Enterprise Resource Planning (ERP) systems are utilised throughout most industries and often deliver crucial efficiencies in process and synchronisation. There is, however, a critical difference between transactional systems found throughout most industries, and the increasingly sophisticated and advanced systems required for use in the construction industry. A construction ERP needs to execute not only the functions of a standard ERP but also undertake cost projections, over-runs, and also managing the entire project life-cycle from tender to hand-over. This work also includes all the elements in between that will likely span multiple accounting periods. With this information in mind, we will discusses the five components your construction ERP system must have.
1. Construction ERP and Estimation Assimilation
Completed projects in most cases will either be handed over on time or not. The projects will also likely have been completed within the budget, or not. End users are most concerned with whether projects were built according to the promised specifications (build quality and time) and are particularly not concerned with whether you made a profit. In most situations there will be penalties imposed for any over-run that will effect your pocket and margin. With cost being one of the most crucial components of running construction projects, it is important that construction ERP solution not only has the capacity to efficiently organise projects but also the functionality to monitor different projects at once. With ERP software such as Candy, accurate construction estimates can now be made. Candy is a state-of-the-art construction estimation software platform that was designed and developed exclusively for construction contractors. The system’s ability seamlessly connects with BuildSmart, another world leading product from CCS, that can assess progress throughout the life-cycle of the project against the approximation. This process permits the system to highlight factors such as over-run in cost and time, with a deep drill-down facility to identify where, when and why this is happening. This feature enables the user to take immediate actions to rectify any outlying issues.
2. Progressive Accounting
Throughout any business, certain aspects of accounting and book-keeping will be standard. With reference to a construction ERP however, additional elements will be necessary in order to manage the financial particulars of the entire process across multiple projects.
Examples of additional functionality will include:
- Subcontractor management
- Debtor and Subcontractor tracking of advances and retentions
- Plant and equipment management
- Operational inventory management
- Purchase and change order management
- Cost reporting (accurately compare actual costs to anticipated project costs in real-time)
3. Supplementary Payroll Functions
The calculation activity of costs in the estimation stage will be broken down into time vs activity. In order to devise accurate information on cost against budget, payroll and accounting divisions need to have the ability to track and report on time and progress against estimated costs.
The additional elements that will be required to provide this level of granular analysis in construction ERP software will include:
- Real-time payroll processing
- Summary labor cost analysis
- Unit cost reports
- Unit productivity reports
- Direct labor cost control
- Multi-project capability
- On-demand project cost/revenue consolidations
4. Plant, Equipment & Materials
A useful construction ERP system will need to be able to organise and handle the management of all plant, materials and equipment across a myriad of projects. Typically within competitive environments with increasingly tighter margins it is commonplace for many types of resources to be shared across projects and locations. This process is often undertaken to streamline activities and maximise efficiency of those processes. With this idea in mind, it is reasonable to assume that your construction ERP will need to manage and account for a diverse range of construction materials as well as equipment and manpower.
5. Comprehensive Financial Reporting
The reporting process within a construction ERP solution needs to be up to date at all times, creating real time data in order to be effective in managing margins. In the construction market, profit and loss assessments are characteristically more difficult to calculate than traditional business models. ERP structures that provide for construction will therefore need to be centrally focused on projects and consider additional elements such as:
- Resource utilisation analysis
- Multiple location reporting and analysis
- Profit & loss management by unit, location, product mix and/or project manager
- Detailed asset tracking
- Liability and equity management by project, business unit or function
- Balance sheet management by project, business unit or function
- Multiple company consolidated reports and multi-currency translations
Is Construction ERP Software Right For Me?
Before investing in ERP software for your company it is important to understand which product is best for you. Speak to an industry professional today or look at the available products to ensure you are getting the most suitable software for your company.