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More Benefits Of Integrated Construction Software

Monday, November 22nd, 2010

In my last post I talked about how an integrated construction software system can automatically generate a job schedule from the data in the job estimate.

Now that you have a job schedule, and it is integrated with your job estimate data, there are a lot of very useful things you can get out of that, such as:

Allowance Schedule

Allowance items are items that your customer must shop for and select before they can be purchased and installed. Allowance items include things like floor covering, wall covering (wall paper, paint colors), ceramic tile, finish electrical and plumbing fixtures, cabinets, and appliances.

Allowance items are called “allowances” because their exact costs cannot be known until specific products have been selected. So, when the contractor writes the contract, an allowance amount is added to the contract for each allowance item. The customer is allowed to select any product priced up to the allowance amount, and must pay the difference between the allowance amount and the actual cost of the product selected.

An Allowance Schedule shows the list of allowance items, with the dates on which each item must be ordered in order to be received in time for scheduled installation.

How does the Allowance Schedule know when each item must be ordered?

When you create an estimate, you specify which items are allowances by checking a box to indicate an item is an allowance item. If the item has a product associated with it, the product information includes the order lead time – how much in advance the product must be ordered. Since the job schedule knows when the item is scheduled for installation, the allowance schedule calculates the “order by date” by subtracting the order lead time from the date of scheduled installation.

So, the allowance schedule gives your customer two very important pieces of information: how much they are allowed to spend for each item (or pay the difference), and when each item must be ordered to be received in time for scheduled installation. Giving your customer this information in a clear, concise form is good for both you and your customer. It gives your customer the information they need in order to keep up with the project schedule, and it gives you a very clear document to refer to when questions arise about the amount of their allowances, or why the job has fallen behind schedule (because the customer didn’t order the product on time).

While we’re on the subject of allowances, I should mention another very important feature of integrated construction project management and accounting systems. As we all know, construction clients rarely pick out allowance items for the exact price that you allowed in your contract, so obviously there is a need to account for the differences.

This means that records have to be kept of the allowance amount for each item, the actual cost for each allowance item, and a report must be provided to the customer to document the difference between the original contract amount and the actual amount after allowance items were purchased. Managing that manually is a pain and a lot of work, but a worthy integrated construction software system will do all of that for you automatically. How?

The system knows which items are allowances, so after you enter actual costs for them, it can automatically recalculate the contract amount, and generate an “allowance variance” report, which is a sort of automatic change order for allowance items that documents the difference between the allowance amount and actual cost for each item.

Draw Schedule

A Draw Schedule shows the dates on which draw (invoice) payments will be due, and the amount of each payment. The payments are based on the value of the job items anticipated to be completed within the draw payment period. A good integrated construction software management system can generate a draw schedule automatically. How?

Since the program knows the scheduled installation for each item, and it knows the estimated cost for each item, all you have to do is tell it the draw payment period (how often draws will be made – 15 days, or 30 days, etc.) and the program adds up all of items that are anticipated to be completed within each payment period.

Purchase Orders

Purchasing is an area in which an integrated construction project management system can be of tremendous benefit. Purchasing materials for a construction project is extremely tedious, time consuming, and error prone. And errors in ordering construction materials can wreak havoc on your job schedule.

Also, the difficulty in purchasing materials for construction projects results in a significant “hidden cost” that contractors just have to live with because there’s no way around it. What hidden cost? Let me explain…

If you need to purchase a single medium to big ticket item, you will logically shop around to see where you can get the best price. If you need to purchase a few items, you’ll still check around to compare prices and go with the supplier with the lower overall cost. But if you have to purchase hundreds of items for a job, and thousands of items for multiple jobs over a year, what are you going to do? Do you shop around for prices for every item you purchase? No. You do what all contractors do: decide on a materials supplier (based on whatever criteria that may be: the convenient location, or the because of the gal in the sales office) and stick with them.

Well, guess what: building materials suppliers know that you don’t have the time and resources to shop around for everything you purchase. So what does that mean? Let’s just say materials suppliers don’t feel any pressure to compete for your business based on pricing. This means that, at best, you may not be getting the best price for your purchases, and at worst, you may be getting gouged. But how would you know? And what could you do about it?

Well, you could start using an integrated construction management software system that allows you to store and compare product price lists for each of your vendors, and then automatically select the vendor with the lowest price when it generates purchase orders to purchase materials for a job.

How would you get all those product prices into the computer?

Other than typing them in manually, a good construction software management system will give you two ways to do that. One is that you should be able to automatically submit price quote requests to your vendors for specific items (with specific quantities needed) for a job, and you should be able to do that by email so that the vendor can do the data entry and email the prices back to you so you can import them.

Or, your vendor should be able to provide you with a computer file that contains their product price list, which you can simply import into your construction management system.

So, instead of sitting and staring at plans for hours on end to compile lists of materials to purchase, you can use an integrated construction project management system to generate purchase orders for you automatically. And if the construction system also integrates the job schedule data, then the purchase orders can be generated based on the dates on which the materials purchased need to be delivered in time for installation.

Work Orders

If you have employees, then you need to provide them with instructions for what work items they are assigned to at which job sites, and when. An integrated construction project management and scheduling system will allow you to assign employees (resources) to schedule items, and then automatically generate work orders to be distributed (by paper or email) to employees. Work orders can be re-generated as a result of last minute changes and updates to the job schedule.

Data Integration Caveat

Friday, November 12th, 2010

OK, I’m convinced! I definitely want to buy an “integrated” construction software system.

Well, not so fast.

Unfortunately, there is a fair amount of latitude taken among some construction software makers in how they define the term “integrated data”. Some software companies market their software as being “integrated”, when in fact it is only able to copy data from one part of the system to another. So the data still exists in separate instances for each functional part of the program. This is better than having to enter it into each program module from scratch, but not much better.

The problem with that approach is that, once you copy data from one module to another, you must make any updates to the data in all places where that same data exists. You can’t update the data in one module and then re-copy it to another module, because that will over-write the changes that you made to the data in the second module. So in systems like that, you are forever required to make updates to the same data in as many places as it exists.

That’s not data integration in our book.

The only truly integrated construction software systems are systems in which the data exists in a single central database, where all data is entered only once, where all information only exists in a single instance of itself (information is not duplicated anywhere in the system), and where changes to data entered in one part of the program are instantaneously reflected in all other parts of the program. That’s data integration.

So how do you tell if a software system is truly integrated or not?

One easy way to tell whether the data in a system is truly integrated is if the system is based on Microsoft Office (Excel spreadsheets, Word documents, Project schedules). If a software system is based on Microsoft Office, then the data is not integrated.

Software systems that are based on Microsoft Office (UDA ConstructionSuite, for example) are not integrated because the data can only exist in separate files (Word documents, Excel spreadsheets, Project files, etc.) You can copy data from one source to another, but, as described above, when you do, you are creating multiple instances of the same data. So when information about the job changes (as it does every day), you must update that information in every place that information exists in the system (and make sure you remember where it all is!). Also, when you make changes to information in one part of the program, since that data is separate from data in the rest of the system, those changes are not reflected in other parts of the system.

What about construction software that integrates with software made by other software companies, like QuickBooks? Is that really integrated?

Good question. There are many construction software companies who advertise that their system integrates with QuickBooks. But look out. QuickBooks integration is another issue that has multiple definitions. Many construction software systems advertise that they are integrated with QuickBooks when really they are only able to export data that can be imported into QuickBooks. Again, this is another example of duplicating data resulting in the problems that come from that: when information in your construction system changes, you will need to re-export it and re-import it into QuickBooks. Or you will need to manually make the same changes in QuickBooks that you did in your construction software system. That’s not real data integration.

But QuickBooks has it’s own database, so data has to exist in both systems, right?

Right. But QuickBooks provides other software developers with an “application programming interface” (API) which allows other software companies to write programs to automate the synchronization of data between two systems. So even though the data does physically exists in both systems, a program can be written to automatically and transparently maintain the synchronization of data between the two systems – in real time. That’s data integration.

So, if you are considering a construction software system that is advertised to integrate with QuickBooks, make sure you find out whether the synchronization of data between the two systems is managed automatically, in real time, or whether that has to be done manually, or in batch update mode.

Job Scheduling

Friday, November 12th, 2010

Benefits of Construction Software: Generating Construction Schedules

In my last post I talked about how an integrated construction software system can automatically generate customized documents for your customer with specific information about their job. Another thing an integrated construction software system should be able to do is generate a CPM job schedule. (more…)

Using Construction Software: Construction Documents

Wednesday, November 3rd, 2010

In my last post I talked about the benefits of using detailed job cost estimates, and then I started to talk about how using detailed job cost estimates (in an integrated construction software system) pays additional dividends.

An integrated construction software system is a system that shares all of its data between all of the systems functions. The advantages of using an integrated  system are:

  • You only enter each piece of information once.
  • Data entered in one part of the program can be used in other parts of the program.
  • The data entered in one part of the program can be validated for logical consistency for use in other parts of the program.
  • Because data is only entered once, there is no discrepancies between data in various parts of the system.
  • When data is changed in one part of the system, the changes are reflected in other parts of the system that may be affected.

Another benefit of using detailed job estimates in an integrated construction management system is that you can use the data in the estimate to generate a number of different types of documents for uses other than job estimating, such as:

  • create construction proposals, bids, and contracts
  • create construction schedules
  • request construction materials price quotes
  • request construction subcontract RFP’s or bids
  • create construction materials purchase orders
  • create subcontractor contracts
  • track construction costs
  • create construction invoices and AIA payment applications

Today, I’m going to talk about the first item, creating construction documents for your customers. This includes construction proposals (construction bids), construction contracts, and other construction documents that your customer needs in order to be kept informed about the construction process as it progresses.

“Keep my customer informed? Thanks but no thanks! I don’t want them breathing down my neck any more than they already do!”

Referring back to my Chicken And The Egg post, remember that your customers only fear what they don’t know. So, rather then leaving them in the dark, your relationship with your customer will actually be greatly improved if you give your customer clear and complete documentation about the job from end to end, on an ongoing basis.

And remember, you’re using integrated construction management software now, so this isn’t going to take any more work. Once you’ve created a detailed job estimate, you can just click some buttons and watch the program go to work for you…

The first thing your customer needs is a printed proposal that will clearly define the scope of the work you propose to do. There are a number of reasons both you and your customer need this, but the two main reasons are that a printed proposal gives you…

  • Something to refer to when questions arise about exactly what the customer requested and exactly what you agreed to do.
  • Something to refer to when questions arise about how much the customer agreed to pay for what you proposed.

So to create a printed job proposal, or contract, your worthy construction software system will take all of the information in your job estimate, and merge it into a “template document”, or “merge document” to produce a customized proposal or contract for your customer – complete with your company’s logo and letterhead.

A “template document”, or “merge document” is like a “mail merge” document in MS Word; it merges data from a data source (such as your job estimate, etc.) into standardized text, to generate a customized document for your customer, such as this: Fixed Sum Contract.pdf.

Merge documents allow you to develop and save standardized text that you can use over and over again to produce any number of different documents that your customers will need, or will greatly appreciate. A good construction software system will allow you to produce any of the following types of merged documents:

So, all of these documents can be produced by simply merging data that is already in your worthy construction software system into your pre-defined merge documents.

That’s pretty slick. But then what do you do with them? Print them out and hand them (or mail them) to your customers? Yes, you can do that, and a lot of folks still like paper these days. But a lot of your younger customers, being all into the internet and iPhone gizmos, might ask you to email your documents to them, or post them on the web so they can download them.

Well, your worthy construction software system should be able to do that too, without any fuss.

So see, here you have gone from simply having created a detailed job estimate to having all sorts of useful customized documents generated and printed, emailed, or posted on the internet for your customers, without doing any more work. Not so bad.

And along the way, besides having made your job estimating more accurate, you have also greatly improved your professional image!

Using Construction Software: Estimating

Monday, October 25th, 2010

As I mentioned in a previous post, there are many benefits in using construction software. Because the benefits are all interrelated, it’s difficult to start at one point and go from there. For example, creating a good estimate allows you to do better job costing, and better job cost information allows you to create better estimates.

So, rather than try to find the beginning of any sort of cost benefit tree and start there, I’ll just start with the beginning of the construction project management cycle: the estimate.

In the end of the day, the bottom line is whether you make or loose money. That’s why they call it “the bottom line”. Because it’s the bottom line of a ledger in which you record your income and expenses. If your income is more than your expenses, then you make money; if your expenses are more than your income, then you loose money. That’s the bottom line.

Some contractors operate like this:

1. Make a bid.
2. Do the work.
3. Invoice the customer and deposit the payment.
4. Check the bank balance. If I lost money, ask for more.

This is may be the best you can do if you don’t have a way to accurately anticipate and track your construction costs. The disadvantage of this approach is a difficult customer relationship, and more important, you don’t know where you are making or losing money, so you can’t do any better estimating the next job. So the cycle continues.

Construction estimating software allows you to:

• Create detailed, itemized job estimates,
• Track the actual costs and labor hours,
• Report the difference between estimated and actual costs – by item or summarized by job phases or cost categories – for one job or for all jobs.

This is the only way you can know whether you are making or losing money, and, more importantly, why you are making or losing money. But you can only do this if you itemize your job estimates.

Q: How detailed do you need to make your job estimates?

A: How detailed do you want to be able to track your costs?

The level of detail you need in your job estimate depends on the level of detail you need in tracking your job costs. For example, if you’re a general contractor, and you subcontract construction of the foundation, you will be OK estimating a lump sum for the whole thing based on your subcontractor’s estimate. Your subcontractor’s bill will be for a lump sum, so you’re not going to be able to track your cost for the foundation at any lower level of detail.

On the other hand, if you’re a foundation subcontractor, and a GC asks for a bid on a foundation, you could say (like a lot of people do), “I know what it costs to put up that foundation”, and give the GC a lump sum estimate based on what you know it costs for x number of lineal feet of foundation.

The problem with that approach is, what do you do after the job is done and you have less in the bank than when the job started? Just add something to your next estimate? OK, then what do you do when your competitor turns in a lower bid on the next estimate?

There was a time not so long ago when you could get away with that approach, because there was more work to go around than there were people to do it. But those days are over, my friend, so it’s time to sharpen our pencils.

This means you need to come up with a detailed estimate. Again, how detailed? The answer is, your estimate needs to broken down to the same level of detail as your materials or subcontract purchasing and costs. And, if you have employees, your labor estimates needs to be broken down to the number of hours it will take for each type of work that has a different labor cost associated with it.

“Why do I need to create estimates with that level of detail? What good will it do?”

The reason is so that when you record your construction costs, you are able to compare the construction costs to your estimate. That is the only way you will be able to know exactly where you are making or loosing money on an individual job, or as a trend on all of your jobs.

“What about using construction a cost database like RSMeans cost data, or National Estimator?”

You can create estimates based on costs from construction cost databases like RSMeans cost data, or National Estimator, and good construction estimating software will allow you to either integrate with construction cost databases, or import costs from them. That’s a good place to start, but what many construction contractors find is that the costs in off-the-shelf construction cost databases are not very accurate. You can start there, but be warned that you may end up double checking all of the costs. Many construction contractors find that, in the long run, construction cost databases are not worth the expense.

“But how could I possibly take the time to create estimates with that level of detail? That would take forever!”

Yes, it would take forever, if you had to create an estimate with that level of detail from scratch every time. But that’s not how construction estimating software works. Good construction estimating software allows you to create job estimate templates and assemblies that you will use again and again.

Construction estimating software is designed based on the idea that there are a lot of similarities in the work that you do from one job to another. You may build completely different types of projects, use different materials, purchase from different vendors, use different subcontractors, and you may even use different employees. But even with that much variability, there is a lot of detail that is common from one job to the next. And the more specialized the type of construction you do, the more overlap there is from one job to the next.

All you need to do is get started estimating your first job. Yes, the first estimate may take a bit of a time investment. But once you have that estimate, there will be parts of it that you can use in your next job, by just changing the unit costs and counts. Each job you do results in another template that you can use on another job. After running a job, if you find that part of the estimate was not detailed enough, the next time you do similar work you will know to break that part down to a lower level of detail. But once you do that for one job, that assembly will be available as a template for other jobs with similar elements.

And, in addition to being able to copy estimate templates or assemblies from previous jobs to create new estimates, using construction software that integrates estimating with construction cost accounting gives you a huge bonus: you can use actual unit costs from previous jobs as your new estimated costs.

“What? You mean I can create new job estimates based on the actual costs from previous jobs?”

That’s right. Good construction software integrates your estimate data with your construction cost data. The result is that every job you do is adding to and updating your own job cost database. You can’t get construction cost estimates more accurate than that.

I know estimating construction costs on that level of detail seems like a lot of work just so you can have accurate cost accounting and guaranteed profitability. And it would be, if accurate cost accounting and guaranteed profitability was all that you got out of detailed estimating. But as you’ll see, there are so many more benefits to using detailed job cost estimates that by the time you realize them all, you will agree that it doesn’t make sense to operate any other way. Especially when you use integrated construction management software that allows you to reuse your estimate data for other important construction business functions, such as when you:

• create construction proposals, bids, and contracts
• create construction schedules
• request construction materials price quotes
• request construction subcontract RFP’s or bids
• create construction materials purchase orders
• create subcontractor contracts
• track construction costs
• create construction invoices and AIA payment applications

I’ll be talking about how you can use construction software to do each of these things in future posts.

The Chicken And The Egg

Monday, October 18th, 2010

The Chicken And The Egg

The chicken and the egg parable comes in handy in describing a lot of the problems we deal with in operating and growing (or attempting to grow) a construction business.

To make more money, I need to turn more business. But in order to turn more business, I need more people to get all the work done. But in order to hire more people, I need to make more money.

The image of a treadmill also comes to mind. But that’s a bit pessimistic. At least with a chicken and egg, you could get somewhere if you had a chicken. Or an egg.

So how do you come up with a chicken, or an egg? Don’t get discouraged. The answer is simpler than you think! It’s the same reason why humans no longer live in caves. It’s called tools!

Humans have always lived in a chicken and egg situation, but we have progressed from one level of existence to the next because, at each step of the way, we came up with a tool that broke the chicken and egg cycle by dramatically reducing or eliminating one of the hurdles in the cycle.

Funny we should mention tools in reference to construction! Can we think of any tools that have made construction work more efficient over time? Well, let’s see… there are electric hand tools like the skil saw, reciprocating saw, and drill. And then battery powered hand tools. And pneumatic nailers, there’s a big one…  And laser levels, and…

OK, you get my point.

So the idea is that the right tool disrupts the chicken and egg cycle by making one of the required elements of the cycle so much more efficient that it no longer limits you from getting to the next level of productivity. As construction people, we are very familiar with the idea with using tools to become more efficient.

Well, ladies and gentlemen, I give you… construction software!

OK, construction software… what does it do? And why do I need it? How is it going to help me get more work done so I can turn more business so I can make more money so I can hire more people so I can get more work done so I can make more money?

There is a lot to discuss in describing how construction software will improve your construction business. But to begin with, it is important to note that making your business operate more efficiently so you can get more work done is only half (or one third?) of what using construction management software can do for you. There are two other crucial aspects of your business that will benefit from using construction software: 1) job cost accounting, and 2) customer relationship management.

Job Cost Accounting

Job cost accounting allows you to accurately track and compare your estimated job costs to your actual job costs, and report this information so you can see where you’re making or losing money; where you’re estimating less than you should be, or where your costs are higher than you estimated.

Job cost accounting is your roadmap to your bottom line. Accurate job cost accounting is absolutely essential for the most important thing in your business: whether you make or lose money.

Customer Relationship Management

This is a difficult issue that many contractors would rather not have to deal with, and so it tends to get ignored. But like it or not, the quality of your relationship with your customers is as important as any other part of running your construction business. Why?

Let me count the ways…

1) Your customers are human.

Psychology research reveals that a new home construction or major remodeling project is one of the most stressful and anxiety producing experiences that people might encounter in life. Most people who have been through it say they would never do a custom home construction or remodel project again. Why?

Major purchases are stressful for everyone. Even when you can see and touch what you are buying – like a car. But a major purchase – the largest purchase of your life – is much more stressful when it is for something that does not even exist yet. Your customer is signing their life away, and putting all of their trust in you… their contractor.

People get anxious when they are out of control and don’t trust the people who are in control.

Yes, hiring a contractor to do a custom construction or remodel project means the customer is not in control – you, their contractor, is in control. But why do your customers loose trust in their contractor?

People fear (don’t trust) what they don’t know.

Your customers loose confidence and trust if they don’t know what’s going on. They reasonably assume that if they don’t know what’s going on, then you may not know what’s going on. How do you build and maintain your customer’s confidence? I will discuss this in detail in later posts, but it can be summed up in two words: Documentation and Communication.

You can build and maintain your customer’s confidence and trust by maintaining complete and accurate documentation of their entire job, end to end, and making that documentation readily available to your customer 24 hours a day, 7 days a week.

How do you do that? With construction management software. Just by using the construction software, you will by default create and maintain complete documentation of the job project. Good construction management software will make it easy to present that information in a personalized and professional manner to your customer, either on paper, by email, or on the web.

2) Your customers talk.

People like to talk to their friends and family about their major acquisitions, right? And they don’t just talk about the good parts… they also talk about what they didn’t like. This is what’s known as “word of mouth advertising”.

Guess what? Your customers talk to their friends and family about their experience with you, their contractor. Do you think your relationship with your customer is going to make a difference in how many referrals you get? You better believe it! Successful construction contractors don’t need to do any advertising or job prospecting because they get a steady stream of new clients from their past clients’ referrals.

So here I have brought up three key areas of your business that can benefit from the use of construction software:

  • More efficient, organized, and accurate estimating, scheduling,  bookkeeping and office management.
  • Accurate and detailed job cost accounting.
  • Improved customer relationships.

I’m here to tell you that these benefits can be achieved without having to hire an army of clerical staff. All you need is one good clerical staff and a good construction software system.

Now, I know you didn’t go into construction because you wanted to use a computer. Well, you don’t need to actually run the computer yourself. In fact, after purchasing construction software, my other most important recommendation is to get someone to run it for you! If you’re reading this, you most likely already have someone doing your bookkeeping, office management, and paying bills. Even if it’s “just your wife”, you know it’s a very important job, and you know you’re glad you’re not doing it alone. But you also know that the system you have in place is not good enough. So you’re looking for something better. Good for you! You’re on the right track.

Construction Software

Wednesday, October 13th, 2010

What is “construction software ” or “construction management software”? And why do I need it?

Construction software is software that is designed and developed for the needs of construction businesses. Non-specific (or general) business software includes things like Microsoft Office (Excel, Word, Project, Access, etc.), and QuickBooks. Those programs are designed to be used by all businesses, regardless of what industry they are in.

General business software is good at serving common needs of many businesses, and, because so many people buy them, they can be priced very low. The down side is that, because they have to be flexible enough to be used in every kind of business, they cannot be designed for the needs in any specific type of business. The result is software that is effectively “electronic paper”; all the program does is provide you with a means of entering and storing information in a computer (rather than on paper). Sure, Excel can do formulas, and Word can format and print text nicely, and that’s better than paper. But not a whole lot better when you compare that to what you can do with software that is designed specifically for construction businesses.

So what is construction management software? Construction software is software that has been specifically designed for use in construction businesses. Construction software doesn’t just provide a means of entering and storing data in a computer, it also automates the business logic and procedures used in operating your business. In other words, construction software automates the “business system” that you use to operate the business.

What is a “business system”? A business system is the set of procedures that you follow in the daily operation of your business. In the construction business, you follow a set of procedures like:

Find a customer

  • Estimate the job
  • Submit a proposal
  • Sign a contract
  • Create a job schedule
  • Request quotes for materials and subcontracts
  • Purchase materials
  • Schedule subcontractors
  • Schedule employees
  • Do the work:
    • Customer requests change
    • Request quotes for materials and subcontracts required for change
    • Generate change estimate, issue change order
    • Reschedule subcontractors
    • Reschedule employees
  • Receive bills from vendors and subcontractors
  • Pay the bills
  • Enter time sheets from employees
  • Pay employees
  • Submit invoices to customers
  • Receive payments from customers

Well designed construction management software provides you with a system that automates the tasks required to operate your business, and integrates the data that those tasks use.

What does it mean to “automate a task”?

Let’s look at an example: Create an invoice to bill your customer for work completed. Using a manual system (paper, or general business software), you would have to make a list of all of the work items that have been completed. If you’re working on a cost plus or time and materials contract, you would have to then go and find the actual costs paid, or hours worked, for each item. Even if you are working on a fixed sum job, you would still have to do that for all of the allowance items. Then you would need to add the invoice to your customer’s job accounting, and the amount invoiced to your accounts receivable balance.

In a system that automates that task, all you would need to do is select a menu option to generate an invoice. The program would already know which items are completed (because you marked them as completed in the integrated scheduling system), which items are allowance items (because you marked them as allowance items when you created the estimate), and what type of contract the job is working under (because you indicated that when you created the job) and whether to bill estimated or actual costs. And once the invoice is generated, it would be automatically added to your accounts receivable balance, and to the customer’s job accounting.

So there are many advantages to automating business procedures:

  • Everything you do in the regular operation of your business in a day, a week, a month, or a year, can be “systematized”. That means that, once you figure out how you want to do something, you can established a procedure so you don’t have to think about how to do it the next time.
  • Because you don’t have to think about how to do everything each time you do it, using established procedures makes routine tasks go much quicker, and produces much more consistent and accurate results.
  • Using established procedures allows you to hand off routine tasks to clerical staff and free yourself to do what the owner/manager of a business needs to do, which is to deal with things that come up that aren’t covered by your existing procedures. Hint: come up with another procedure to deal with it so you don’t have to take the time to think it through the next time it happens.

Using this approach of systematizing your business is the only way your operation can become more efficient. Since there are a limited number of hours in the day, the only way to make your business grow or become more profitable is to become more efficient.

One of the main features of construction management software is that it automates routine tasks, so the software provides you with pre-defined procedures. So, another way of looking at this is that when you purchase construction management software, you are not just purchasing software, you are purchasing a system of pre-defined procedures.

The other main feature of construction management software is that it integrates the data used in all parts of the construction business. In other words, rather than storing the same data multiple times, all data is stored in a central repository that is shared by all parts of the system.

There are many advantages to using a system in which the data is integrated:

  • You only enter each piece of information once.
  • The data entered can be validated by the program using business logic to improve accuracy and assure the integrity and coherence of interrelated data.
  • Because data is only entered once, there is no discrepancies between data used in various parts of the system.
  • When data is changed in one part of the system, the changes are reflected in other parts of the system that may be affected.

Now that we’ve covered the reasons for using construction management software, in future entries, I’d like to talk about specific aspects of a construction business operation, and how those are served by well designed construction software.

Perfect Storms

Sunday, September 19th, 2010

A “perfect storm” is what happens when unrelated events converge to result in something great. Or awful, as the case may be, but this is about the great.

Smart Construction Software LLC makes software for construction companies. Smart Construction Software is the result of a perfect storm that developed over the entire span of my life. Or even before that.

My father grew up in a Finnish community in Vancouver Washington. His father was a builder, so my father grew up building, and built his first house when he was 17.  I grew up doing construction too, and seeing first hand where that would get me, I was inspired to go to college and learn to program computers!

So I became a computer programmer and went to work for businesses designing and developing software to make the business more efficient, organized, and profitable. Over a period of about 20 years I worked for a for a number of different companies in a wide variety of industries. While the business environments varied from one to another, the basic theme was the same: design procedures to improve operations, and develop tools to automate those procedures. I had found my niche. I loved my work, and I was good at it.

Then my wife and I bought a house that needed major remodeling before we could move in. And so gathered the clouds of the perfect storm that brought us Smart Contractor.

My contractor was great, as contractors go, but… how can I say this… A 20 year veteran business organization and management analyst oversees a typical 1990’s construction contractor operation… Lets just say that I observed a lot of issues with potential for improvement in the way of organization and documentation.

OK, I’ll be blunt… My contractor was a very nice and easy going guy, but the whole thing drove me nuts. Nothing was documented, or if it was, the numbers involved were “rough” and constantly changing. I had no idea what the schedule was, what to expect when, or whether we were on track for completion in time for our impending move in date. Every time I received a request for payment, it was more than I expected, and lacked any documentation. It was like I had to re-negotiate the contract with every invoice – after the fact.

I came to understand first-hand why so many people have told me that, after having been through it once, they would never do a custom home construction or remodel project again.

And this is understandable. Major purchases are stressful for everyone. Even when what you’re purchasing is intact, standing in front of you where you can see it and touch it. Like a car.

But even more stressful is a major purchase – the largest purchase of your life – for something that’s not there yet. And you’re putting that investment in the hands of who?A contractor? A guy in a ball cap who gives you no schedule for completion, no documentation of what it will cost, or why it costs more than expected.

So I did some research to find affordable, usable software for small construction contractors that might help solve some of these issues, and I was surprised to find very little. There were programs that did bits and pieces, but the only things out there that came close to doing everything that’s needed cost tens of thousands of dollars.

A perfect storm; the convergence of my life’s two careers. I grew up doing construction into my twenties, so I new a lot about it. Then I built a career designing computer software for businesses. Then I came back to construction and found a monumental opportunity.

So I talked to my contractor about the idea of designing and developing software, and he said “How soon can you have it ready?”

Small Beginnings

Saturday, September 4th, 2010

So I set about working on the first version of Smart Contractor, and my contractor was my first user.

Except back then it wasn’t called Smart Contractor. We started out calling it “Contractor’s Edge”; a catchy and descriptive name I thought. It would have stuck except that neither the domain name or trademark were available. If you’ve had any experience coming up with either, you know how hard that is. But I digress.

Our original aim was to design a program to address problems I had experienced as the client of a contractor. My contractor needed an easy way to document and communicate details of the job to the customer. The reason there was a lack of documentation and accounting as the job progressed is because there was a lack of documentation of what the job entailed to begin with. So the first thing needed was a job estimate.

So the first version of the program provided a way to enter and print a job estimate. The “tree” structure of the item list allowed for flexibility in the level of detail in any particular job item.

My contractor’s first response to the program was mixed. On the one hand, he now had a way to itemize and define all of the details involved in a job. On the other hand, there are a lot of details in a job project, and entering all of that information takes a lot of time.

The solution was to make it easy to “clone” new job estimates from old job estimates. And make it easy to import job cost data from a variety of external data sources, like National Estimator, RS Means cost data, product price lists from building materials suppliers, and take-off lists from CAD design systems like Xactimate, AutoCAD, Chief Architect, Cadsoft Envisioneer, and electronic take-off systems like On-Center, Planswift, eTakeoff, and SoftPlan.

And then, OK, this is a great construction management system with all that data in it, but now do I have to enter all of that again into QuickBooks? Well, OK, we’ll integrate it with QuickBooks, so now you only have to enter the data once.

And so began the process in which Smart Contractor has lived and grown for over 7 years: Show it to a contractor; they like it, but they want something added. In the early years, a lot of that was because there’s a lot involved in the construction business, and there’s a lot that a software system needs to do to support that. But even as basic functionality was completed, it became obvious that every individual business is a little different. Either they have a little different business focus, or they do things a little differently than other companies. So it has still been necessary to add configuration options to allow users to conform the program to their specific needs.

The years of enhancing and refining Smart Contractor has been a long road, but the result is very successful program that is well liked by all of the companies who are using it.

In my last entry, I talked about how the “perfect storm” of my background in construction and business software development came together to create Smart Contractor. I’d like to mention yet another major front that has converged on top of that.

Before we started developing Smart Contractor, I wondered if it wasn’t too late to be starting a new construction software company. But the longer we worked with contractors, the more I came to realize that, if anything, we were too early. I figured out that the people who own and manage construction businesses didn’t go into construction because they wanted to use a computer. So selling and training industry specific software to contractors has been a bit like herding cats. (No offense guys.)

Another big issue is that, in the hay days of the construction boom, everyone in construction had more business than they could handle, and the last thing on their mind was what they needed to do to make their business more organized and efficient. After all, if you’re busy, you’re making money, right?

So, while the construction boom was booming, not a lot of construction businesses were interested in construction software. Then the bubble burst, and while the market was in free-fall, again, not a lot of construction businesses were investing in a business that they didn’t know would be around in a month or a year.

But eventually everything landed, somewhere. Some contractors went out of business, and some landed on their feet. In spite of the turmoil and angst, life goes on. Wealthy people are still building custom homes. Empty nesters are still moving out and selling. And young families are still remodeling older homes. And construction companies are still doing the work.

But one thing has changed. The housing boom is over, and we are not likely to see another one like it in our lifetime. So construction companies who are still in business (or new ones starting) are now living in the real world. Which means they need to do what other businesses need to do to succeed. They need to be organized, efficient, and competitive. And these days, there’s only one way to do that: by using industry specific software – software that was designed for your business.

So the third front that has converged, with perfect timing to coincide with the maturation of Smart Contractor, is the fact that there is a new market for software for small construction companies. All of those companies who surfed the wave of the construction boom without balancing a check book are now looking for new ways to tighten their belt, improve their efficiency, and serve their customers better. And Smart Contractor is right there, right now, getting the job done.

In the entries that follow, I will discuss many of the issues and details involved in the construction business. But before we get bogged down in details, I think it’s worth taking an overall look at why construction businesses need to use industry specific software in the first place.