Connecting Financial Management, Estimating and Operations

February 1, 2024

Read the article in Construction Outlook - June 2023

Greg Norris - B2W Software
Creating a Technology Triangle
Entering the same data more than once and managing it in multiple places are well-known barriers to the efficiency, accuracy and easy access to timely intelligence contractors strive for. This is an area where smooth integration between the systems used for financial management, estimating and operations pays big dividends.
Accounting/ERP systems, estimating software and applications for key operational workflows like scheduling, performance tracking and equipment maintenance are all essential. At the most successful construction companies, they play complementary roles. Accounting is the authoritative system of record where profits and losses are recorded.
Estimating and operations are where profits are won or lost. Technology to manage these functions sets contractors up with potentially profitable bids and helps them execute according to plan to realize that potential.
Without connectivity across these three areas, employees typically enter and manually reenter bid data, cost codes, labor and equipment hours, materials and a range of additional information into the various systems at different times. Each instance creates extra work, opportunities for errors, and lag time in making the information available to someone else in the organization who could use it.
A cohesive, connected approach essentially allows estimating, operations and finance – and their respective teams – to communicate with a common language across the various phases of a project.

Communication between estimating and accounting

The ability to transfer resource data from an accounting/ERP system to an estimating system is important. This ensures that that labor rates, material and equipment costs, information on vendors and subcontractors, and other information is up to date when bids are generated.
Likewise, when contractors win a bid, estimating software should allow them to transfer details of the estimate directly to the accounting/ERP system to create a budget. This eliminates the need to manually reenter the job into accounting, saving time and preventing discrepancies between how jobs were bid and how they will be billed and accounted for.
These data transfers between estimating and the accounting/ERP system can be accomplished through an import/export function. Contractors should look for software suppliers that have set up specific capabilities that help their systems work together. Alternatively, web services or API (application programming interface) capabilities can be established to bring automation to the transfer process.

Eliminating manual job setup

Estimating software can also send information needed to set up schedules and field logs directly from the bid to the applications used for those workflows. This data can be organized with as much, or as little detail, as a contractor requires according to tracking accounts that relay the estimated labor cost and hours, equipment cost and hours, material types with quantities and costs, and the subcontractor and vendor information.
Some contractors instead opt to first transfer this bid data from estimating to their accounting/ERP system and then to operations. In both workflows, compatibility across the systems allows them to bypass manual job set up and duplicated effort.

Transferring data between operations and accounting

Field tracking software should allow field employees to capture daily production quantities, labor hours, equipment utilization, materials and other data and transfer it electronically to the accounting/ERP system. The information drives billing and financial reporting.
This direct transfer is especially valuable for payroll, as it can expedite processing significantly, while reducing errors and staffing requirements. Personnel previously burdened with data entry can instead move to a role of checking data rather than keying it in, freeing them up for more valuable tasks.
Reporting is another area where financial and operations systems should complement each other. Field tracking software can provide immediate reporting on how jobs are performing versus a plan or estimate daily or even in real time. These reports are accurate enough to guide leaders in the field in making timely operational adjustments.
Reports from the accounting/ERP system are equally valuable and serve different purposes. They will come out later, but will be accurate to the penny, reflecting any after-the-fact adjustments in billing or rates for the specific job. A ‘true-up” function between accounting and operations systems is a nice feature to have, particularly for larger or longer jobs, as it can periodically bring these reported values into alignment over time.

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