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Posted on: June 17th, 2013
by Chad Evenrud

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Construction Document Management Software: Cost Control vs. Cost Reporting

Getting the most out of your construction document management software is critical when running an effective accounting system.  Technology has been able to automate and generate workflows for the most paper-intensive and time consuming tasks that are common in the construction industry.  However, even with all these convenient advancements, people are still relying on archaic methods that cause them to undergo cost reporting instead of cost control.  In this article, we will review the difference between cost reporting and cost control, and how you can get the most out of your construction software.

Cost Reporting

Your company has just finished a large project and management is ready to review the financial data.  The accounting department prepares the reports and sends them off to the management team.  After review, management notices that they have overspent on multiple commitments and were allowing none-complaint contractors on their site.  This scenario is common in the construction industry.  Documents, reports, data and communication can become convoluted especially when a construction company is undertaking multiple projects.  This is what leads companies to perform cost reporting.

Cost Reporting is when data is presented to management showing their financial standing after all the bills have been paid and the project is complete.  This kind of “reporting” tends to occur when the company administration personnel lack the workflows necessary to effectively enter and retrieve data.        

Cost Control

Cost control is much more proactive than cost reporting.  Errors in accounting, compliance and operations are quickly recognized and are effectively handled.  For example, companies that generate workflows in which purchase orders and subcontracts are entered into the accounting software before issuing the commitments allows management to analyze the data for cost overruns.  This workflow gives “control” to management and helps prevent wasteful losses that are all too common in the construction industry.  Utilizing your construction software is key when practicing proper cost control procedures.  Here are some helpful tips to get your company generating Cost Control workflows.

Creating Effective Workflows:  Workflows stand for “a sequence of connected steps where each step follows without delay or gap and ends just before the subsequent step may begin… The flow being described may refer to a document or product that is being transferred from one step to another.” (1)  The flow in which data is entered and reviewed is what determines if you are using your construction software effectively.  For a workflow to be effective, multiple departments have to be implemented within the software program.  Just because a company spent thousands of dollars on a software program, doesn’t necessarily mean the personnel are using the software to its fullest.  Make sure that your company personnel are willing to learn new software techniques and chance their old habits.      

Retrieving Data/Document Management:  Making sure you can actually retrieve and generate the proper reports is critical when performing cost control.  Finding the right data in your construction software can be like finding a needle in a haystack.  Your accounting system can be filled with a sea of data.  Make sure your software can generate the reports necessary for management to make proactive decisions.  For example, as soon as a PO or a Subcontract is entered into the software, management should be able to generate a report that indicates any bill that has exceeded the original commitment.  Documents should also be readily available to management when dealing with questionable bills.  Having a good ECM system implemented with your accounting software can help your company save time and money when dealing with hundreds of documents.  

Compatibility:  Not all departments use the same software, thus it is important that each software is compatible with one another.  For example, when implementing a new construction document management software, make sure it is compatible with your current accounting system.  Take the time and research which software solutions fits your company needs.  Also, many departments use different software applications, so make sure that your company creates a workflow between those departments.  An example would be the accounting department and the compliance department.  Both could be using separate software applications, but rely on one another for certain processes.  Make sure each department is using their software to its fullest and understands the workflows.

It is important to understand that software is just a tool to help drive efficiency within your company. And like any tool, it is only effective as its user.  That is why it is essential to stay on top of your construction software’s updates, training manuals and training seminars.  If you are having trouble implementing your software, then you should talk with a software consultant who can help increase your company’s knowledge on current technology trends.       

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