While today’s headlines analyze construction backlog indicators, economic swings and a possible double-dip recession, construction company executives are dealing with the immediate challenges of running a business.
It can be hard to strategically plan for a successful 2010, even with strong evidence that now is the time to look for ways to benefit the bottom line in both the near term and long term. Managing the efficiency of any single active construction project can significantly raise productivity, reduce costs and improve financial performance. After all, corporate results are determined by project results.
Construction companies are rapidly taking advantage of mobile technology to reduce indirect costs by providing a reliable and timely link between field and enterprise systems. Automating the capture of data in the field provides daily visibility and has vast potential for real savings. This return on investment (ROI) can be achieved right away, not at the end of the year.
Where Is the True Value? A profitable construction project often hinges on the accuracy and timeliness of tracking job-related costs—particularly labor hours, equipment utilization and daily production data. Manual, paper-based processes not only inhibit accuracy, but they also can require up to three hours of paperwork every day for field supervisors—time that otherwise could be spent improving productivity.
By automating the collection of labor, equipment and production in the field—using handheld devices, PCs, PDAs or smartphones—supervisors can accurately clock workers in and out, virtually eliminating phantom payroll costs of up to $1,200 per field worker, per year.
Beyond labor savings, streamlining the timesheet approval process and seamlessly integrating this information into the company’s enterprise system eliminates the inaccuracies and inefficiencies of paper-based timekeeping processes.
If a solution also can track equipment utilization, materials usage and jobsite receipts, supervisors gain the daily visibility into production needed to better manage the outcome of a project.
The benefits to finance and payroll operations are equally valuable. Payroll staff and managers no longer have to spend hours deciphering handwritten labor sheets, manually keying in labor information and validating data entry to produce payroll checks. Along with this increase in productivity, project billing becomes more accurate because of the reduction in errors and ability to validate data accuracy on a daily basis. And, if signature capture is incorporated, employees can confirm their weekly timesheet data.
The immediate benefits to construction companies include:
- reducing data entry costs by 50 percent;
- increasing field supervisor productivity by eliminating manual timekeeping and time spent looking up employee numbers, jobs and cost codes;
- improving equipment utilization by recording daily use;
- enabling better financial decision-making and improving margins by providing daily production and job visibility; and
- saving 5 percent or more on payroll costs by accurately recording hours worked and eliminating other errors.
Generating ROI
While an investment is required to extend relevant data (employees, jobs, cost codes, work orders and equipment) from the company’s enterprise system to each field supervisor’s laptop or handheld device, a positive return can be achieved in six weeks to six months. Sample calculations for a construction company with 100 field employees and five foremen highlight the ROI available by using remote time and equipment entry.
Phantom Payroll .25 hours per day (1.25 hours per week)
$25 per hour 100 field employees
50 workweeks per year
= $156,250 annual savings
Back Office Time Entry30 hours per week (total)
$20 per hour
52 weeks per year
= $31,200 annual savings
Field Supervisor Time Entry .25 hours per day
$32 per hour
5 foremen
50 workweeks per year
= $2,000 annual savings
Equipment Maintenance
5 percent reduction in repair budget due to more accurate and efficient tracking of project management schedule
$200,000 annual repair budget
= $10,000 annual savings
Equipment Utilization 1 percent improvement in utilization via status information on availability of owned and rented equipment
$5 million equipment value
= $50,000 annual savings
Total Annual Savings: $249,450 By eliminating costs and inefficiencies with a technology investment, construction company margins and profitability can grow—strengthening the 2010 outlook.
- How many people in payroll process paper timesheets, and for what percentage of their time?
- What is their burdened compensation rate?
- What is the cost of being days behind on the job?
- What would be the savings if field employees clocked in and out, and recorded their actual work time instead of their estimated work time?
- How much time do field supervisors spend dealing with timesheet discrepancies, such as missing information, transposed job codes or other errors?