everyone-from receptionist and payroll clerk to estimator and project supervisor-needs to understand the "big picture" and their role in it. 

Like a jigsaw puzzle, the "big picture" in construction comes together only with the collection of data pieces from individual jobs, past and present. The job costing component of a contractor's accounting system is the framework for managing job data, but it relies on accurate and up-to-date data from the field. Unfortunately, many construction companies use their accounting system primarily as a bookkeeping tool for writing checks, invoicing vendors and printing the occasional financial report. With no job costing system in place, the back office and the field often operate independently from one another. And with no sharing of job cost data, no one (from the owner to project managers) has access to the kind of information necessary for informed decision making.

Project-Based Contracting Relies on Communication

Contractors live in a project-based world, and therefore, must keep accurate costs not just for the entire project but for each component of that project. Because each project differs in terms of location, labor, equipment and material, contractors must understand the costs of each component in order to stay on budget and bid jobs accurately.

Throughout the life of the project, the contractors' project control procedures and record-keeping methods become essential tools for management. It is important to create efficient and cost-effective methods for gathering information on actual costs and project accomplishments (such as labor hours by cost code, quantities complete, change orders and so on).  

 

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