Masonry Magazine December 2002 Page. 35
Job costing will give you very important tools to help keep jobs on budget, and you know it's critical to keep to your projects on budget. By utilizing your job cost system properly, a mason contractor should develop an understanding of unit costs on the type of work they're doing, and also understand their productivity at those types of jobs. "By having good, detailed job cost information, you'll really be able to develop a good understanding of what your costs are and hopefully do a better job of estimating," claims Mathews.
While some contractors are comfortable using a spreadsheet like Microsoft Excel to do costing, there are much better systems available. Dexter + Chaney's product, Forefront, can integrate with Excel, using it as a "search and sort" tool. According to Mathews, "Because Forefront is accessible to Excel, it is very easy to have Excel query the data directly in the Forefront database. Excel can grab data directly out of Forefront to build charts and graphs, and to plot whatever kind of trends you wanted to see."
Maybe you want to look at what happened to unit cost on a particular activity. You've got standard phases - bricklaying for example - and you want to develop a job-to-job comparison of what the unit costs were. Forefront can produce that data and if you want to create a chart of those reports, you can build it in Excel. "That information is going to be very important to do a better job, not just for managing the jobs currently open, but for estimating future projects," Mathews says.
Another item that's important, especially as the company is growing, is to be able to produce a good work-in-process (WIP) schedule. You may know it as a bonding report or a contract status report. It gives you a picture of your revenue, costs and profitability on every job you have running and puts it together in a format that allows you to reconcile your financial situation at any time.
The traditional revenue recognition model for construction is on a percentage completion basis, not on how much you bill. You may have billed $10,000 so far on a job, but because of the amount of work you've done your actual revenue might be $15,000. You need to understand and be able to reflect that difference in your financial statements and if you don't have a good job cost system, you're not going to be able to do that accurately.
"A lot of people do this in some manual fashion," Mathews notes. "They do it in a spreadsheet, for example. They pump data in and spend a significant amount of time each month trying to assemble a WIP schedule so they can make entries into their accounting system. It's a time consuming and inaccurate process.
"Instead, it should be as simple as hitting a button and producing the report that tells you what the current situation is so you can review each job, review where it stands in terms of it's billings, revenue, cost and profit. The system you use should allow you to see all of that on a single report and give you the information you need to really understand the financial position of your company in each accounting period."
One of the reasons it is called a bonding report is because bonding companies want to see this information and see that you consistently produce as you say you do. If you can provide this information, you're going to have a much easier time getting bonded for additional work and be able to grow the company. Without a good WIP schedule, you really cannot have an accurate financial picture of your company. If you're doing it manually, the accuracy is going to be questionable.
Estimating the difference
FRED ODE, CEO of Foundation Software, Brunswick, Ohio, agrees with Mathews that job costing is at the top of the list for contractor specific software. But he adds, "As with any construction trade, mason contractors have unique technology requirements. A mason contractor should have both a job cost accounting and estimating system in place, ideally ones that are trade-specific. These two programs are critical to their business."
On the estimating side, Ode recommends a product from another company, Tradesman's Software. "Tradesman's Software was developed for masons and allows quick and efficient bidding on jobs," he says, "On the accounting side, programs like Foundation for Windows can substantially increase productivity and bottom-line results. Foundation is specific to the needs of labor-intensive contractors and will facilitate timely and accurate reporting of job cost and profitability. In addition, marketing savvy mason contractors may also want to consider a separate contact management system to facilitate the marketing and sales processes."
Since Ode brought them up, we called on Bill Pacetti, president of Tradesman's Software, Orland Park, III., to give us a rundown on how their product differs from other estimating systems. At the top of his list was the visual nature of the product. "It's masonry estimating software in 3D," starts Pacetti. "We can integrate with accounting packages but we don't supply an accounting package. Numbers are numbers, but masonry estimating gets complicated real fast. When you figure a job, you better come up with the right number or the money comes out of your pocket."
Foundation is specific to the needs of labor-intensive contractors and will facilitate timely and accurate reporting of job cost and profitability.
The Voice of the Mason Contractor
December 2002
Masonry 33