How to Fix Your ERP (Pt. 2)

Contractors in this range are likely running a few crews on a handful of jobs and self-performing a few services.

In this range, you’ll typically have an owner (who is often just working his way out of the field), a head of Ops and project management who also estimates and bids jobs, and an office manager responsible for getting payroll out the door and working with a CPA to keep the books in order.

Leadership can monitor performance in their heads—they know which of their crews are good at what kinds of work, and which jobs are making them money and which aren’t. They can succeed while bidding in Excel, tracking time using paper time cards or a basic timekeeping app, and figuring out the exact cost of jobs after the fact.

That said, we do have customers in this range who recognize that, if they’re going to add crews or services, it’s helpful to build the habits they’ll need across field and office to grow profitably. Better technology helps them to document sites, set production targets and review performance in real time, and monitor where they’re gaining and fading hours and profits across jobs and crews.

If you’re in this range and happy to stay there forever, spreadsheets and Quickbooks will serve. If you have aspirations to grow, read on to learn more about what you’ll need to put in place.
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Midsize contractors are running five to 15 crews at a time on more jobs than an exec can track in his head. They’re also often starting to take on more highly-regulated public work and to perform services that haven’t traditionally been in their wheelhouse.

Their operations are more complex—they have dedicated PMs and estimators, a Finance function that brings bookkeeping in-house, and a chain of command for the field that distinguishes foremen and superintendents, reporting up to a general superintendent and head of Operations.

Smart contractors equip these new personnel with what we’ve termed a performance management system to unify project teams in pursuit of field and financial excellence. A performance management system isn’t just a field time card or quantity log. Rather, it’s a complete set of capabilities that allow Ops, PMs, and superintendents to set financial targets, tie them to production goals, set plans to achieve them via concrete, near-term lookaheads, and review performance in real time. Without the ability to forecast, build, review, and repeat, companies struggle to identify, bid, and deliver profitable jobs for sophisticated clients in competitive markets.

The ERP plays a role, of course—this system must pull financial data from accounting so that PMs can monitor the financial impact of field performance. But today’s ERPs, with their clunky reporting tools, siloed data, and decrepit mobile interfaces, cannot serve as the daily operating system for office or field. Nor can generic field reporting tools that leave contractors to manage everything in the rearview. The right system equips contractors to unify, plan for, and hit their field and financial targets.

A final note—at some point in this range, you’ll push Quickbooks to its breaking point—especially if you’re running Quickbooks Online rather than Desktop—and will need to think about graduating to a Foundation, Vista, Spectrum, or Sage. We’ve seen some 120-employee contractors manage payroll and job cost out of Quickbooks, but it’s a lot of work.

Large customers deliver a broader range of services for a mix of public and private clients. Typically we see customers in this range investing more heavily in administrative functions in the form of project engineers and project coordinators to ensure that Ops, PMs, and the field can focus on delivering jobs rather than, for example, counting quantities, chasing documents, enforcing internal processes, or minding the ERP.

If you don’t already have a performance management system in place before growing into this stage, you’ll begin to feel serious pain now, as stacks of disconnected time cards, logs, and job cost reports pile up from the field and from finance without ever painting a clear picture of where you’re over-performing, underperforming, and why. Getting this system in place quickly ensures you’ll max out your profits in good market conditions and know where to double-down and to cut in bad—no better time to get moving.

Finally, safety gets its own headcount in range as contractors take on larger jobs with rigorous bonding requirements, as does asset management as company fleets outgrow a mechanic’s ability to manage off memory. Again, ERPs have made a bid to manage all these critical capabilities themselves. But while having a centralized equipment list in the ERP is certainly critical for job costing, ERPs will never serve as intelligent hubs for analyzing telemetry data, managing maintenance, or even giving up-to-date utilization.

Enterprise contractors typically have a robust mix of GC and self-perform work, with all the complex web of subcontractor management—qualifying, contracting, monitoring, paying, etc.—inevitably involved.

Contractors in this range have done well to adopt tools like Procore originally built for commercial and residential GCs. But GC tools, which don’t allow companies to monitor budgets, actuals, and forecasts for quantities, hours, and cost, won’t fuel profits in the self-perform, unit-price, production-driven side of the business. Contractors are best served finding a dedicated performance management system that connects both with the ERP and with the sub management system, thus solving self-perform and subcontractor management problems in best-in-class tools.

So what’s the lesson for self-perform contractors? This isn’t another tired reflection on how contractors should buy more technology. It is, however, a call to get better at evaluating it.

Observers love bemoaning, “There’s too much technology in the market.” But the number of construction tech offerings is much smaller than the number available to manufacturing, energy, or utilities companies, to name a few examples. The reason there are so many contech vendors is because there are lots of opportunities to improve processes and return profits to contractors—and because a few tools that each solve one problem well generates more value than one tool that solves all problems poorly (provided they integrate with the ERP, as discussed above).

It takes time and effort to find those tools. The real cost to contractors of getting the tech stack right is less the fees they pay for great tools than the time and effort they must expend finding and implementing them. More on how to do that effectively in this post.

At CloudRig, we’re passionate about solving the most critical problem faced by self-perform, production-driven contractors over 25 people and a few million in revenue—identifying where you’re making money, losing money, and why in time for Ops, PMs, and superintendents to do something about it.

Come see us at CFMA 2024 to learn more.
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To see how CloudRig solves the PM, Ops, and Finance problems outlined above, sign up for a demo below and visit us at Booth 227 at the 2024 CFMA Annual Convention.