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Choosing and Implementing an ERP System for Your Construction Business

As seen in the Boston Business Journal

One of the most difficult decisions a company faces as they commence operations or are in a period of growth is which accounting system to choose to track their activity. Many smaller companies starting out opt for QuickBooks as this is a cost-effective option which takes little time and effort to set up. It also possesses the basic required areas to invoice customers, run payroll, pay vendors, and provide standard financial reporting. QuickBooks Enterprise for Contractors also has the capabilities to track job costs, measure profitability, and generate reports to show estimated revenues based on cost to complete. However, as contractors grow and want to implement project management software that will link to their accounting system, many will opt for a construction specific enterprise resource planning (ERP) system and navigate away from the QuickBooks platform.

Evaluate available options

There are plenty of options out there and it is important for contractors to do their research and demo several of these systems with the software vendor development teams to find what works best for their company. Certain systems are better suited for specific industries, size of the company, number of employees. It is important to get an understanding up front before committing to a significant outlay of cash, time, and effort to implement the new system. Most contractors end up moving to a new software as they were previously performing workarounds and reconciliations outside of their legacy accounting system. The end goal should be to have the new system perform these processes and avoid wasting valuable time and duplication of work.

Consider team integration

The major benefit of a construction ERP system is integrating the project management and operations with the financing and accounting modules to record the transactions. A cost-to-cost input method measures progress towards completion for each contract based on the ratio of cost incurred to date to the total estimated cost to complete. As many contractors recognize revenues on this method for its contracts, any changes to the budget by project management will have a direct impact on revenues recorded by the accounting team.

This also demonstrates the importance of including the whole team (estimators, project managers, and accounting staff) in any weekly or monthly job meetings as any job budget changes will have an effect on each department. Including the estimators in these meetings may provide opportunities for change orders if items were missed by the job owner in the initial drawings. This prevents the company from assuming any additional costs to complete the work. As this is a full enterprise solution, it is imperative to include the entire enterprise team for the system to function at its highest level.

Assess enhanced data-informed decision making

Much of the accounting data that we live in is based on historical information. Typically, audited or reviewed financial statements are received anywhere from 90 to 120 days after year-end, so it always begs the question of whether it is timely enough to help management make decisions. Choosing a system that allows companies to utilize some of the key performance indicator features and add-ons of these accounting systems can help management more effectively track their important ratios and make timely decisions across all aspects of their business. Rather than utilizing just the budget to actual on the work in process schedule, the enterprise system will allow them to monitor additional items related to performance at the project manager level, rework rates that are driving up individual budgets, analyze operating cash flows at the individual job level, and assess other key performance metrics that can help make more informed decisions. These metrics can be reviewed in real-time rather than relying on historical data after a month-end close, which often becomes more important in the current uncertainty of the market.

Evaluate security features

The last and arguably most important feature in choosing and implementing an ERP system is security. While one of the benefits of an ERP system is having all modules and departments integrated with each other, it also provides an opportunity for cyberattacks as all information is stored in one place under one system. It is important to consult with your IT team and the software vendor to ensure that the proper security measures are in place to protect both the financial and administrative assets of the company. Setting up employee access limitations to access only the modules necessary to perform their responsibilities is important to protect these assets internally. The company should also look to perform penetration testing with their IT provider to help prevent and detect external threats to the system.

By integrating an ERP solution, it allows the company to centralize and perform each of their processes under one system. If properly utilized, the ERP solution should save the company time previously misallocated by the workaround performed due to the limitations of a generic accounting system. The opportunity cost of the time saved should provide a return on investment with timelier information and allocate resources to more important tasks.

For more ERP insights, reach out to a professional in our Construction Industry Practice or Corey McCusker at

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