Editor's Note: Following is the eigth article in our ten-part series called, "Accounting Software Checkup: Ten Ailments That Can Hinder a Healthy Bottom Line," by Fred Ode. Each "ailment" will be discussed in detail to help you determine if your seemingly healthy business has an underlying problem. To read the previous article, click here. To read the next article in the series, click here.
Like late-night pizza on a sensitive stomach, construction accounting managers and operations people don't always get along.
They both perform essential roles necessary to the business, but their jobs involve different agendas, different processes, different skills and even different personalities. Hoping to avoid painful flare-ups, many contractors allow these two areas to remain distant and separate. But at what cost? Today's industry experts agree: A contractor's success is dependent on two-way communication between the field and office.
In part eight of the "Construction Accounting Software Checkup" series, we'll focus on integrating field operations with accounting practices for stronger financial performance. More specifically, we'll take a look at how your current construction accounting system measures up when it comes to streamlining costs and serving all areas of the company.
Connecting Disconnected Departments
The gap between the construction office and the field mainly deals with miscommunication. Joe, your multitasking project manager, doesn't always appreciate the part of the company that knows bonding, government regulations, payroll, taxes and more. He needs accurate and timely job cost data to keep the project on track, but he resents having to complete all the "useless" paperwork mandated by the front office.
Mary, your busy accounting manager, doesn't always appreciate that the administrative paperwork assigned to field employees can seem like burdensome work not specific to the project. At the end of the day, she needs accurate field data to complete accounting tasks, and when information is late, illegible or miscoded, her job is virtually but impossible.
To connect these disconnected departments-and better manage your costs-you must first have a sound financial management system in place. You also need to define the step-by-step processes your company will use to fully integrate construction operations with accounting practices. It takes the right technology and a commitment to two-way communication.
Technology Solutions for Data Gathering and Sharing
Many generic accounting systems add to the operations/accounting communications gap because they have no bridge that can link the two areas together. Serving primarily as a bookkeeping tool for writing checks, invoicing vendors and printing the occasional financial report, they have no ability to store and share job-specific data between accounting and field personnel or staff. As a result, each department tends to operate independently of the other.
Change order management, billings by job, purchase order tracking and quantity tracking for production reporting are all examples of information that cannot be tracked efficiently in off-the-shelf systems. In order to obtain this information, your field employees (and your accounting staff) must gather and record this information in spreadsheets or other applications outside the accounting system. You end up with many people reentering the same data over and over again, as well as islands of data that cannot be easily shared or verified as accurate.
Integrated accounting systems, in contrast, are designed to work for the good of both the financial (business) and project (job costing) sides of the business. Sophisticated job costing systems serve the dual purpose of recording financial transactions and producing timely, accurate job cost reporting. Many are built upon powerful databases, such as Microsoft SQL, which offer unlimited data storage capabilities and seamless integration with popular third-party applications.
Communicating the Need for Jobsite Accounting
Managing your construction company's job costs begins and ends with accurate data. In order to boost profitability it is essential that you have efficient systems in place as well as cost-effective methods for gathering field information. But that's not all. People on both sides of the company need to see the value that this information brings to the business as a whole. Only then will two-way communication flow easily.
Upgrading your accounting system, for example, will not only make it easier for your accounting office to control job costs, predict cash flow and provide accurate reports to banks, bonding companies and others. It will also inevitably have a positive effect on the operations side of the business. With access to detailed and timely job cost reporting, project managers will now have the tools they need to manage their resources more efficiently and make more-informed decisions. Suddenly, they'll see the value of gathering accurate field data. The software maintains the information and performs calculations so the project managers can do what they do best-analyze and coordinate.
Field Reporting Tools that Make Communications Easier
Fortunately, there are also faster and more efficient ways of gathering field data today. Whether it's a simple spreadsheet program, a handheld device or more elaborate software/hardware combinations, new technology enables field employees to submit timely field data with less effort and greater accuracy.
Instead of having employees fill out paper time cards and send them to the office for the information to be reentered into the company's payroll system, for example, you could use a remote device to capture each employee's time, the equipment that he/she worked on and to which phase or activity the labor cost should be tied. In addition to saving time in the field, think about how happy the office staff would be to receive legible and properly coded information.
Better yet, there are many products that will link directly to your company's job cost accounting software. Choosing compatible products with seamless integration capabilities means that labor, equipment hours and quantity (production) information can be entered once and sent directly to payroll, job costing and other appropriate modules.
When it comes to serving the needs of both your accounting and operations departments, how does your accounting system rate? Does it promote a healthy flow of two-way communications, or is it driving a larger wedge in the communications gap?
Good job cost accounting software, as well as field tracking technology, is helping to bring these two sides of the business together. The bonus is that your company can now work toward a common goal-streamlined costs and greater profits.
Construction Business Owner, September 2008