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Accounting Accounting Software Construction ERP Software Features Job Costing

Why Forecasting Project Costs Is Important For Your Construction Business

From day one on a construction project, the number one question everyone has is whether the project will meet the expected budget. You can wait to answer this question at the end of the project when you can’t do anything about it, or you can assess where the project stands as you progress through the work, allowing you to act proactively if an overage is found. In order to assess the project costs before completion, however, you must forecast or predict the potential costs to complete the work.

A forecast to complete the project is a well-educated guess of how much you have left to spend to finish the work. It’s based on the current costs, the percentage of the project that’s complete, and what’s remaining to be finished. The better you are at tracking your costs, the easier it will be to predict how much is left to spend.

Before we get into how to forecast final costs on a construction project, let’s look at why it’s important to know how much the remaining work will cost you.

The importance of forecasting final costs

One of the primary benefits of forecasting costs is that you get an early warning if a project is losing money. Since many contractors rely on their profits to fund future work, losses on today’s job can quickly lead to real problems when it comes time to start the next one. Without adequate profits to fund the work, contractors have to rely on alternative financings, like bank loans or credit cards, that ultimately cost them more in the long run, further reducing profits. It’s a never-ending cycle of higher costs.

Predicting final costs also allows companies to identify their future cash flow needs and address any issues before they become real problems. If contractors know that they won’t have enough money coming in to finance their payroll or other necessary business expenses, they have time to move money from investments or seek lower-rate financing options.

Sometimes forecasting final costs can help contractors identify change orders that have been missed or haven’t been processed yet. If a change hasn’t been made to the project budget but extra materials have been paid for or work has been completed, it may show up as a cost overage. The contractor can then follow up with the owner or architect to determine the status of the required change.

Finally, forecasting allows companies to learn valuable lessons about the accuracy, or inaccuracy, of their estimates. If a contractor is always going over budget on labor costs, they will see that sooner and be able to adjust future budgets accordingly. This will make their estimates more competitive and lead to more work.

How to forecast final costs

One of the most important things you can do to help forecast final costs is to monitor costs as you go. If you’re relying on data from a single point in time to predict costs, it can be difficult to make the appropriate assumptions and gather enough data to accurately predict future costs. By tracking costs as you go, with an accounting system that supports job costing, you’ll be able to monitor the project’s progress and see cost patterns that may not be visible with a static report.

To forecast final costs, you’ll be looking at three data points: the amount remaining in committed costs, the amount remaining in your budget, and historical costs. Based on these three data points you should be able to predict, with a reasonable degree of accuracy, the final costs for a specific scope of work. Let’s look at an example to help illustrate how these data points help predict future costs.

Let’s say we are forecasting costs for the concrete scope of work on a project. The contract with the concrete subcontractor was originally for $100,000, and they have billed $80,000 so far, leaving $20,000 to bill. This is the amount remaining in committed costs. Based on our original budget, we know that we still need to purchase some rebar that wasn’t part of the concrete contract for $5,000. We also know, based on reviewing past projects and the amount of work left to be finished, that we have about $30,000 in work remaining to be completed. So, how do we predict what our future costs will be?

Remaining committed costs:                       $20,000

Remaining in the budget:                             $5,000

Historical data:                                                $30,000

The answer will be somewhere between $25,000 and $30,000, depending on whether we are looking at it for cash flow reasons or to assess what our profit margin is for this particular project. Either way, we are using the three data points to inform our prediction and will continue to improve the accuracy of each prediction as we analyze the data on more projects.

What to do when you’re over budget

The second most important question, after “Are we on budget?” is what to do when you’re over budget. The answer depends on why you’re over budget.

  • If there has been a change in the project scope that affects the budgeted costs but hasn’t been reflected in a change order yet, that could cause an overage.
  • If there was an unforeseen condition, such as bad soil, that caused additional costs, this may cause an overage.
  • Or, if the general contractor or a subcontractor made an error in their work, that could also cause a budget overage.

Depending on the cause, the contractor will need to either ask for a change order or make an internal budget transfer. The internal budget transfer will move excess monies from one line item of the budget to another to help cure the overage. It’s important to note the reason for the transfer for future lessons learned.

How Premier helps you predict future costs

Premier has made forecasting future costs in your projects easier with its forecasting module. Using this module, project managers can account for unexpected costs and request internal budget transfers to cover overages.

To see how Premier can help keep your projects on track, request a demo.

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Accounting Accounting Software Construction Job Costing Trends & Technology

Time is Money: How Premier Construction Software Can Save You Both

While a project can take months or years to complete, the reality is that construction moves fast. A company that knows time is money and knows how to make the most of both is on the path to success.  Premier Construction Software can help with time and money, and in this guide, we’ll discuss how it can save your company both. 

How Premier Can Save Time and Money

Would you put trust in a software program that can save your business both time and money? It seems like a no-brainer. That’s what our construction ERP solution was designed to do, and the following features or abilities are just some of the ways that Premier can impact your company.

Automated Processes

All of the data entry, report creation, and updating required to keep a construction business on track requires a lot of time. One of the most significant benefits of using Premier Construction Software is its ability to automate processes. 

When a user inputs or changes a value in the system, the software knows to update every related value affected by the change without a person having to track down the specific pay app, change order, or report.

One-click updates might seem the big time and money saver here, but consider this: Updating reports and budgets manually introduces multiple opportunities for human error. The time it takes to realize there is a mistake, track it down, and change it can be tremendous. And, should that mistake affect the project, it may translate to real money wasted. 

Customizable Workflows

The amount of time it takes to get a document, budget transfer, or change order in front of all the people that need to see it is often time wasted. With customizable workflows, users can design a free-flowing system that automatically moves important documents from person to person.

Ultimately, these custom-designed workflows ensure that important documents or changes make it through all of the required stops faster. Whether these documents need approvals, modifications, or updates, the company will receive feedback in less time using automated workflows.

Cloud-Based Storage

Upgrading document and drawing storage is a great way to save time and money. While most construction companies have evolved away from running to the shop every day for the latest revisions, their access to these documents is still antiquated and slow. 

For example, loading drawings onto a drive and then having to access those drawings with a computer is slow. Or, attempting to send large files through email only to have it take forever. And what if that drawing wasn’t the most updated version? Or just the older version the other party was looking for?

With cloud-based storage, contractors can move past those old, slow document management solutions. Premier Construction Software allows users to access the cloud for documents, drawings, photos, pay applications, and more from any internet-enabled device. It’s one of the fastest ways to share information with a team, and it can save time and money right away.

Report Generation

No one wants to blow that meeting in front of the investors or stakeholders, but time spent compiling data for a custom report may be a waste. Premier has the ability to automatically generate important reports with the very latest updates, as well. 

Not only are these reports easy to generate, but they take into account all of the most up-to-date information. Rather than stressing out about that report all week, it’s possible to simply click a button to create a report that’s not only instantaneous but also more accurate than anything you could compile.

Electronic Signatures

The construction world runs on agreements and signatures. Waiting to get those signatures on a paper agreement takes lifetimes (or at least it feels that way). The documents either need to be sent via courier or downloaded, printed, and sent back. Or, the agreement has to wait until a meeting can be scheduled for everyone to review the documents together before anyone can sign anything.

With electronic signatures, this entire process can take a fraction of the time. Documents can be sent electronically, which recipients can open from any internet-enabled device. Once they’ve reviewed the contract, change order, proposal, RFI, pay application, or any of the many compatible docs, they can sign electronically. This instantly updates the status in the system, cutting down on data entry or errors, and saving time and money.

Subcontractor Management

Minimizing the amount of time spent collecting lien waivers, monitoring compliance, calculating payment retainage, and ensuring everyone gets paid costs contractors and project managers lots of valuable time. But with a construction ERP like Premier, which is designed to make subcontractor management easier, users can save time and money.

For instance, Premier can track licensing and insurance compliance documents and alert the users and sub to possible expiration. It can also automatically generate subcontractor agreements and change orders instantly and ensure that those documents make it to the sub for an electronic signature. It’s also easy to set up automatic retainage for each payment, as well as distribute payments automatically (and accurately) by setting up pay-when-paid AP. 

Premier is All About Strengthening Your Business

Premier Construction Software’s goal is to strengthen your business using simplicity and automation. This means less time spent doing the remedial tasks that are always prone to error. When you’re not paying them to handle these tasks, you’re saving money and freeing them up to be creative and focus on projects that create more revenue for your business—and that’s a recipe for success. 

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Accounting Industry Insight

Understanding Change Orders in Construction

Every company sees change orders slightly differently. Some see them as a time and resource vacuum, while others see them as opportunities to make more money. And the fact that there are many different outlooks on the subject makes truly understanding change orders in construction and the impacts they have a challenge. In this guide, we’ll take a look at these important documents, what they are, and how to manage them.

What is a Change Order?

A change order is a document used to modify the original contract on a construction project. These documents detail changes in the scope of work for the contractor as well as any adjustments to the amount of money the contractor will make on a project. They’re essentially miniature contracts (sometimes with not-so-miniature impacts) that steer the project after the original contract is awarded.

For example, let’s say a contractor won a bid to build an apartment building with eight identical apartments inside. At some point during the project, the project owner realizes that the bathrooms could benefit from half-walls alongside the toilets. The project owner will approach the contractor, they’ll discuss the details, and the contractor (or project owner) will draw up a change order that states the contractor will build half-walls in the bathroom for an agreed-upon price. It’s simply a contract within a contract that denotes a change in plan, materials, or pricing. 

Change Orders for Additional Work

Change orders for additional work require more time and resources. For that reason, these change orders will increase the total cost of the project, as well as extend the timeline. Impacted contractors must ensure that the change order reflects these changes to avoid issues when dealing with these types of change orders.

Change Order for Subtractions

Change orders that omit certain aspects of the agreed-upon original contract have the opposite impact on the cost and timeline. Under these change orders, project owners and GCs may expect the price and timeline to decrease. 

What Causes Change Orders?

Change orders can be caused by project owners, designers, inspectors, contractors, material suppliers, and many other possibilities. 

  • Project owners can change their minds about the budget. 
  • Designers can add design elements or colour changes. Inspectors may notice code issues that require the designer to go back to the drawing board. 
  • Contractors might not be able to do the job for the agreed-upon due to unforeseen circumstances or site conditions. 
  • Suppliers might not be able to get the chosen material.

Any one of these situations would alter the original plan. They could impact the budget or the timeline, and these changes need to be documented and agreed upon with the parties responsible for the changes. How these changes impact the project depends on what they involve.

Change Order Protect Contract Parties

Change orders can be a headache to manage, but they protect contracted parties. These documents take modifications in the course of the project and turn them into clearly-understood directives with legal backing.  

Contractors know that once they have a change order, they can move forward with the project without fear that they’ll be breaching the contract. They also know that if the project owner or designer adds something, they can adjust the timeline or project price and that they’ll have lien rights if they don’t get paid. 

Project owners know that they can alter the contract to subtract an item or design element. This will likely lower the amount of money the contractor was expecting, but the document keeps the contractor from suing or placing a lien on the project for non-payment. 

How to Manage Change Orders

Managing change orders is the most difficult aspect of these documents. Knowing how they’ll impact the budget and timeline, getting the correct signatures, communicating changes to stakeholders, and changing everything in the system at one time are all difficult tasks to coordinate. 

Budget Impacts

Change orders can cause ripple effects on a project budget. For example, if a particular material isn’t available, but a more expensive item is, it’s important to know how much that will impact the project budget before moving forward.

With construction ERP software, many of the best programs offer customers a chance to see how the change would impact the budget in real time. These systems allow users to lock original estimates or shift budgets without permanent changes. This also makes communicating the change’s impact much easier. 

Timeline Overruns

Change orders are often to blame for the project running off track and behind schedule—whether it’s true or not. But, changes typically impact the timeline a little, as they usually mean more or less work. It’s knowing how much it will throw the timeline off track that makes a difference, and the change order should reflect it. 

A construction ERP can help determine how much of an impact the change order will have on scheduling and the project delivery date. This can help the project owner decide if changing the timeline is worth the cost.

Getting Approvals

Getting approvals and signatures is always a challenging aspect of construction, and change orders are no different. Ensuring that the right eyes are seeing the change order and then get their signature can seem impossible.

A construction ERP can simplify this issue. By setting up automated workflow and capturing electronic signatures, the change order process moves along faster, saving time and money. Users can access the system from any internet-enabled device in the world.

Automated Changes

Once all of the approvals and signatures are secured it’s time to make the actual changes. Entering the change orders into whatever accounting software program the company uses is all the opportunity that’s required for multiple data entry-related issues like human error, accuracy, and a lack of thoroughness.

The right construction ERP software can handle this challenge, making automatic changes to every line item affected by the change order. With the click of a button, the changes will ripple through the entire system, automatically updating budgets, billing amounts and timelines, and more. 

All without manual data entry.

Communicating Changes

Communicating changes to the contract to company stakeholders requires data and reports. They want to know what’s changing, how it’s affecting the project delivery, and how much it’s going to cost the company.

Construction ERP software can handle those questions and more. With the ability to generate reports in real-time, project managers can provide stakeholders with the latest, most accurate information regarding these changes. 

Change Orders are Necessary, But They Require Management

Change orders are necessary, as almost all projects go through one change or another after signing the contract. But knowing how to manage these documents is important. By relying on the right program, like Premier Construction Software, contractors can minimize the negative impacts these documents have on their projects. And isn’t that what it’s all about?

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Industry Insight Tips & Advice

Pros and Cons of Working From Home

 

As pandemic restrictions are tightened again, and some areas go back into lockdown, workers are again being asked to work from home when possible. While construction companies are used to working from many sites, the office staff is generally located in a central office. Changing venues for office workers has its advantages and disadvantages. Here are some of the benefits and challenges for construction company employers of having workers work from home.

Benefits to employers

1. Higher productivity

When working from home, employees are often more productive than they are at the office. There are fewer distractions from coworkers stopping by to chat or ask questions. It’s easier to shut out time-suckers like email notifications and unnecessary meetings. A FlexJobs 2020 survey found that workers who thought they were more productive at home, were. Respondents cited fewer interruptions and quiet working environments as part of the reason for their increased productivity.

2. Recruit from a larger pool of candidates

When location isn’t a factor when hiring, companies can expand the pool of possible candidates for open positions. This can lead to hiring more highly skilled workers for key roles. When companies hire the best of the best, their products and services improve in quality.

3. Reduce turnover

The flexibility inherent in a remote job allows workers to stay with them longer. For example, if an employee needs to relocate because of a spouse’s job change, instead of quitting they can easily continue working for the same company from another location. Companies can keep key talent when there are fewer constraints on where they perform the work.

4. Reduce overhead costs

For some companies, overhead costs like office rent and supplies can be significantly reduced or even eliminated by employing a remote workforce. With fewer overhead expenses, profits increase.

Employees also save money. Since they don’t have to commute anymore, they save on gas, car repairs, parking, and lunches. This savings translates into more of their hard-earned money staying in their pockets.

5. Fewer sick days

Spending less time around other people, coworkers, and the public, results in less sick time. Workers reduce their chances of catching viruses, colds, and the flu. With less downtime, workers are more productive and are able to get more accomplished over the long haul.

Challenges to employers

1. Collaboration and communication

As contractors know, when teams are spread out over long distances, it can be difficult to maintain communication and collaborate with team members. Impromptu meetings and discussions are more difficult to have when workers aren’t in the same physical location.

Luckily there are several tech applications that can assist teams in maintaining their connections. From online messaging apps, like Slack, to videoconferencing programs, like Zoom, it’s easier than ever for teams to keep in touch when working remotely.

When it comes to accessing collective data, online SaaS programs allow everyone to get the data they need from any device with an internet connection. This ensures that everyone has the info they need when they need it. Using SaaS software also allows office teams to stay productive from wherever they’re working, as well as ensuring everyone is working off the same real-time data.

2. Distractions

While there may be fewer distractions at home than in the office, they are still a struggle to deal with. Children, pets, and household chores can quickly steal employees’ concentration. Workers must do their best to set boundaries and structure their work environment and schedule to reduce distractions as much as possible.

3. Technology struggles

Technology can be difficult to deal with, whether it’s at home or in the office. Programs crash, computers die, and internet connections are lost. While these problems can’t all be eliminated, there are some things that can be done to help prevent them.

  • Ensure that employees have the latest in hardware and software installed on their work-provided devices.
  • Develop a schedule for regularly replacing hardware every 2 to 3 years.
  • Employ IT workers or hire a company to provide remote service to all employees.

4. Time Management

Without the structure of the office environment to keep them on task, some workers may struggle with managing their schedules when working from home. They may lose track of their work time and blur the lines between home and work life. This can lead to added stress and burnout.

Allow workers to set their own schedules when possible, so they can effectively manage their work and home life. Encourage them to stick to their schedule as much as possible, with only occasional changes under special circumstances.

5. Dress code

When working from home it can be tempting to dress more casually than when working in the office. While an occasional day spent working in your pajamas is acceptable, workers need to be dressed properly the majority of the time. Clothing can be both professional and comfortable, keeping workers in the correct mindset when they’re on the job.

As construction workers and companies continue to navigate the ever-changing pandemic restrictions, it’s best to remain flexible, as this helps reduce stress. Teams can function successfully when working remotely with the help of technology and a little patience.

 

Check out Premier Construction Software to see if it fits your company’s strategies and goals.  Our construction management and accounting software provide teams with the tools they need to take advantage of these technologies. Schedule a demo by contacting us today.

We’re more than just construction financial software. We’re built to help your business.

Author Biography:

Dawn Killough is a construction writer with over 20 years of experience with construction payments, from the perspectives of subcontractors and general contractors. Dawn has held roles such as a staff accountant, green building advisor, project assistant, and contract administrator.  Her work for general contractors, design firms, and subcontractors has even led to the publication of blogs on several construction tech websites and her book, Green Building Design 101.

Categories
Industry Insight Tips & Advice

Go Mobile: 5 Reasons to Transition to Mobile Devices for Construction Reporting

Construction is a unique industry, where most of the work takes place off-site. This can lead to unique communication challenges, many of which have been reduced thanks to mobile technology. 

In the 2021 Construction Technology Report, the annual survey found that every year since 2018 over 90% of respondents is using smartphones daily. During the same period, tablet use has been increasing. Construction companies are increasingly recognizing the value of going mobile.  

Here are the top five reasons construction companies use mobile devices on the job, according to the survey: 

  • Daily reports 
  • Photos and video
  • Time management 
  • Safety management 
  • Drawing management 

While most companies are actively adopting mobile technology, some still rely on tried-and-true paper documentation. Due to the nature of the work, this can lead to project delays and added costs due to rework. Adopting mobile technology has several benefits for construction companies. 

Benefits of going mobile

  1. Better communication

Construction projects require almost constant communication between team members and the office. A lapse in communication can lead to errors and rework. Using mobile devices allows workers to communicate with the office and other team members while still in the field. There’s less wasted time in meetings and going to the office. Improved communication leads to better outcomes in the field, reducing errors and rework. Team members’ questions get answered quickly and efficiently without downtime. 

  1. Access real-time information

Many mobile apps allow field workers to provide input to and pull up reports, drawings, and emails without leaving the field. Project managers can see budget reports at any time, so they know where the project is. Supervisors can access productivity reports and compare them to past reports. Team members don’t have to wait for reports to be generated, they can access them when they need them. This allows them to make better project decisions quickly, avoiding schedule delays. 

  1. Improve productivity

With access to data at their fingertips, workers spend less time in meetings, going to the office, and on phone calls. They can spend their time actively working on the project, instead of looking for lost documents, timecards, or other paperwork. Productivity is maintained and efficiency is improved through the use of mobile technology. 

  1. Improve organization

Mobile apps provide document management, helping workers find the information they need when they need it. Workers no longer have to spend time looking through multiple folders on a shared drive or combing through files in a truck. Drawings are automatically marked with revisions, making it easy to know when you’re working with the current version. This helps prevent mistakes due to lack of communication and reduces rework. 

  1. Integration

Integrating information between the field and the office improves productivity, prevents mistakes, and improves organization. Workers spend less time reentering data into multiple systems and are able to be more productive in their work. Data entry mistakes are reduced, and information is available at the touch of a button, instead of waiting for lengthy reports. 

Premier Construction Software allows teams to communicate in real-time, from the field and the office. This improves communication, gives teams access to real-time data, improves productivity and organization, and is completely integrated. The mobile connection saves companies time and money on slow paper processes. It helps ensure that everyone is working from the same data at the same time. 

If your company is ready to go mobile with your project management and accounting software, contact us for a demo or to answer any questions. 

Author Biography:

Dawn Killough is a construction writer with over 20 years of experience with construction payments, from the perspectives of subcontractors and general contractors. Dawn has held roles such as a staff accountant, green building advisor, project assistant, and contract administrator.  Her work for general contractors, design firms, and subcontractors has even led to the publication of blogs on several construction tech websites and her book, Green Building Design 101.