To win jobs and work as efficiently and profitably as possible, construction executives need detailed, reliable data about their businesses and instant access to financials. When used correctly, new construction-specific accounting software programs help turn information from accounting and operations departments into concise data that aids decision-making.
The stumbling block comes when trying to implement a new software purchase companywide. Accounting understands its arena: payroll, billing customers and paying vendors. Operations understands its arena: tracking job performance, scheduling job resources and managing the documentation required on jobs. But with today’s turbulent economic conditions, it is more important than ever for both departments to work in unison for a successful software implementation to become a reality.
Making the New Software Work Across Departments
Most businesses experience some level of disconnect among their various departments. The typical construction office is no exception. That’s why it’s critical to establish companywide goals and expectations prior to purchasing a new software system. Accounting and operations should work as a team to outline everything they need (both absolutes and wish list items) before even looking at a system. These items should be considered during the software selection phase and thoroughly discussed with the software vendor before planning the implementation.
Understand Departmental Requirements
Employees frequently fail to understand how their practices affect other departments. Take something as basic as coding. Does the field staff have a coding system in place for job take-offs, time sheets, daily field logs or pick tickets of materials used? Do these field coding methods align with what the accounting staff will use to enter data into the new accounting system? L
ooking at payroll entry specifically, the accounting staff may use a very basic list of codes for breaking down the job (or none at all). The field staff, however, may require a more elaborate breakdown. If the codes used in the accounting department vary from the codes used in the field, inaccuracies can occur with the data entry. This discrepancy alone can render the job cost reports useless.
Reports That Satisfy Everyone
Most quality accounting systems offer accounting, job costing and document control capabilities. This robust functionality is nice, but it requires upfront planning to ensure all users get the exact information needed to run reports.
For example, project managers and operations users like to track their purchase orders, subcontracts and change orders because they (not accounting) ultimately may be responsible for these items. To further complicate matters, document statuses can range from approved to pending, rejected, estimated or internal. Keeping these complexities in mind, accounting users need to work with operations staff when implementing new software, as the ramifications of categorizing these documents improperly can be significant.
For instance, an over/under-billing report is one of the most important reports in a construction accounting system. Many controllers and outside CPAs prefer to show the original budget and original contract on this report. It is also common to display only approved and internal change orders on over/under-billings in the revised contract and revised estimated costs columns.
Often excluded from this report are pending and estimated change orders. This level of tracking has a critical impact on the job’s percent complete. Pushing change orders from pending to approved status too soon could negatively impact over/under-billings and, ultimately, affect the company’s bonding capacity.
Harmony through Proper Workflow
Establishing good workflow practices among all departments can prevent future frustrations. It may make sense for operations to establish the purchase orders and subcontracts in the accounting software and then receive against them as the material is shipped or as the subcontractor progresses through its part of the job. As accounting receives the invoices from the vendor or subcontractor, approval from a project manager often is required. Whether the invoice is scanned and sent to the project manager or simply put on his desk, that project manager needs to approve it, code it and send it back to accounting in a timely manner.
In order to generate accurate reporting, it is imperative that the correct data feed back seamlessly into accounting. Setting up concise workflows between purchase orders, accounts payable invoice scanning and approval tasks has to be discussed between the two departments to guarantee data reliability.
Another workflow example involves timing considerations. If accounting routes invoices with large dollar values to a project manager for approval and he doesn’t approve them in a timely manner, it could have negative consequences for another manager relying on that data. When reviewing current job cost reports, project managers may miss significant dollars for material, equipment and subcontract costs if they elect to show only approved invoices on the reports. Both departments must set guidelines for routing and approvals and understand how these integrate with accounting reports.
Overall, the key to success is keeping the communication flowing between these two critical parts of the business. The more they communicate, understand how each area uses information and establish agreeable workflows, the more the new software investment will benefit the entire company.
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Wednesday, February 8, 2012