This article was published in the Construction Financial Management Association (CFMA) Talking Heavy newsletter - June 14, 2021.
How to align real-time field tracking values with actual accounting values over the duration of a project
Managers tracking actual performance against plan to keep heavy construction projects under budget and on schedule face a dilemma when it comes to data. A true-up feature within their field tracking application solves the problem.
Waiting weeks for reports from accounting threatens timely operational adjustments. Daily reporting driven by field log data, on the other hand, is not accurate to the penny, and this gap between figures reported in the field and final accounting figures can widen over the duration of a project.
Truing up, or reconciling, values periodically corrects these natural deviations in values between the field tracking and accounting systems. This enhances the ability to get real-time reporting on productivity, labor and equipment hours, material utilization and other variables.
Differences between “operational” values captured in the field and actual accounting values are usually small. Over time, and especially on larger projects, however, the gap grows and skews the accuracy of the field software for measuring performance versus plan. True-ups keep the two systems in sync.
The gap between actual accounting values and field log values can grow over the duration of a project (left). Running true-ups periodically (right) aligns those values and improves the reporting accuracy of field tracking software.
Why not just rely on accounting?
Accounting or ERP programs are the system of record. They give a detailed picture of exactly what was spent and what was earned, but achieving that level of accuracy inflicts the cost of time. Invoices and data must be processed and validated before final reports can be produced. That typically takes weeks. Sometimes it takes a month or more.
What software for field tracking lacks in to-the-penny precision, it makes up for in immediacy. Values entered in electronic field logs populate reports and dashboards to provide a summary of project status daily, or even in real time. A field-centric format, rather than a financial format, makes it easier for project managers, supervisors and foremen to get the data they need to make decisions in the field. Timeliness lets them adjust operations right away, when there is still time to protect profitability. They do not have to wait weeks for an accounting report and then spend hours trying to interpret it.
This sample summary report from a field tracking application makes it easy for managers in the field to see where a job stands versus plan for four tracking accounts prior to true-up.
Why do values vary?
Differences between values recorded in a field log and in the system of record are expected, and it is easy to understand why they occur. Field logs, for example, usually record a blended average hourly rate for types of employees such as laborers or operators. Individuals, however, earn different amounts based on tenure or other factors. Precise amounts are recorded when payroll is processed.
Likewise, using values from the original estimate for materials when they are delivered, or work by subcontractors when it is performed, is close enough for field tracking. Actual costs can vary, and final accounting cannot be completed until the invoices are processed.
Other items typically “trued up” include quantities, costs for rented or owned equipment, trucking costs and any T&M (time and materials) revenues.
How is True-up Done?
To bring the field tracking application into alignment with the figures in the accounting system, contractors export actual data from their accounting or ERP system into a CSV file. This data is organized according to the common tracking accounts for labor, equipment, materials or other items.
Running a true-up shows variations between the field log data and the accounting data and makes corrective entries to update the field tracking software.
Field tracking software with true-up functionality can then prompt them to import the CSV file, select the effective date and map columns to the equivalent fields in the field tracking program. Operational and accounting values are then compared, variations are identified and corrective entries are created. At this point, original values from the field logs and the adjustments from the true-up are reflected in the field tracking reporting and dashboards. This provides an accurate, reconciled picture of where the project stands.
Following the true-up, the activity summary has been updated to reflect the most current, actual data from the accounting system.
Contractors using field tracking software with these capabilities will typically true-up values incrementally as needed over the course of a project. They can also set up a protocol in their systems to trigger a true-up to occur automatically at set times, such as every week. The software can true-up values at the account level or the account tracking level, and the true-ups can be easily deleted, if any errors in the file transfer are detected.
Specialized software for field tracking and analysis provides mangers in the field with timely data they need to make operational adjustments right away to keep projects on track. Deploying true-up on a periodic basis increases the precision and effectiveness of that reporting by keeping the data on productivity, labor, equipment and materials in line with actual values from the accounting system of record over the entire length of a project.