More Benefits Of Integrated Construction SoftwareNovember 22nd, 2010 by admin
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 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.
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.
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.
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.