The ability to deliver quality work in your trade doesn’t guarantee your business will profit. You could be the best carpenter, plumber, electrician, etc. in the entire world, but still go out of business if you aren’t managing your jobs properly. So many excellent contractors miss this very point, which is why construction businesses have such a low survival rate.
Why Construction Companies Struggle to Stay in Business
According to a recent study, construction businesses had the lowest survival rate. On average, only 36.4 percent of all new construction businesses survive after five years. Even retail businesses had a higher survival rate – 41.1 percent.
Why is construction accounting different than standard accounting? In short, jobs and/or projects. While it’s not that simple, that is generally what separates construction accounting from standard accounting.
Why Construction Accounting is Different
Let’s take a step back. Imagine you are a retail store selling clothes. In most cases, you have items that you bought at wholesale that you are now selling at retail with margins to drive a profit. There are expenses such as paying employees, rent, utilities, etc. This kind of business model is very common for most small to medium size businesses and standard accounting software is perfect for these businesses.
Construction businesses operate very differently. Because of this, they require a different type of software to manage their budgets. Construction businesses work off a job and/or project. For example, let’s say you are building a school. That would be considered a job or project. The job may take many days, many weeks, or even many months. The margins for each particular job are constantly fluctuating as each day passes. Labor has been spent, materials have been bought, tools have been rented, work has been delayed for weather, and more.
Construction businesses need an accounting software that can track all of these fluctuations in real-time. Construction accounting software gives business owners full transparency into day-to-day costs (e.g. committed costs) to keep any given job under control and profitable.
Why Construction Accounting Software is Necessary
Companies that try to use a standard accounting system, like QuickBooks, end up relying on solutions outside the software. That means post-it notes on spreadsheets or penciled-in notes in the margins to meet the demands of the client and the job. Either that, or mistakes will be made, and potential profit lost. Standard accounting software simply lacks critical features such as job costing, WIP reporting, tracking unposted payroll, AIA invoicing, and so much more that are necessary for a contractor to succeed as a business.
Construction accounting systems, such as ComputerEase, are built to manage the complexity of construction and contracting work. It is designed from the ground up with the construction business owner in mind.
Built with YOUR Business in Mind
The accounting system built for construction covers both direct and indirect costs, with every cost falling into the correct category. Every project is different, and the requirements can be built into the software so you can see and calculate associated costs.
The foundation of true construction accounting software enables a construction business owner to properly bill and manage a job. Profitability can be calculated. The gaps in your billing and project management can be filled in using the proper tool, construction accounting software, so money isn’t lost.
Too many construction companies don’t approach managing a construction business much differently than a run of the mill retail shop. This is the systemic reason they don’t survive. Business success for construction isn’t a mystery. Just as the right tools are needed in the field, the right tools are needed in the office. And that means construction accounting software.
A Final Word on Construction Accounting
Profit margins are razor-thin in construction. Every mistake can mean lost profit. If you own or work for a construction business and are currently using standard accounting software, excel, or pencil & paper, then we suggest exploring ComputerEase. You can learn more by watching a quick demo here: https://www.construction-software.com/video-demo/
Do you sleep well at night knowing all your company data is secure and safe? If you do, you might be kidding yourself as each day hackers find new ways to infect systems to get to your data.
It only takes one time for your data to be hacked or released to someone that will use it against you and your clients, which obviously carries a substantial risk to your company. Here are 6 areas that can help keep your data secure.
- Employee Access. It is essential to put limits on employee access to company data. Computers and servers with password protection will ensure this, but remember to change passwords and access rights when members of staff leave your company – particularly if you store data in the cloud. Having a password policy in place is essential for keeping your data secure.
- Security Software. You should have firewalls and anti-virus protection on all devices used by your company. Also, employ encryption protocols to make it difficult for them to view the data if they do breach your security. All Windows computers now come with BitLocker, which is a full disk encryption feature that should be considered.
- Updates. It is essential to keep all your devices up to date with updates. This includes the operating systems and the soft-ware installed on them. Usually all updates released have security updates included in them which is critical to keeping your data secure. For mobile devices this can also be handled by a mobile device management system like Microsoft Intune.
- Remote Wiping. With more mobile devices being used by companies, the concern of those devices being lost or stolen is a large risk. Remote wiping software can delete data and potentially stop this issue. Apple offers a remote wipe function as standard (provided devices are signed up to iCloud) and Google offers a similar solution via the Google Apps Device Policy app. Office 365 also offers a solution with Intune which is a mobile device management application that can wipe devices.
- Choose A Reliable Cloud Provider. If you store much data in the cloud, make sure you choose a reputable and secure solution. Microsoft, Amazon, Google and Apple all offer leading security for their cloud solutions, and you can purchase more storage when necessary. If you would prefer to keep your data on your own private servers, choose a well-known hosting provider.
- Make Sure You Have Cyber Liability insurance Coverage. We’re not affiliated with any insurance carriers, but often clients will request that we help them fill out the questionnaires for cyber insurance coverage, which is generally relatively inexpensive coverage.
What is ERP and How to Buy One …
ERP (Enterprise Resources Planning) software isn’t something new, it’s been around for quite some time. An ERP solution encom-passes technology that manages all of a company’s business critical operations. For a contractor, this functionality typically includes estimating, project management, accounting, service and scheduling, field operations, human resources, sales, inventory and more. That’s a lot to cover under one software umbrella!
A few ERP programs have all or most of the functionality required. The other alternative – a point solution – handles only one aspect of the business, such as estimating. The number of choices can get confusing, and we talk to many people who just don’t know what the best solution is for them.
I recommend if you are looking for new business software, start with the following steps. I call it the DART process
- Define your business goals and current needs. Seems obvious, right? However, you’d be surprised how many people miss this critical first step and jump right into shopping. In order to make a good decision on new software, what are your drivers and compelling events? The more detailed and defined your answers are, the better your chances of finding the right system. As part of this step, define the current issues, bottlenecks, and problems you have with your current processes and systems. Using this list will provide a great tool in mapping your existing needs to a new ERP system.
- Assess your budget. Systems vary in cost and functionality, so it’s important to realistically understand what you can spend. We’ve been in the room when people fall in love with that perfect $50,000 solution, and share their disappointment when they can’t do it because they have a $10,000 budget. Keep in mind that with today’s cloud solutions you can reduce the upfront investment significantly allowing for more buying power, but that purchase will cost more over the long run. When assessing your budget, look at not only the up-front investment for the new solution, but the cost savings by implementing the new system as well. Understanding your return on investment will help quantify the financial impact and may even justify a bigger budget.
- Resources Required. Once you have determined your project and budget, you will need to understand the impact on internal resources required to implement a new system. Who will be your internal project manager? Who will be using the software? Who will be the stakeholders of this project? For the project to be successful, it is important to get agreement and buy in from the top down on what the goals are, and provide direction and assistance to those employees participating to make it a success. It is also very important to understand how the new system will affect everyone and how much time the team needs to spend for the project to be successful. If employees already have a heavy workload, they might resist spending more hours on a new system unless they fully understand the benefit to the company and to them individually as well.
- Timeline. What are the compelling events driving your company’s go-live date? There are many considerations on the best and worst times to implement a system such as peak season, holiday and summer hours, or month end or quarter end. You don’t want to implement a new system during your busy season if you can avoid it. Sometimes you can’t avoid scheduling is-sues, but planning for them in advance goes a long way to a stress-free implementation.
Now you are finally ready to start talking to vendors and shopping for a new system. Armed with the information you have collected in the above steps, comparing the features and functionality of software to meet your needs should be easier. We know that making a decision on which software to choose to run your business is a critical one. If done correctly, the next system you buy should be the last system your company ever needs to buy.
If you start down the DART process and find you have a lot of questions, that’s okay – it’s complicated and not something you do on a regular basis. But we do! For the last 25 years, we’ve helped businesses find and implement new software. So if you’re thinking about new software to improve your business in 2019, give us a call.