Death to the Standalone Spreadsheet? Construction Financial Software can help Companies Save Millions
Large construction projects typically employ an army of workers – for instance, the 2012 Olympic Park required up to 14,000 construction staff. And as with any army, organisation and discipline are vital to ensuring a successful outcome.
Every military general knows that intelligence is vital to ensure that resources are sufficient and the supply lines are secure enough to help the troops on the frontline carry out their jobs effectively. In the commercial world, the objectives and stakes are financial, but duff intelligence can be fatal to the bottom line.
Within a construction firm, a number of members of staff require different sets of information to carry out their duties. A commercial manager may need one set of reports to make decisions while a member of the finance department needs to see another set.
During the procurement process, all members involved in responding to a tender need a firm grip of their own figures. This helps to ensure that the estimate of costs is as accurate as possible, ensuring that the bid price is as low as it needs to be to win the contract, but as high as it needs to make a profit.
Traditionally, large construction companies have produced a number of reports covering different aspects of a project. Purchasing data reports can provide information on what materials have been bought from what suppliers on what date. Site managers can use separate reports to assess the progress of work and when the plant might become surplus to requirements, allowing them to make a decision to end a hire period.
Multiple reporting causes problems
But there are problems with this system of multiple reporting. Firstly, a commercial director can end up looking at data in a completely different context to the financial director. Picking out only the information they need, without referring to other reports, one staff member can end up with an understanding of the project that is completely different to that of their colleagues.
In addition, the process of producing reports takes time. Often, update reports are only produced every four to six weeks, which means that any developing problems are spotted only well down the line. Also, it is sometimes difficult to ensure that reports refer to exactly the same period of time, meaning that the state of a project becomes unclear and difficult to assess.
This can lead managers into a false sense of security – fatal flaws in the figures are discovered only at the very end of a project when, of course, it is far too late. In 2003, a mistake in one cell of a spreadsheet cost a US construction firm $3.7 million.
Construction is a transaction-focused process, so such problems can have a serious impact on the viability of a project and, in turn, the whole business. A company which identifies a gap between its understanding of operational transactions and the outturn business intelligence is a business which is disconnected from its own processes.
The information a company holds should give an objective picture to help managers successfully navigate choppy waters. But too often it can muddy the picture.
For emerging companies, the issue is particularly stark. Such companies, which are often operating on smaller margins, need effective reporting to minimise errors, spot risks more quickly and even identify areas where the company can grow.
Bridging the disconnect can require a completely fresh approach. While spreadsheets and monthly reports have their place, construction financial software allows companies to truly make the most of the intelligence they have at their fingertips. If all members of staff input their figures in real-time into the system, reports can be pulled off as and when required, without having to wait for figures to be compiled and distributed before analysis.
While tailored reports can still be pulled off the system and discussed in face-to-face meetings, each staff member can be allocated different access rights to view the information that they need online. So instead of having to wait a month or more to discover whether the project is making money, construction financial software allows errors and changes in circumstances to be spotted quicker, flagged up and acted upon.
Such systems also provide benefits for business security. While the system can be accessed remotely and on mobile devices, confidential information is displayed only to the staff with the relevant permissions. And if a laptop gets stolen or accidentally left on the train, there is no danger that vital spreadsheets disappear with it. The data is all held in a central repository, meaning that it can never be lost.
Not only does construction financial software encourage the secure sharing of best practice, it provides confidence within the company that management are making decisions based on the best information to hand.
Conversations between staff members are better informed, helping drive intelligent decisions and profitable bids and projects. In short, the software can produce “one version of the truth” that can be displayed differently for the purposes of each member of staff. And that’s half the battle already won.
Remember: Make sure you have the right software to create the reports that you need. Find out if you have in the guide ‘5 signs that your construction accounting software doesn’t fit your company’.