Top Terrible Mistakes—Number 5 & 4

I started writing last summer about the common threads for those contractors who are highly successful, as opposed to those who are just barely making it, or in some instances, are no longer around, and have put them into a top (or bottom, depending how you look at it) 10 list.

Recapping to date, No. 10 was Poor Project start (link here), No 9 – Documented Processes, a.k.a. semi-organized chaos, No. 8, Poor project communication, No. 7, Support systems – software and infrastructure, that don’t support organizational success and last time we covered No.6 – Information Silos.  I want to get through the entire list this year, so we’re going to cover two this time- Number 5, Bad estimating, and Number 4, broken change order processes.

Getting into the top five – you could make the case that any of these could be the most important issue for any contractor.

The impact of bad estimating is clear to most contractors – consistently bid too high, and you don’t win enough business, too low, and you end up with low margin or losing jobs, a sure recipe for disaster.  Then there is the opportunity cost when good margin work is available but you can’t bid it because you are fully booked with low margin jobs.

Everyone we talk to is busy, and margins are generally healthy, reflective of the great growth in construction work since the great recession.  But we all know it won’t last forever, making it important now to develop and maintain good estimating practices.

The consistently profitable contractors have an estimating process in place.  I doesn’t matter so much which estimating system is used – even that Excel spreadsheet template is fine – as much as how it is used, starting with the selection of which jobs to bid in the first place.  Do you have a template of your ideal job, the “sweet spot” that you know you can profitably execute on?

Something that I think every contractor should know, but I think very few do – what is your cost to bid a job?  If you take your entire estimating cost and divide it by the number of jobs bid, and number of job won, what is does each estimate actually cost?  Sometimes knowing that number helps you decide what kind of jobs to avoid spending estimating resources on.

Beyond that, does your system provide a consistent review process?  Do you allocate enough time for review and revisions?  How about estimate evaluation – does your system allow you to collect and analyze bid and job performance by relevant metrics – by type and size of job, by estimator, by GC or owner type, etc?  Do estimators get feedback on actual performance of jobs they bid in the past, to help them avoid those mistakes in the future, and to repeat successes?

Putting a consistent system in place that documents each step, provides time for review and for end of job feedback, and takes in account the cost of estimating, will help you get where you want to be with job profitability.

A related issue is how change orders are handled.  Bad mistake No. 4 is broken change order processes.  This mistake typically starts at the very beginning of a project, with the project start-up.  Like most processes, the break-down is usually in the “hand-offs” from one person or department to another.  The new job comes in, a project manager is assigned, and all the details of the job are handed off from the estimator to the project manager.  How well is that hand off accomplished – how timely, in how much detail? Are potential areas of risk identified right from the start?

Now the job has to be staffed – superintendent, foremen, specialists, laborers, etc., depending on your specific job staffing process.  Each of those people will have a great idea about the exact scope of work and what could constitute a change, and knows exactly what to do when they discover such a change, or are asked to do what could be “extra” work, right?  There is a process that provides a mechanism daily to report on potential changes, correct?  Those potential changes are communicated in enough detail to allow the change to be quoted and processed?  And once quoted, the changes are documented and followed up on in a timely manner for approval, billing and collection?

Very rarely do I get a yes to all of those questions.  If you are able to answer all those in the affirmative, congratulations and keep up the good work.  For the rest of you, the break downs in your change order processes are for sure costing you money.

Stayed tuned next edition for numbers 2 and 3 on the list.

6 THINGS CONSTRUCTION COMPANIES SHOULD BE DOING IN ACCOUNTING

By John Meibers

In construction accounting, managing cash flow and optimizing for maximum job profitability is a daily responsibility. Profit margins can be extremely narrow and contractors need to do everything possible to increase construction accounting efficiency to continue to grow. That means projecting job costs, identifying problem areas before they arise, running labor analysis, and constantly measuring productivity. Here are a few tips that will help.

1. Prepare for the Future Now. Good ideas feel great. Plans can look impeccable. However, reality will still, inevitably happen. If you want to grow your company, dream big but plan now. Budget and bid accordingly. Usually the lowest bidder is synonymous with low quality. If a contractor is put in a situation where it’s a race to the bottom, it’s often a project the company isn’t all the way proud of. Budget and bid fairly and have a construction accounting system in place that can and will keep your company on track financially. Bookkeeping cannot be an afterthought when preparing for the future today. Professional construction accounting software made specifically for contractors will go a
long way in helping your company prepare for the future right now.

2. Track and Analyze Everything. It’s easy to let receipts fall by the wayside, then suddenly you’re wondering why your project is way over budget. This isn’t just buying a few extra things here and there, it’s also employees working overtime, additional subcontractors being added to the project, and other unforeseen expenses. Tracking is important, not just for keeping receipts at tax time, but also for managing job profitability in real time. Handwritten notes won’t help with this, and an Excel spreadsheet isn’t much better. Contractors benefit greatly from construction accounting software that’s specifically built for the job. Construction software that’s made to track the things contractors deal with every day, backed by training and implementation from industry experts.

3. Know the Rules and Follow Them. Between building regulations, employee laws, taxes and everything in between, there are a lot of rules in the construction space. It’s difficult to be an expert in every detail a complex job entails.  Advanced construction software can help keep things in check and enable contractors to be an expert in the unique subtleties of construction. The construction software a contractor chooses needs to be flexible enough to manage rules and regulations as well as work with construction payroll processing to ensure compliance.

4. Back Up Your Data. Extreme weather, accidental damages, or even hard drive failures can lead to loss of critical business data. Insurance companies can payout for damages, but they cannot replace lost paperwork or the information needed to run a business. At a minimum, have a backup hard drive of your critical job and business data. If the main records are lost, having a copy to reference can save a project from failure.

5. Use a Cloud-Based Accounting Software. Utilizing the cloud is typically more secure than a hard drive and also enables your team to work more efficiently. Ditching paper will help a company save in a few ways. With no physical printing and storage, you save money on paper, ink and space. With the cloud, construction accountants can execute critical business functions right from the office and easily communicate directly with the field.

In addition, with Deltek + ComputerEase’s field-to-office application, FieldEase, everyone in the office and in the field can stay on the same page with access from anywhere, anytime. FieldEase streamlines administrative tasks and increases job efficiencies. The seamless integration of FieldEase with your existing Deltek + ComputerEase system allows a contractor to access information and reports in real-time.

6. Don’t Be Afraid to Ask for Help. Deltek + ComputerEase is focused on enabling contractors to get the most out of their construction accounting software. Any software solution is only as good as its training, and our training and implementation specialists are here to make sure you are positioned for success. Talk to construction software experts when problems arise. Have a question? Ask! We have a team of
consultants and additional resources including training webinars, videos, personalized support, and more to ensure you have the tools you need for job success.

 

The IRS is Calling

Be aware of yet another scam to get hold of your personal information.  The IRS is calling.  Not true!  The IRS does not make random phone calls.   This is a scam that our clients are reporting, where they  received a call from the “IRS” asking for information.

What should you do if this happens to you?  First and foremost, do not give out any information, hang up.  You can also take down the phone number they are calling from and add it to the blocked list in your phone system.  Before adding it to the blocked list, you may want to check that the number is invalid as scammers will often spoof phone numbers (just as they do with email addresses).  We can help if you need it, let us know.

Contractors Beware – Business Email Compromise

Have you heard about Business Email Compromise (BEC)? BEC is a type of scam targeting companies who collect their money via wire transfers. Did your ears just perk up? Well they should since contractors rely heavily on payments through wire transfers and are prime targets for this scam.

The goal of a BEC fraudster is to infiltrate the email account of an executive or high-level employee authorized to make wire transfer payments. The scam usually starts with a spoofed or compromised email by an unsuspecting employee. Once the fraudster gains access, they lay in wait collecting information, carefully researching and closely monitoring their potential victims for just the right time to attack.

Then, they impersonate the email of the infiltrated executive, authorizing an employee to move funds. In the case of construction projects, the fraudster will pretend to be the contractor notifying the project owner they’ve changed bank accounts. Could they please make note of the new account when making future payments? Of course, the bank account is fraudulent and the money is transferred out of the project owner’s account into an offshore account immediately. The contractor never gets paid, and the project owner never knows they’ve been scammed until the contractor calls looking for their funds.

According to the FBI, there are five types of BEC scams:

1. The Bogus Invoice Scheme.  Companies with foreign suppliers are often targeted with this tactic, wherein attackers pretend to be the suppliers requesting fund transfers for payments to an account owned by fraudsters.

2. CEO Fraud.  Attackers pose as a company CEO or any executive (often when they are out of town and unavailable to verify the request) and send an email to employees in finance, requesting them to transfer money to the account they control.

3. Account Compromise.  An executive or employee’s email account is hacked and used to request invoice payments to vendors listed in their email contacts. Payments are then sent to fraudulent bank accounts.

4. Attorney Impersonation.  Attackers pretend to be a lawyer or someone from the law firm supposedly in charge of crucial and confidential matters. Normally, such bogus requests are done through email or phone, and at the end of the business day.

5. Data Theft.  Employees under HR and bookkeeping are targeted to obtain personally identifiable information or tax state-ments of employees and executives. Such data can be used for future attacks.

Because these scams do not have any malicious links or attachments, it’s easy for them to evade traditional solutions. Employee training and awareness can help spot this type of scam. Look out for email messages that have subjects containing words such as request, payment, transfer, and urgent, among others. In addition, always be a skeptic. No matter how believable the email may appear, always phone first!

Mistake6

I started writing this summer about the common threads for those contractors who are highly successful, as opposed to those who are just barely making it, or in some instances, are no longer around, and put them into a top (or bottom, depending how you look at it) 10 list.

Number 10 was Poor Project start (www.cssworks.com/blog). We moved on to No 9 – Documented Processes (a.k.a. semi-organized chaos), and then No 8, Poor Project Communication. And don’t overlook No 7, Support Systems – software and infrastructure, that don’t support organizational success. This month, we’re moving on down the list to Terrible Mistake #6 – Information Silos.

You might wonder – what is an information silo? We define it as any software system that is used by company personnel to track information that does not talk to other systems. It could be a stand-alone service application, or inventory tracker, or scheduling system. Often, it is an Excel spread-sheet that was created out of necessity to “track” something that either could not be accommodated in the company’s accounting system, or more likely, was created out of expediency due to lack of access or licenses, or knowledge that the capability actually already existed.

The impact of this common issue is lots of duplicate effort which results in mistakes and inefficiency, inevitably resulting in silo conflict (“your information is wrong” – “no yours is”, finger-pointing and in the end, unreliable information. The cost is not just two or more people maintaining separate records, it is also the cost of reconciling those records to match actual accounting records that are (or should be) used for financial reporting, and the cost of partial information – not having the complete picture.

We regularly encounter companies with as many as four, five, and six separate systems that are being maintained. If there are multiple divisions and locations, whoa!

How to Prevent Making this Mistake?

The answer is to just find what I refer to as the “holy grail” – one software product that will do everything the way you want it to be done. Unfortunately, just like the proverbial holy grail, software like that just doesn’t exist, and never will, even if you wanted to spend the huge amount of money necessary to build your own. Why? Beside the expense of building your own, there are many oth-er factors. Finding (and keeping) resources, determining precise requirements, adapting to changes, etc. etc. etc. Developing software is not your core business.

The alternative is selecting the right software for your business. Every business is unique, and all software products are built to cover the largest part of the market, the features and functions that will be able to be sold to the most number of businesses. The “gap” for your business can often be covered with configuration adjustments, user defined fields, and custom reports. But sometimes more is needed.

That is where the concept of integration comes in. Get product A to “talk to” product B, with the goal of using the best features of each product, and not having to re-key any data, ever.  This can work, depending mostly how many points of integration are needed. By points of integration, I mean how many specific data elements have to be shared, or moved, between the products, and how often. It can be very simple, like just customer names, or it can be very complex, like detailed job budgets, change orders and inventory transactions.

And, of course, it gets much more complicated if you add in product C and product D to the mix.

Common Sense Solutions has been providing integration services for most of its 26 years of existence. We’d be happy to discuss how to help you reduce your number of information silos.

Stayed tuned next edition for number 5 on the list…

Congratulations to John Dobbins

Congratulations to John Dobbins of Common Sense Solutions for being appointed as a committee member on Chicagoland AGC’s Technology Committee for 2020.

Chicagoland Associated General Contractors serves as the unified voice of the Chicagoland construction industry and empowers our members through labor and government relations, ongoing education, and business relationships.

Business is Becoming (Technically) More Complicated

There is a powerful force driving all businesses to deliver superior products and services faster and on tighter margins – technology.

Every business, from small mom-and-pop stores to the large enterprise, is developing a dependence on technology.  Whether it’s e-mail, e-commerce, websites, database management or accounting software, there are very few businesses that don’t have some level of dependence on their computer network and the applications and data it stores.

The upside of technological advances is tremendous.  It can provide your business a significant competitive advantage with faster production, increased productivity, improved customer service, and up-to-the-minute reporting for strategic planning and decision-making.

Downside Of Technology

The downside of our dependence on technology is that when it doesn’t work, it can become a tremendous source of frustration, causing a strain on production, sales and fulfillment.  No business is immune from computer problems and failures.  There’s the cost and complexity of the ongoing maintenance of support of it.  If you’re like most business owners, you probably shy away from the computer technology headaches because there are so many other business issues to deal with.  Yet the technology that runs your business is too important and too expensive to ignore the answers to these questions:

  1. How do you make sure that the hardware, software and solutions you are investing in actually support your business goals and work the way they are supposed to?
  2. How do you stay on top of technical advances that will give you significant competitive advantages wile steering clear of the “latest and greatest” fade?
  3. How do you make sure your data is protected from an ever-growing list of threats?
  4. How do you go about finding a reliable partner who has not only the expertise to make technology work for you, but also the business acumen to recommend and implement real solutions that enhance productivity and profitability?

What Are Your Options for Technical Support?

Hiring a full-time IT manager is not always feasible for all businesses.  If your business can’t justify that expense, here are some other options for computer support:

  1. Don’t do Anything. Foolish, but we see it every day.  Don’t pay attention to the care and feeding of your network until it stops working, then call in an expert to fix the problem.  This reactive model is similar to ignoring oil and filter changes in your car until smoke starts pouring out from under the hood.  This “break-fix” model is not a good idea, especially if the operation of your network and data on it are important to your business.
  2. Do It Yourself. This option is better than doing nothing, but it still puts you at risk.  We’ve seen the most technically knowledgeable person on staff be designated as the makeshift IT manager, and bring in outside help when a crisis arises.  Problem is you are pulling this person away from their real job, and unless they have time to stay up-to-date on the latest IT developments, they don’t have the skills or time required to do a good job and could actually make the situation worse.
  3. Outsource Your Support To A Competent Vendor. Many vendors like Microsoft, Dell, or other software vendors provide support.  If you have ever tried to get support from one of these large manufacturers, you know how frustrating it can be.  Plus, they aren’t going to be able to help you solve problems that aren’t related directly to their hardware or software.
  4. The Independent Technician. This is usually someone who left a job in the IT department of a company and decided to start his own businesses.  They try to do a good job, work cheap and are eager to please.  On the other hand, they are often hard to get a hold of, may not be available in an emergency and often do not carry the necessary business guarantees or insurance.
  5. An independently Owned Computer Consulting Firm. You might accuse me of being biased here, but read along for a minute before you dismiss this option.  Common Sense Solutions has been doing business in the construction industry for 26 years and has considerable experience working with and talking to hundreds of businesses just like yours.  We can attest to the IT horror stories you face!  We believe an independent, locally owned and operated consulting company, knowledgeable of the technical issues of the construction industry is best solution to deliver the consistent and professional services your business needs

If you still have questions about the technical support that’s right for you, download our paper, “21 Questions You Should Ask Your Computer Consultant Before Hiring them to Support Your Business”.  (http://www.cssworks.com/pdfs/21questions)

Top Terrible Mistakes—Number 7

I started writing this summer about the common threads for those contractors who are highly successful, as opposed to those who are just barely making it, or in some instances, are no longer around, and have put them into a top (or bottom, depending how you look at it) 10 list.

Number 10 was Poor Project start. We moved on to No 9 – Document-ed Processes, a.k.a. semi-organized chaos and then No 8, Poor project communication.

Terrible Mistake #7 Support Systems That Don’t Support Organizational Success (Software and Infrastructure)

The impact of this common issue is wasted time, employee frustration, poor communication and excess overhead.

How Do You Prevent Making This Mistake? Start with the basics – an on-premise or cloud environment that is current enough to support all users with minimal downtime and guaranteed backup, including disaster recovery capabilities.

Next, you need to have appropriate software to fit the needs of the business. Add training (and allow for continual re-training), with 100% management buy-in. Too often we see companies skimp on training, or more often, reinforcement of original training. Learning anything new takes a while, longer for some than others. Mix in the inevitable employee turnover with continual software enhancements and over time a smaller and smaller fraction of the software investment is being used, or used correctly, to accomplish the original goals.

Which brings us to what is the appropriate software and what should the goals be for any software in-vestment? The end goal should always be to help make the company more efficient by getting accurate and timely information that allows for good decision making. Accomplishing this is hard. What works for one company may not for another due to differences in management, capability of personnel and ingrained habits.

In the end, the biggest technology cost is not the investment in hardware and software. It is the loss of productivity and all the resulting re-work and miscommunication that results from everyone using their own workaround without the right system for you.

Common software mistakes Include:

Not staying current with your software, which results in the loss of support and new features that keep up with hardware, technology changes and security vulnerabilities.

Not training new users (as noted earlier). Lost productivity is way more expensive than training cost!

Not fully utilizing the software. Leadership either doesn’t know – or is unwilling to enforce – the changes necessary to use the software properly. Every good system implementation will result in improvements to processes and procedures, but as you’ve probably witnessed, resistance to change can be a roadblock. Without a senior level champion, people using their own workarounds can defeat all the good intentions from the start.

Mismatched Software Selection. Do your due diligence before buying and stick to your must-haves. Here are a few of the selection mismatches we’ve seen:

  • Software intended for larger organizations is not usually a good fit for smaller companies. They have the resources to fully utilize it, you don’t.
  • The level of process changes necessary to meet the standards of the new software may not be feasible. Be realistic. As noted earlier, no one likes to change – the comfort zone of “that’s the way we’ve always done it” is very, very hard to move.
  • None of the software is integrated. Every separate system that does not “talk” to any of the others is an information “silo” that will end up causing extensive data duplication, errors and miscommunication within the organization.

Stayed tuned next edition for number 6 of our Top Terrible Mistakes!

According to a recent study

According to a recent study, by 2020, 100% of large enterprises will need to report on their cybersecurity measures to their board of directors.  What are you doing today to ensure you’re protected from an attack?

Making the shift to a ‘modern desktop’ removes the pain of you keeping your desktop environment secure with built-in protection and easy access to security updates.  A ‘modern desktop’ is Windows 10 and Office 365 kept up to date –and while that combination seems straightforward, adopting these solutions can be a challenge.

If you’re considering deploying new PCs or getting PCs up to standard and would like to learn more about how to plan, implement, and optimize your IT assets, contact us today to learn how.  At CSS, we have some of the best IT pros you will find, and together, we can integrate your modern desktop solutions quickly and securely, bringing your desktops up to par with the latest digital security solutions.