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By Missy England
March 29, 2017
Managing the details is a large part of mastering the accounting aspects of a construction business. There are countless areas where money can slip through your fingers on a typical construction project, and you can’t be everywhere at once.
That’s why you need to push a portion of the accounting load out to the field.
No matter what the construction activity is, it probably entails some sort of accounting. Those that are hands-on in the building process handle multiple types of materials, tools, and equipment. They also use labor hours to complete their tasks. Every one of these inputs into the project requires some type of accounting.
In the case of materials, quantities are important for several reasons. Not only do you have to account for the number of items used for the finished project, but you also have to account for the number of items that are reassigned to other activities because of overages in the initial order.
You should also be interested in the amount of material that gets spoiled or wasted. When it comes to tools, you need to account for the ones in use, ones that are damaged, and the ones that are no longer functioning. You also need to account for the fuel and other expendables your equipment uses, and the number of hours they operate on specific tasks. If the equipment is rented, you also need to have accurate accounting of pickups and returns.
Labor makes up about 50% of the cost of any construction project, yet it is often one of the least tracked aspects. Historically, it hasn't been easy to track, nor has it been tracked accurately. Since mobility is crucial on construction projects, locating time clocks in convenient places can be challenging. When you rely on workers to fill out timecards, you are subject to forgetfulness, human error, and even fraud.
Furthermore, when foremen are tasked with tracking everyone's time, they are removed from their other duties of managing the work. This can result in compromised data because they are accounting for workers they weren’t physically with. And if you aren’t tracking the time people spend on job cost centers, you’re missing fine details that affect everything from estimating and scheduling, to year-end reports and taxes.
Besides improving your budgets on activity and task inputs, having accounting functions in the field also improves collaboration. Take change orders, for instance. When doing the accounting aspects in the field, you can drastically improve documentation timeliness and take the time it takes to complete the work.
When those physically performing the work actually calculate the materials required, the probability of accuracy is increased. When that information is passed to the next level where the documentation for the change order takes place, the people who are adding prices and calculating costs are less likely to overlook an input, and they're more likely to end up with an accurate estimate of the change.
When you consider all the different ways accounting information influences all aspects of your business, you soon realize it makes good sense to empower the people in the field to do the accounting directly related to their jobs. Fortunately today, there are tools that allow you to accomplish this without compromising or risking sensitive accounting data. And a big part of the attractiveness of these tools is their mobility––the power to perform accounting and PM tasks directly in the field.
Not only do mobile applications empower your field workers by making it possible for them to handle all the accounting functions of their jobs, but it also allows them to collaborate in real time with other jobsite and office personnel.
Here are 3 steps to transforming your field teams into boots-on-the-ground accountants:
First, you need to show them what kind of data they need to track. For those times when they have to calculate the amount of materials, equipment, or tools, you’ll need to provide training as necessary so they can do it accurately. Seasoned tradespeople will already be well-versed at figuring out what they need to do the job. Most of your focus here will be on those with less experience. One approach is to assign an experienced person to work with them as they learn.
The second requirement is to provide the tools. For example, when accounting for time working on tasks, you need to provide the application and the mobile device that's required. If you have people bringing their own devices, then you’ll simply need to provide the application. Regardless of the function, you’ll need to make sure they understand how to use the devices and the applications.
The third requirement is to assign someone as a focal point to monitor results as people get up to speed on field accounting. This is very critical because people need to know where to get help, additional training, and feedback on how their efforts are benefiting the project and the company.
It is also a good idea to have a company-level review on a periodic basis to find out what's going well and what needs improvement. To make the move to field accounting manageable, you might consider rolling it out one department or job function at a time, checking results and pain points, and then adjusting before moving onto the next.
It wasn’t very long ago that accounting at the field level was impractical and not very accurate. All of that has changed thanks to software, mobile devices, and the cloud. It’s now possible to decentralize your business accounting aspects, while maintaining control over sensitive data. Benefits include improved performance and a healthier bottom line.
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