Dump Truck, Backhoe, Crane, Computer
A key piece of equipment for Gig Harbor-based utility contractor Active Construction never moves an ounce of dirt or lays a single pipe.
But company owner Walt Smith and controller Anne Meek say their computer hardware and software system is at least as much of a "profitability tool" as a dump truck, backhoe or any other unit of heavy equipment.
"Our computer system enables us to be very organized about what we do, and how we do it and that shows up on the bottom line," said Meek. "We've established a system by which all of our work is accounted for, and billed properly to the customer. That's vitally important. To borrow a phrase that's appropriate for a contractor: nothing slips through the cracks."
Active Construction uses the Forefront accounting and project management system from Seattle-based Dexter & Chaney, whose 500-plus customers are located throughout the United States (including more than 200 in Washington). Tracking and billing costs is "make-or-break" to a utility contractor like Active, whose contracts typically are unit pace.
"We get paid on the basis of the number of units we install, for example, linear feet of pipe or cubic yards of gravel," said Meek. "Thus, it's important that we're able to track those quantities accurately and be able to tell quickly whether we're over or under the budgeted amount for those individual items."
Each week, as Active enters payroll information into the system, it also enters the quantities of units installed on individual jobs. "We can determine our rate of production for that many tons or cubic yards, and then compare that to our bid for those individual units to determine if we're on target or if we need to make changes," said Meek. "We know on a weekly basis, because we enter payroll information once a week, whether or not we're meeting our targets for individual jobs."
The system also helps Active easily track (and bill) change orders, a fact of life for utility contractors. Through the use of Forefront, Active has been able to compete on several fast-track projects, documenting and accounting for changes that might have otherwise been lost to them.
Equipment control
Active's computer software also helps determine the profitability of individual items of equipment, both on a per-job and over-all basis, according to Meek and Active equipment manager Dennis Kooker.
Once it's set up in the system, the scheduled maintenance on all of Active's equipment is determined by the computer system. It uses metered hours to determine the level of maintenance required. The system covers the full spectrum of maintenance requirements, from checking fluid levels and air intakes to engine and transmission rebuild times, and it defines parts required to complete services and repairs.
"One of the most important items to us is to determine how profitable our equipment is," said Kooker. "When we enter the hours that a particular piece of equipment has been used on a job, through the payroll system, we also enter the hours from the equipment's meter so that we'll know if it has got a lot of idle time on it. By tracking both of those, we're able to determine if the equipment has paid for itself, via the income it has generated.
"That information also tells us whether we should repair a piece of equipment, taking into consideration its age, or should we consider purchasing a new piece of equipment. Of course, all that information-telling us how profitable our equipment is.-helps us bid for future jobs, by helping us determine a billing rate for that equipment."
"Working smart" has been a hallmark of Active Construction since Smith founded the company in 1962 with his wife Norma. It's grown to 100 plus employees and annual sales typically between $15 and $20 million, with projects primarily in Washington.
"We didn't originally set out with any grand schemes for growth we just knew that good things would happen if we did good work for customers," said Smith, a former president of the Associated General Contractors of Washington. "And, as the growth has occurred, our financial management needs have grown exponentially."
As the company has grown, so has the paperwork. But, thanks to efficient use of the computer, the accounting/finance and administration staff numbers only four people today.
Meek and her staff handle all aspects of accounting, billing and contract compliance for more than 35 jobs at any one time, in addition to payroll for the company's 100 plus employees, taxes and other vital information. Additionally, project managers use the same system for their purposes.
A key reason for the efficiency of Active's finance/administration staff is that job-related information is entered only once into its system, typically when payroll information is entered from timecards. It's then distributed duplicate entry of the same data.
"That's a waste of time and money," said Meek. "The project manager can sit at his desk and go over reports from the field by punching a few computer keys.
Any jobs or portions of jobs that require special attention will come to their attention immediately."
With the system's "contract status report," based upon percent of cost to complete, Active can pull a monthly financial statement that's identical to the yearend statement prepared by Active's certified public accountants.
As with any utility contractor, change orders occasionally occur on Active's jobs. The key to controlling costs is to track and bill those correctly. To track change orders, potential claims and any other outside-of-the-contract cost, Meek and her crew use a phase code for each project to generate the cost of labor, equipment, material, subcontractors, rented equipment or other costs related to the changes.
Then, Active adds its profit margin and presents the customer throughout the system at the touch of a computer key.
After that information is entered just once, financial and project managers can "slice and dice" the information any way they'd like, though 17 job-cost reports provided.
Active believes there's no reason to maintain multiple spreadsheet programs for the needs of multiple users, since that requires with proposed change orders, while continuing to work on the project. According to Meek, its to Active's advantage to give the customer accurate, current information about change orders to ensure timely billing.
"Obviously, no one wants to shut down a job while we go through the arduous process of obtaining customer approval on additional expenditures," said Meek. "But with the ability to accurately track costs and provide adequate, timely documentation, the customer rarely has a question about change orders."
With the financials of a multimillion dollar company to track, Meek needs to be able to access information in a manner that fits her needs.
"As an accountant, I really appreciate the system's flexibility that allows us to sort data in multiple ways," said Meek. "It really is a database program that lets you sort information and reports to fit your company's specific need. You're not just stuck with a 'canned' program or some programmer's idea of what your reports should look like."
Since being installed in 1990, Active's system has paid for itself many times. "The ability to check the current status of jobs and make necessary changes pays for itself alone," said Meek. "But we've also been able to save money by using the system to efficiently maintain our heavy equipment and only replace it if or when necessary.
"Pound for pound," said Meek, "our computer system just may be our most valuable piece of equipment."
Reproduced by permission from: The Seattle Daily Journal of Commerce April 1996
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