Construction job cost accounting/ERP software handles the "back office basics" of a business and has expanded over time to include a whole lot more. Job cost accounting packages typically start out by supporting these functions:
- Accounts payable (A/P) (paying direct and indirect bills)
- Accounts receivable (A/R) (getting paid)
- Payroll (managing and delivering employee salaries)
- General ledger (the entire picture of A/P, A/R and the other details that make up the financial picture of the company)
- Job cost (managing direct costs posted to jobs, so that the company doesn't need to create new general ledger accounts for every new job)
Beyond that, companies can add modules to fit their customized requirements. As the company grows and its needs change, job cost accounting software can be extended to perform additional operational management functions, to the point that it can become an enterprise resource planning (ERP) system. Many of these functions are accounting-based, such as cash management. Others fit more closely into a cost estimating or project management framework.
Under the right circumstances, job cost accounting/ERP software can be used for many aspects of strategic planning and operations management, functioning much like an ERP system. The modularity becomes a cost-effective way for a company to scale. At larger companies, job cost accounting is sometimes a module within a larger enterprise resource planning (ERP) system.
A well-designed JCA/ERP system will provide a critical efficiency edge, letting a company streamline its operations and make the best use of resources, says Paul Nobbs of Paul Nobbs Group, and construction consulting firm in San Diego, CA. In his experience, JCA/ERP systems can deliver the following advantages to construction companies:
Improve project execution. Modern construction financial systems have evolved well beyond the accounting department. A construction JCA/ERP package will give a project manager all the information he needs to manage a project as efficiently as possible.
Reduce business risk/vulnerability. Potentially the greatest return on investment from a complete job cost accounting ERP solution is protection. Having the right information in a timely manner can help prevent unexpected project expenses, claims defense costs, or human resource related issues.
Improve accountability. The passing of the Sarbanes-Oxley Act (SOX) has greatly increased the accountability requirement for business owners and senior managers. More efficient and accurate information, such as that provided by a good JCA/ERP system, is crucial in satisfying these requirements, as well as requirements from other government agencies, clients and unions.
Improve efficiency. JCA/ERP packages can improve efficiency in many ways, from reducing the number of staff required for data entry and error checking, to seeking cross-project purchasing opportunities to decrease costs.
Increased confidence in the quality of information used to make decisions. Does your company's staff trust their data? Data integrity is an important, often-overlooked component of a successful business. The more confidence your employees and partners have in your data, the more likely they are to use it to make good decisions.
Enhance forecasting and cash flow visibility. JCA/ERP software can move cash flow forecasting and management to a very granular level. At minimum, it can enable a solid, timely close at the end of the month.
Attract top recruits. The best-of-breed are naturally attracted to the best-run companies. Many potential recruits judge employers by their ability to advance their careers and provide a progressive workplace. A well implemented and running job cost accounting ERP solution will go a long way to converting your company into a "best-run" company.
Build client confidence. The information you deliver to your clients on status, costs and other project details can greatly enhance your image…or destroy it. Good JCA/ERP software should make it easy to generate up-to-date project visibility for your clients.
Help close more business. An efficiently run business attracts clients. You'll get much farther with a client if you have a reputation for delivering timely, accurate information.
*** Go to the next article: Construction Job Cost Accounting Software Buyer's Guide: Capabilities