We built this city, using cash control; why construction companies should invest in ERP.

Now that you’re humming along to the earworm that we planted in the headline (based on this 1985 classic by Starship), let’s talk about how ERP can help construction companies improve their efficiency and increase profits.

Mention Enterprise Resource Planning (ERP) to business people and they almost certainly think that you’re referring to software for the manufacturing industry, which in fairness would have been true years ago, but things have changed. ERP has evolved and different industry sectors have adopted the ERP platform to help manage their processes, improve efficiencies and increase growth.


Laying the Foundations

Initially there was a reluctance in the construction sector to move towards ERP, mainly because it has its own unique requirements and specific processes and business practices. The consensus was that ‘point solutions’ would be the best way to support each stage of the construction process. However, this wasn’t the case for all construction businesses and some early adopters experienced major benefits to their business.

One possible reason why it wasn’t taken seriously as a viable option could have been a lack of awareness about what ERP is. Having only worked in traditional construction environments, many senior managers in construction had little or no experience of technology and best in-breed solutions. However, a more obvious reason was the fact that there were very few affordable solutions that were suitable to construction. Leading to confusion and an unwillingness to embrace ERP.


Building a Framework

At one time, ERP’s lack of project management functionality to record costs, cash flow, time, resources and risk didn’t work in its favour. Without being able to understand and measure these factors and the effect they have on each other, businesses were less able to make major business decisions. This made it less likely that a project ran smoothly and profitably.

Now, more than ever, construction companies are working on projects that need to meet the demands of the client in terms of time and budget. This requires a solution that has the functionality to manage a project from pre-construction stage (estimating) to post-construction (maintenance & retentions).

With budgets so tight, a contractor has to make sure that they record every aspect of a project, whether it relates to materials, labour, plant hire, or sub-contracting. They need a solution that will centralise all of this information, process it and allow them to produce the corresponding invoices at various stages of the project, when required. It should also allow them to record all costs against a project/person/plant. This probably sounds straight forward, so why has it taken so long for ERP vendors to catch up? It was probably due to the lack of industry expertise on behalf of ERP vendors as well as limited awareness of the construction sector’s needs in relation to IT.


Fittings & Fixtures

You will be glad to hear that vendors such as Microsoft, and their partner network, have made vast steps in developing a fully functional ERP to support and help construction businesses take control of their finances and manage projects more effectively.

Microsoft Dynamics NAV has been developed to provide the tools required to effectively perform the everyday tasks faced by a construction company. Processes such as financial reporting, human resources, payroll, timesheets, estimating & budgeting, variations, retentions, applications, total project management, and inventory control are now fully integrated. Due to flexible deployment options, including cloud ERP, you won’t have to wait until you get back to the office before you can update your records, it can all be done on site in real-time.

ERP Solutions used in construction can lead to better:

  • Financial management and allocation of cash
  • Streamlining of business processes and operations
  • Awareness of labour, materials, and plant hire on site, allowing them to be optimised more effectively
  • Communication between people and departments to maximise productivity
  • Tracking of cost comparisons for Budget v Committed v Actual
  • Visibility of projects, as all information is in one system
  • Compliance with HMRC for sub-contractor costs

Taking a leaf out of the construction industry’s book, ERP has built a stronger solution that meets this sector’s specific needs, providing measurable benefits to the business and its bottom line.

Get in touch with us to find out more about how Microsoft Dynamics NAV for construction could help your business.

Article written by Mark Blackmore, Head of Telemarketing at QBS Group

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