Accounting Software Helps Contractor Remain Efficient, Retain Small Staff
How does a heavy/highway contractor manage growth without adding significantly to its accounting/ finance staff?
Growth always is accompanied by the challenge of tracking the avalanche of individual components that comprise the standard unit-price contract for heavy/highway contractors. But Dobson Brothers, of Lincoln Neb., has handled a 50% increase in revenues since early 1992 (and the associated blizzard of unit-price information) with the addition of only one part-time employee to its accounting/finance staff.
The answer for Dobson Brothers is efficient use of accounting and project management software developed specifically for the needs of heavy/highway contractors. The profitability of a job equals that of its individual components-from equipment and labor to the cost of the units of materials (rock, sand, cement, etc.)- devoted to the job. Thus, Dobson Brothers believes the key to profitability lies in tracking, analyzing and managing each of the literally thousands of components.
The company operates a system that allows it to analyze each piece of company equipment as its own profit center, measuring profit or loss for that equipment according to its cost, billing rates and usage. The software also enables them to ensure that the equipment is being maintained properly and in a timely fashion.
Although company owner Sam Olson and controller Carol Clark have added only one part-time accounting/finance staffer to manage the company's dramatic growth, they're still able to process information from the field quickly and access current information immediately.
"In a very real sense, we view our software as a 'profitability and productivity tool' that's as important as any individual piece of heavy equipment," said Clark. "It has a direct impact on our company's profits, by allowing us to use essentially the same number of accounting/finance personnel even with significant growth."
Since early 1992, Clark and Dobson Brothers have used the Forefront accounting and project management software system from Seattle's Dexter & Chaney. It replaced an older, slower system.
With 200 to 250 employees, depending upon the time of year, and more than $30 million in annual revenues, Dobson Brothers has been a fixture on the Nebraska landscape since its founding in 1946 by the late Robert A. Dobson and Adna Dobson. Dobson Brothers' red dump trucks, loaders, backhoes and heavy equipment have become a familiar sight to generations of Nebraskans. It's a construction industry leader in a community best known as the home of the University of Nebraska and the state capital.
If you've ever driven on a Nebraska highway, particularly in the Lincoln and surrounding Lancaster areas, chances are that Dobson Brothers had something to do with its development or maintenance. In all, the company has built or repaired hundreds of miles of roads in Nebraska and neighboring Oklahoma and Kansas.
Clark is a native Nebraskan who grew up in the small town of Valparaiso, 25 miles north of Lincoln on Highway 79. She's been charged by Olson, another native Nebraskan, to oversee the company's profitability.
A Dobson Brothers employee since 1984 and controller since 1988, Clark firmly believes that it's better to work smart than to work hard. Hence, she uses her computer system to its potential.
Let Clark explain: "As a heavy-highway contractor, we have a lot of equipment, and we need to track the repair costs for that equipment (both in labor and parts (and how we utilize our equipment," said Clark. "We have to track how many hours we're getting of actual usage time out of the equipment to see if it's worthwhile even having them.
"Use a dump truck as an example. We give it an hourly rate for the usage of the equipment, and we know the dollars that we've spent to purchase and maintain it. SO, when we charge the equipment to a job, we can see immediately whether or not we're making money on that particular piece of equipment. Basically, it's a separate profit center.
"Plus, we can also see whether we're utilizing the equipment enough. If, for example, we're using a piece of equipment, like a loader, for only 350 hours a year, we can ask ourselves if we really need it at its cost."
Of course, one of the best methods to maximize the profitability of your equipment is regular preventive maintenance. With many pieces of equipment costing upwards of $100,000, it behooves Dobson to accurately track equipment maintenance and perform it on a timely schedule.
Several years ago, Dobson Brothers worked with Dexter & Chaney to develop a system to track preventive maintenance. Their combined efforts resulted in Forefront's preventive maintenance module.
As Clark explains: "We develop a computer file for each piece of equipment and print out one card for that piece of equipment that lists various tasks that are required. The tasks include things like changing oil, hydraulic fluid or anti-freeze.
"The employees in the field turn in hours or miles, or whatever measure we choose, that gives the actual usage for each piece of equipment. We tell the computer the allotted time for each piece of equipment between performing each of those tasks (whether, for example, it's 3,000 miles for an oil change, or six months for an anti-freeze change.
"The equipment card prints out automatically just before the due date for each of those tasks. For an oil change, for instance, it'll print out on Nov. 1, or after 3,000 miles of usage."
After the preventive maintenance task is completed, the card is returned to the office staff with the notation that the task has been completed. "We have millions of dollars worth of equipment, so an automatic system pays for itself by ensuring that the equipment is regularly maintained," said Clark.
People who don't keep up with maintenance can't hide from the system thanks to an exceptions list that it generates. If, for example, a truck's oil is not being changed on time, Dobson management can determine that immediately and ensure that it occurs.
Dobson Brothers is able to develop 250 payroll checks, and all the related reports that accompany them, in less than a day. That includes a single check to any employee who, technically, may have worked for multiple companies under the Dobson Brothers umbrella.
"The job cost reports that result from payroll are very important to us to evaluate the profitability of our jobs," said Clark. "We do payroll weekly, generating a labor report (customized specifically for our needs (that shows labor gains and losses specifically for each job, based on unit cost, quantities performed and other variables."
The information used by Clark and project managers to perform their jobs is instantly accessible to top managers to help them do their work. Olson, the company owner, analyzes comparative financial data from year-to-year on expense accounts and shop accounts, reviews history reports on jobs, analyzes jobs in progress, or views any other area of the company by using the system's on-screen inquiry.
"Working directly with Carol and the computer, I'm able to look at the 'big picture' or any of the thousands of 'little pictures' that make up a heavy/highway contracting firm," said Olson. "I'll continue to be able to do that as we grow, without any planned increase in our accounting/finance staff."
Reproduced by permission from: Roads & Bridges Magazine, December, 1995.
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