| March 01, 2010 |
Control costs with software
Time is money whether it’s finishing a job or figuring out job costs in between. You can’t wait for your accounting system anymore.
By Daniel Brown, Contributing Editor
Suppose you bid a large excavation job to use an excavator and trucks to produce 300 cubic yards per hour. Say on a Tuesday you work 10 hours , produce 3,000 cubic yards, and production is on target. But is the job in over budget?
How do you make sure you know if you’re over budget? How do you know what’s wrong?
Waiting for your accounting system — which might provide feedback in a week or two — just won’t cut it.
Modern software can make the difference. Here are just a few examples of just how it can work with your numbers.
“Costs are only gathered in your accounting system once a week, and by the time you got that report and looked at it, you might have forgotten what you were doing that day,” says Bill Woodford, chief estimator for Trumbull Corp., a large Pittsburgh-based contractor. “You might find that although you’re making production, you’ve got too many people on the crew, or you’re using a different spread of equipment than what the estimators originally figured.”
To control daily costs for labor and equipment, Trumbull uses Heavy Job software from HCSS. Each day, a foreman enters labor and equipment costs into a computer. “Then we know what our costs are and we can compare them against our budget,” Woodford says.
At Trumbull, Heavy Job software integrates with Profitool, which is accounting software. Profitool is used to track costs for subcontractors and materials and summarize all costs on a monthly basis. Heavy Job is used to track labor and equipment on a daily basis.
“We and most contractors separate them that way because labor and equipment is a very constant ongoing and changing cost, whereas most contractors have a pretty good handle on what their subcontractor and material costs are,” Woodford says.
Seamless exporting for labor, equipment costs
At W.W. Clyde & Co, a large contractor from Springville, Utah, project teams also use Heavy Job, but they integrate it with Viewpoint Construction Software for accounting purposes. Project personnel enter labor and equipment costs daily. “Job personnel have the ability to track costs daily within Heavy Job, but we also export that information each week to Viewpoint,” says Scott Okelberry, a vice president at Clyde.
“We could export it more often, but we choose to do it weekly because the jobs have their daily information in Heavy Job at their fingertips,” Okelberry says. “So to put it daily into Viewpoint doesn’t make that much sense for us.”
For estimating, W.W. Clyde uses Heavy Bid, which is a companion piece of software to Heavy Job. “Our estimates roll from Heavy Bid to Heavy Job and Viewpoint — two places,” he says. “The seamless export to accounting is very important. A lot of programs can export data that can be manipulated, but it’s not very easy to do. Heavy Job is very user-friendly and it’s pretty simple to make the transition between Heavy Job and Viewpoint.
He says Heavy Job allows a contractor to do “what if” scenarios on daily costs. Suppose a pipe-laying crew is not meeting budget. They decide they need another excavator, so they plug another crew scenario into Heavy Job. They could get maybe 25 percent more production for 15 percent higher costs, Okelberry says. Heavy Job will tell the project manager what the projected unit cost would be. “They would try it out the next day, or the next week, and see what difference the added excavator makes,” Okelberry says.
Does Heavy Job help Clyde make more money?
“We try to give projects the information they need every day about whether they’re meeting budget or not,” Okelberry says. “And we expect them to use that information to make decisions to improve.
“So I would say it helps us to either make more money than we might have, or to lose less,” he says. “If you can figure it out early then you can turn it around early. It may mean that you’re losing less money, but it’s a change for the better overall.”
He says Clyde uses a junior office/field engineer to make sure that the data entered into Heavy Job is accurate and put into the right cost codes. “We get a more accurate daily cost with fewer mistakes by having an engineer do that — a graduate engineer who’s been out of school, say, less than five years,” Okelberry says. “He or she is learning the job, learning project cost accounting; it’s a training ground.”
When that field engineer has made the comparison of costs to the budget, he gives that information to the foreman, the superintendent, and the project manager. “At every daily foremen’s meeting, where all the superintendents and foremen come together, that field engineer can hand them a report that says, ‘Here’s what your operations cost yesterday,’” Okelberry says.
Woodford says Trumbull’s job personnel report labor and equipment costs using laptops, desktop computers in the field office, or even from home computers. Any Internet connection will work, and the software is not Web-based. Instead, Trumbull people tie into a remote connectivity program called Citrix, and use it to gain access to the company’s servers.
“It can be a very poor Internet connection, but the guys can still connect from wherever because the processing isn’t happening back and forth across the Internet connection,” Woodford says. “It’s happening here in our office.”
He likes the uniformity of the Heavy Job reporting process. All jobs report costs the same way; before, they used spreadsheets that were different for every manager. And sometimes they were not properly set up.
W.W. Clyde also uses weekly job status reports to compare actual total costs to the budget. Those reports come from Viewpoint. They incorporate costs for materials, subcontractors, and other costs that are not counted daily. Plus, every month W.W. Clyde does a job cost projection that presents a detailed look at what the firm expects costs to be for the entire project. “If it’s projected to be over budget or under budget, then we claim profitability based on those projections,” Okelberry says.
Gorman Brothers Inc., a paving contractor based in Albany, N.Y., does business a little differently. Gorman performs approximately 600 projects per year and many of them last only a few days.
Using laptop computers and USB broadband cards to access the Internet, each of more than 20 field personnel on a daily basis enters labor hours, equipment hours, materials used and production achieved. To do that, the company employs a program called hh2 Web Services (Remote Payroll and Field Reports) by Digital Business Integration. Job cost information is keyed into a computer just once, by the foremen, says Barbara Morse, Gorman’s IT Director. Labor and equipment hours are imported to a database, then into Sage’s Timberline Office program. The hh2 program integrates seamlessly with Sage Timberline Office. An administrative person reviews each day’s job costs and makes sure that the foremen fill out their reports properly.
Prior to using hh2, Gorman used paper forms. Foremen had to find a fax machine or visit the home office. Handwriting was hard to read. The paper had to be reviewed, approved, and compiled. Then it had to be keyed into another database and analyzed by that database before being imported into Timberline for accounting purposes.
The payroll process now goes much faster. Long-time field foremen, not used to computers, like the hh2 system. “They said, ‘Oh, this is a lot faster than paper,’” Morse says.
Now, instead of working feverishly on Thursdays to meet a direct deposit deadline, Gorman is processing payroll on Wednesdays. Friday is payday for the previous week. “The savings there was substantial,” Morse says. “Now we have more information sooner, which is also good for the sales people who are estimating and managing jobs. The payback has been well worth the cost. The seamless integration with hh2 and Sage’s Timberline Office has made those systems much more efficient.”
Gorman’s sales people use Timberline software to estimate projects. “That works well for us,” Morse says. “We put that in several years ago and it was an awakening for the sales people because when they did their estimates manually they often didn’t consider overhead costs like the time to transport equipment from job to job.”
Gorman accounted for those costs through job cost accounting, but they really weren’t included at the beginning of a project. Now all costs are included and the sales people have a more accurate price per unit of pavement to start projects.
Morse says Gorman built the estimating database by individual paving processes. Timberline calls each paving process an assembly, or it could be called a model. There’s a model for a certain chip seal process, another one for the NovaChip process, another one for FiberMat, and so forth.
“If the sales person has a customer who is just interested in FiberMat process, they’ll just pick that model, and the software asks them certain questions,” says Morse. Many of the questions are take-offs from the project design: length, width, square yards, hours per day worked, estimated production per day, and so forth. Using those numbers, the software produces a unit cost, say per square yard, for that pavement process.
In turn, Gorman exports those estimates out of the estimating software and imports them into a database that’s in Microsoft Access. “We compare those estimates to actual costs that happen in Timberline,” Morse says. “So in Timberline you get costs from payroll, costs from accounts payable, costs from equipment, and so on. We compare all those costs with what the sales person estimated the project to be.
“We’re starting this new commitment process,” Morse says. “If I’m a salesperson and I’ve got a customer who is 95 percent sure he’s going through with a project, I will enter the estimate, called a projection, which will get imported into our job cost database.
“From there, now every week, sales people are going to get reports where they can compare their estimates against budget,” Morse continues. “So variances from budget will be reviewed on a weekly basis rather than monthly, as we did before.” v