How to Choose an Enterprise Resource Planning Software for a Construction Company
What is the best ERP software for subcontractors?
Enterprise resource planning (ERP) software for subcontractors (also referred to as trade contractors) should integrate functionality that manages all facets of business operations, from bidding and project management to job costing and accounting. A.C.E. Construction Software offers a robust set of capabilities designed specifically for contractors and subcontractors.
On a basic level, ERP software provides a framework for businesses to run. It can be cloud-based or installed on your desktop (though we’ll explain later why one is better than the other) and, though functionality varies tremendously in purpose and scope, involves a system of applications that manage and/or automate the various aspects of a business. The advantage of ERP software is that it streamlines workflow because applications are combined into one interface, rather than requiring employees to manage separate softwares and processes, rely on paper printouts, manually input large amounts of data to generate reports, etc.
As it relates to the construction industry, ERP software has become the new normal for major commercial developers and large homebuilders, but many regional contractors, small construction companies and subcontractors are still operating on disjointed systems of spreadsheets, paper records, filing cabinets and maybe even some outdated software system commissioned in the 1990s.
The point is, there is a lot of room for improvement and with the availability of software designed specifically for construction companies, there’s not much standing in the industry’s way. Progress is inevitable.
If you’re questioning whether or not your contracting business should get on board with an ERP software, the answer is a loud, definitive and resounding “YES!.” Combining your years of industry knowledge with the capabilities of an ERP software to automate day-to-day processes and efficiently and accurately collect data is an amazing way to increase your bottom line. It will make your company so. much. stronger.
Instead of contemplating whether or not you should take the plunge with a construction software, you should be thinking about which of the many options is right for your company. I’ve broken down the primary qualifiers to consider and gone into depth about each.
Expert Bidding Center
Wide Scope of Project Management Functions
Visual, Real-Time Job Cost Reporting
Secure Accounting Integration
Ability to Set Permissions
What does cloud-based mean? In simple terms, “cloud-based” refers to availability of a software from anywhere via the internet, as opposed to a desktop application which is only available from the device on which the software has been installed.
In the case of ERP software for construction companies, cloud-based is the best choice. The primary reason to choose a cloud-based program is that it’s multi-user, whereas a desktop program is single-user.
One of the biggest hurdles contractors and subs face is communication between office and the field, and a cloud-based platform could help remedy this challenge. A cloud-based ERP system will allow all employees - field workers and office staffers alike - to have access to the same database at all times.
Field employees don’t typically have access to a desktop when they’re on the job, so they rely on paper print outs for the most up-to-date information. If project details change, then they’re relying on the office to print out new paperwork and driving into the office to get it. Accessing critical documents from the field via a web-based software program is a great way to save time, money and even reduce mistakes on the job.
Another benefit of using cloud-based software is automatic updates and backups, so there’s no data loss. Plus, if anything happens to the device you’re using, your data is stored on the cloud and can be accessed again from an alternate device.
Lastly: security. Business owners often express concern over storing their data on the cloud for security reasons. However, cloud-based systems are often more difficult to hack than desktop softwares because of encryption layers. Also, let’s say your device is stolen. Your data stored in a cloud-based system is typically protected by password login whereas it’s oftentimes not in a desktop application.
This one might seem obvious, but it’s very important to take usability into account considering the challenges construction business owners face when it comes to gaining buy-in from their staff. Choosing a platform with a friendly and familiar interface can alleviate said buy-in challenges. The look, feel and function should have a format similar to popular programs and apps that employees are used to, and be intuitively navigable.
When you open up your software ERP, your next move should feel straightforward. A simple interface that provides quick access to frequently used features is best; it should feel clean and organized. While there is a learning curve with any new software, a good ERP shouldn’t be overly complex or difficult to navigate.
With that said, it should be noted that implementation of ANY software program is bound to disrupt the status quo. Instead of using this as an excuse to not adapt, trade contractors should view implementing technology as an investment in the future of their company.
An important part of any good ERP system for construction companies is its cost databases. Here you will determine important information about labor cost codes and rates, all materials and pricing (direct from supplier or brought in from inventory), equipment rates, subcontractor rates, workers compensation and general liability.
Labor cost databases should allow you to input the crew rates and usage rates associated with each cost code. Your ERP system should be able to handle the way you pay your employees, whether it be hourly or by the piece. It is also important to be able to organize your labor costs codes by project types. This makes it easy for your estimators to ensure the correct rates are being selected for the specific project they are estimating.
Your material costs database should allow you to enter the price and usage rates for each product, so you can calculate exactly how much you’ll need to execute the job. This is important for bidding as well as material ordering during the build (which I dive into further below). The system should allow you to note whether your materials are coming from the supplier or from your yard or shop, aiding your company greatly in inventory management.
Lastly, functionality should allow you to keep track of equipment and subcontractors costs, as well as your burdens, including payroll taxes, worker compensations rates, general liability and mark up rates.
Integrated cost databases will allow you to stay organized and gain a greater understanding of standard costs. However, because details vary dramatically from job to job, it’s important that your ERP allows you to manipulate cost data while estimating each project without affecting the primary database.
An ERP software for subcontractors should feature bidding functionality. The bidding portal must be able to account for all costs involved in a job and serve as the foundation for the build. Rather than using historical data or square footage estimates that are often grossly inaccurate and lead to very small margins or worse, losing money on a job, trade contractors should opt to spend a little more time on bidding using a software that allows for robust detail.
Trade contractors regularly complete the same tasks from job-to-job, generally using the same material - especially if working for the same builder. An effective ERP software for subs should save every detail of the job including labor rates, materials, equipment used and liability costs on each bid so you can easily import it to the next. Using this newly saved bidding template, your estimator can spare valuable time without sacrificing accuracy. This will help increase accuracy and save time down the line.
Effective bidding functionality will help trade contractors:
Improve estimating efficiency
Increase revenue with accurate bidding
Ensure liability expenses are accounted for
Easily edit bids as job specs change
Avoid taking jobs that will lose their company money
It’s important to know that a standalone bidding software isn’t the way to go here. Yes, you could use it in conjunction with other software, but that would just create extra steps that would slow down operations. Ideally, trade contractors will choose an ERP software featuring a comprehensive bidding portal with capabilities to transfer that data into the project management phase. This flow of information between the bidding stage and project management stage is essential when selecting an ERP. It will save time and increase accuracy as the project moves forward.
Wide Scope of Project Management Functions
One of the major pros of implementing an ERP system is to create better flow and ease of operations when executing jobs. With the proper system in place, running your company should feel more streamlined and efficient. This in turn should result in greater productivity.
According to Autodesk and FMI, 35% of construction professionals’ time is spent on non-productive activities including looking for project information, conflict resolution and dealing with mistakes and rework. That’s 14 hours a week per professional gone to waste. By using a construction ERP software with a wide scope of project management functions, it’s possible for trade contractors to significantly reduce the amount of mistakes made on a job and turn those wasted hours into productive work.
Look for a software with functionality specific to the needs of a trade contractor, such as:
Labor time tracking
Organization can be a daunting task for trade contractors. Each lot of a project contains a tremendous amount of information and many subs are running several projects at any given time.
An ERP software can help by displaying all project-related information in one view, allowing office and field employees to work in unison. Whether at the office, at home or on the job, users should be able to add, modify and monitor the following all on the same screen:
Phases and lots
Project and builder contact information
Superintendent and foreman assignments
Schedules and task details
Options and color schemes
The ability to manage all project information within a single view can help contractors:
Decrease miscommunication and data loss
Reduce administration hours spent on paperwork management
Minimize the time field staff spends on acquiring project information
Ensure active options are accurately accounted for
Lowers costs associated with office supplies and project errors
The ability to easily upload and share documents is another reason to implement a construction ERP software. You should be able to create folders, subfolders and set permissions so the right team members have access to the documents necessary to get the job done. All documents needed to complete a job, including builder docs, photos, spreadsheets, PDFs, etc., should be able to be uploaded like you would using any desktop or cloud drive.
A.C.E. Construction Software is an ERP that features document storage capabilities that will help you streamline your business dramatically. With A.C.E., folders are automatically created when you start a bid, saving time and improving organization. Once you turn a bid into a project, all previously uploaded documents will transfer over to the project phase and a general project and phase folders will be created automatically.
Using an ERP like A.C.E. can help you:
Increase organization and save time on administrative tasks
Create seamless communication between office and field with the ability to upload, access and comment on important documents
Field can access files without having to go into the office
Saves on printing costs because documents can be referenced digitally
Unlimited storage space means you won't constantly have to pay to increase your cloud storage
Take a look at the documents storage feature in A.C.E. by viewing the video below.
Scheduling might be one of the most difficult things to master in construction. To illustrate, Autodesk and Dodge Data & Analytics report that 68% of trades point to poor schedule management as the key contributors to decreased labor productivity.
Once given the project start date, contractors are challenged with projecting when their crews will be needed. This can be tricky since schedules are constantly changing depending on other trades' completions. With an ERP software that integrates a template-based scheduling tool, trade contractors should be able to easily change dates for one task or for the entire job at the click of a button.
Many project managers also face the burden of trying to figure out how many men are needed on every project, which in some cases spread across counties or even states. A good ERP software can help solve this challenge by calculating exactly how many men are needed on each project based on the tasks scheduled and the time allowed during the bidding process.
Integrated scheduling functionality should allow contractors to:
Project out several months or even years to allow for consistent workflow
Accommodate the differences in each of their clients' templates
Easily change one task's date or change the entire schedule with one click
Know exactly how many men are needed to complete all tasks per project and company wide on a daily basis
During the bidding process, estimators account for materials needed. Oftentimes, these specs aren’t shared with the purchasers or field managers responsible for ordering material and scheduling equipment use.
An ERP system with the proper functionality will be able to push information from the bid through to the construction process. Instead of starting from scratch, purchasers or field managers can easily use accurate material specs from the bid to submit material orders. This eliminates the duplication of work by two departments and ensures the correct products and quantities are being used.
Because your special negotiated material prices have been entered into the database to create a precise order total, administrative staff can easily check if the suppliers' invoices are accurate.
By submitting material orders directly through an ERP system, costs will be tracked and associated with the correct job. This is important when it comes to job costing, which I cover below.
Using automated material ordering though a construction ERP software, trade contractors can ensure that:
Correct materials and quantities are being used
Suppliers' invoices are accurate
Invoices are always attributed to the correct job
Field staff are focused on completing tasks rather than creating paperwork
Material usage is accounted for down to the penny
Labor Time Tracking
Using an ERP software with mobile time clocking functionality to track labor hours will help you eliminate most administrative costs related to payroll collection. With the emergence of mobile technology, contractors can now get labor data directly from the source - the field staff.
Using a mobile device, field employees can clock in and out from the field. Foremen can associate their crews' hours directly with the task they are responsible for, and if the software uses GPS location tagging, superintendents will have greater transparency with their crews because they can see where employees are clocking in and out.
Office staff will no longer have to decipher and input labor data from written time cards because labor data will already be in the system, readily available to export and submit for payroll.
If you need more convincing, consider the time savings: for a trade contractor with 100 field employees, an estimated 50 hours of admin time will be freed up each pay period. That’s time you can focus on other tasks that often go by the wayside, like creating more accurate bids, job costing, timely billing and more.
Labor time tracking functionality will help trade contractors decrease:
Payroll processing hours
Administrative errors in time reporting
Legal liabilities using accurate time-clocking
Workers' ability to create false timecards
Headaches related to paper timecards
Visual Reporting in Real Time
Now we’re getting to the good stuff! Everything we’ve discussed above is important for a multitude of reasons: organization, workflow, ease of operations, etc. But the main reason we want it all incorporated into one ERP software is so that information flows easily without additional data entry and can be funneled into real time job progress reports.
The ability to access real time project data via a robust job costing system is going to make all the difference for subcontractors looking to survive in the modern era. Collecting all cost information associated with a project in one software enables real time reporting, so you can see how your jobs are performing in comparison with their bids. A good ERP system will be able to show data-driven insights on job progress in visual reports, so you can easily identify and correct problem areas.
Ever completed a project just to feel puzzled by the fact that you lost money on it? We’ve all been there. In the past three years, only 31% of all projects came within 10% of their budget, according to KPMG.
If you’re stuck using disparate and/or old school systems to run your company, then unfortunately it’s pretty typical to be blind to job performance until after a project is wrapped. However, with a software that incorporates bidding, project management and job costing into one platform, it’s possible to check in on job performance in real time and correct problems before it’s too late.
As an example, an article published by Sourceable reported a 50% variation in productivity between two groups of workers doing identical jobs on the same site and at the same time. This gap in productivity was found to vary by 500% at different sites. Unfortunately, this situation is common on construction sites. But it doesn’t have to be.
With real time job costing, it becomes possible to identify and correct these productivity discrepancies before it’s too late. You can also catch an option you otherwise would have forgotten to invoice, pinpoint errors in labor time tracking, discover labor inefficiencies and even see patterns in project performance that will affect how you bid future jobs.
Using a software with effective job costing functionality, you should be able to:
Quickly view accurate profit numbers
Easily compare bid vs. actual data with visual graphs
Understand trends using phase data displayed side-by-side
Monitor all contract, options and extras prices in list views
Analyze employee performances on specific tasks
Account for all variable costs: direct labor, labor burden, materials and equipment
Enable seamless communication between field and office staffs that may improve bidding accuracy moving forward
Job costing is the core functionality of A.C.E. Construction Software. See a preview of how it works by watching the video below.
Secure Accounting Integration
While real time job costing will provide an in-depth look at how you're performing at the job level, an accounting system will provide insights on the overall financial health of your company. The goal is to find an ERP software that features all of the functions mentioned above plus a built-in accounting platform that gives you the ability to track overhead costs and access critical reports on the company's overall finances.
Chances are, you’ve been using Quickbooks® to handle the accounting side of your business for as long as you can remember. While Quickbooks is the industry standard and does a decent job, there are tools more tailored to suit the needs of construction businesses.
A construction ERP software with accounting functionality will allow you to create a chart of accounts specific to your business and build your vendor and customer lists, like Quickbooks. However, it goes a step beyond what Quickbooks is capable of by automatically generating payroll reports based on the data inputted into the system directly via mobile time clocking and auto-syncing all material invoices created within the ERP.
Accounts receivable capabilities should automatically sync with your projects' revenue streams and allows for creating estimates based on task-linked draws. With a few clicks of your mouse, you can get all the financial reports including your general ledger, P&L, balance sheet, and WIP.
Using an integrated accounting software, trade contractors can:
Eliminates the need to integrate with other software programs
Saves you time and money on the administrative side because material and labor expenses are already entered
Allows for sales invoices to be auto-generated based on project tasks completions
Gives you real time information on your company's financial health
Ability to Set Permissions by User Type
The construction ERP you choose should allow for certain permissions to be set, meaning you can customize access to certain data depending on employee type. For example, you might allow tradesmen the ability to clock in and out using the mobile time clocking feature, but reserve the ability to edit and adjust time records for superintendents, office admins and owners. Or perhaps you’d prefer to limit access to the accounting feature or certain financial documents to only a few users. Whatever ERP software you choose should allow you to set limits on access based on user type.
According to Autodesk and FMI, 36% of construction professionals cited the reason technology failed was because of poor fit with current processes and procedures. This is unsurprising because, as mentioned earlier, new technology is inherently disruptive. Business owners must find a way to make room for modern solutions by cutting old school systems and processes loose.
This isn’t easy. To implement a comprehensive ERP software like the one described in the contents of this article, you’ll need support and a solid implementation game plan. When vetting the various software solutions on the market, it’s important to ask about onboarding processes.
A.C.E. Construction Software understands the challenges of implementing a new software and eases the pressure by doing most of the work for you up front. An onboarding team works with you to understand your current processes, then takes all of your information, including users, cost database info, current project details and more, and uploads it to the system. You are then set up with a ready-to-launch software so you can instantly reap the benefits.
In conclusion, the ideal ERP software for subcontractors is one that allows data to flow full circle, from bidding to project management to job costing to accounting, and back to bidding.
As claimed by the Construction Financial Management Association, the average pre-tax net profit for general contractors is between 1.4 and 2.4 percent and for subcontractors between 2.2 to 3.5 percent. That doesn’t leave a lot of room for error.
But with a comprehensive ERP software used correctly, you should be able to see these margins widen. In fact, A.C.E. Construction Software users have seen an up to 10% increase in net profits within the first year of using the software.
To learn more about how A.C.E. Construction software can help your company become more effective, efficient and profitable, visit www.aceconstructionsoftware.com or call 800-604-1236 to schedule a software demonstration.