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When to Buy Construction Job Cost Software

 

Intuit QuickBooks software for contractors is a great tool, but at some point most contractors find that it no longer serves their needs. Paul Nobbs Group, which conducts on-going surveys into how contractors manage their business, said it's common for contractors to complain that they have the wrong accounting software package.

"Either something has changed, or they made a wrong choice," said Nobbs. Often, they've simply purchased a bookkeeping package that can't keep up with all the different streams of data coming from suppliers, clients, subcontractors and the company's own employees.  

"The construction industry, and particularly young firms, often will start with a generic accounting package like QuickBooks or Peachtree accounting software," said Walt Mathieson of Mathieson Consulting, a construction software consulting firm in Glendale, Az. that specializes in the MasterBuilder program by Sage. For these young firms, accounting is simply collecting the information the accountant needs to pay the bills and produce financials.

"Then they start worrying about generating contracts, managing change orders, subcontracts, purchase orders, all the things involved in managing a construction project," he said. Often, they'll tack on other software, such as Microsoft Excel, to bridge the gaps.

"By the time we meet them, they're using a number of different software applications, none of which are integrated. They're spending huge amounts of time importing data into all these packages just to keep the business going, and other software, like their scheduling package, doesn't talk to their accounting package," he said.

In such scenarios, "everything has to be started from scratch. When they're done generating the estimate in one program, and they've gotten the job, they create a job budget. They re-summarize the estimate in the cost reporting tool. Then they redo it in the accounting system for job-cost accounting."

More seriously, this approach can keep a company from smart business practices, such as understanding real job profitability or identifying areas where volume purchasing or more efficient scheduling could make big improvements to the bottom line.

There can be many signals that it's time to move to a more sophisticated job cost accounting/ERP system. The first question to ask in this case is "Where are you in the growth path of your company?"

Mathieson and consultant Dave Brown of D. Brown Management in Lodi, Calif., both recommend that growing companies consider modular, integrated software that can scale to meet their needs. "If they start with a good accounting package the day they start their business, they can then improve their operations as they grow by adding a job cost accounting ERP software module" Brown tell us. Since the modules use the same data, much of the tedious data re-entry required by standalone packages can be eliminated.

You should also consider moving to JCA/ERP software when the following become issues for your company:

  • You need to expand, but worry that your team can't handle more volume.
  • You lack the ability to know if you're making money on a job until late in the project.
  • You can't easily job cost on a daily basis.
  • You spend more time re-entering data than analyzing it.
  • You often find discrepancies between identical data entered into different applications.
  • You need to find ways to improve the profitability of your jobs, but have no idea where to look.
  • Your competitors are providing clients with better information about the job.
  • Your competitors are able to bring a job in for less.
  • You have trouble supplying vendors (or your bosses) with project status and cost forecasts in a timely fashion.

*** Go to the next article: Construction Job Cost Accounting Software Buyer's Guide: Benefits

 
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