Construction companies are increasingly embracing digitization and looking for solutions that enable them to grow and operate profitably in challenging times. Enterprise resource planning (ERP) software offers them an opportunity to pursue their goals as they manage processes and projects on a unified technology platform. In a recent Sikich LinkedIn Live event, Mike Loumeau, Senior Account Executive, and Tim Tucker, Director of Professional Services, Dynamics 365 Business Central, discuss what construction companies need to think about when they consider ERP.
In their conversation, Loumeau and Tucker identify four critical themes that should be top-of-mind for construction executives who feel that an ERP system tailored to their business model might be to their advantage.
1. What are the must-have features of construction ERP?
An ERP system for construction companies has to support such important, typical activities as bidding and estimating, project management, subcontractor management, procurement, work-in-progress (WIP) and profitability reporting, and others. It also needs to facilitate the business fundamentals, like financials or planning.
However, this is almost a trick question. You certainly need all these capabilities, but just as important is how you gain them. We find that many construction companies use disparate systems to manage parts of the business. That means they work with multiple, not always synchronized data repositories, repeatedly entering and retrieving information.
If your data is distributed across several software systems, its usefulness is limited. For instance, when you work in the general ledger, you might no longer be able to see whether transactions originate in a WIP calculation or elsewhere. And you probably won’t be able to easily assess the financial impact of transactions you perform in the job costing software.
ERP can help you run your construction company efficiently and with full control. One of its unique strengths is that it can serve as your central data source and help you understand and manage operations in the context of the entire business and its goals. The more you can unify and integrate workflows and business activities in the same software environment, the more value you can realize from your technology investment and the easier it will be to realize the transformations you aim for.
2. How can you be certain to invest in ERP technology that can grow with you and will remain viable for the foreseeable future?
Your ERP system needs to meet today’s requirements and also has to be able to scale as you add projects and customers. If you grow the business, for example by launching new services or by acquiring another organization, it needs to be able to support that as well.
We recommend focusing your software evaluation on the more stable, proven vendors that also deliver continuous innovation. Sikich partners with Microsoft and other industry leaders. Microsoft Dynamics 365 Business Central is the ERP system we most often deploy for our construction clients. Microsoft continues to invest in Business Central to enhance it with deeper functionality that allows companies to become ever more effective as they modernize, change, grow, and compete. It’s a cloud-based solution whose scalability is practically unlimited, and you can activate and use software modules as you need them.
You don’t want increasing revenue or improving profit margins to be entirely consumed by operations. For that reason, your ERP software should also give you the agility and visibility to accomplish more with limited resources and finite budgets. For instance, if your business model moves toward prefab manufacturing or if you begin offering maintenance services, ERP needs to follow where you’re going.
3. How can construction ERP help you save money and reduce costs?
Already thin margins in the construction industry are being further eroded by increasing expenses related to supply chain challenges and growing labor costs as the war for talent continues. We usually work with our clients to help them improve the cost-to-benefit ratio of their technology in their unique business.
As we mentioned, Business Central and other modern ERP solutions are at home in the cloud. You can run them without purchasing and maintaining servers, storage arrays, and data center infrastructures. You also don’t need a large team for managing them. If you have an IT group, they will be able to spend more time on business initiatives, not everyday systems management. If, like in many construction businesses, an IT team is not part of the organization, your technology partner can configure the ERP system to fit your operations.
Once business processes take place within the cloud ERP environment, you may also save costs because employees spend less time entering data; resolving mistakes; finding ways to access, share, and report on information; moving bids and sales processes along; and more. You may not need to hire more people to manage the business as it grows, because employees can work and communicate more efficiently.
The visibility that becomes possible with ERP and improved reporting can also make a big difference in keeping costs under control. For example, when it’s easier to record and see all the costs of construction projects in one screen—either by individual jobs or across the business—you can more easily forecast your profitability and cash flow, even when projects evolve with change orders. Your management can change from reactive to proactive as you direct financial performance to your advantage.
4. What should construction companies consider when they choose a technology solutions partner?
Selecting and implementing an ERP system is a major milestone in the life of your company. The right technology partner can help you pull this off successfully. The partner you feel comfortable with should be deeply familiar with the construction industry and its trends and challenges, as well as with the best solutions available today. It helps if the partner isn’t allied with only one leading software vendor, so that consultants will recommend a certain solution no matter what the customer’s concerns are. It’s also an advantage if your ERP partner understands other industries, not just construction. For example, when it comes to digitization, some manufacturers are more forward-looking and innovative than many companies in the relatively conservative construction market. Insights from a technologically more mature industry can be greatly valuable for growing construction businesses.
Your ERP partner should understand your other technology systems and be able to help you build a unified, connected technology ecosystem. At a minimum, the consultants should be able to integrate ERP with any specialty software systems you want to continue using. If they can also help you address end-user computing needs or ensure the right level of cybersecurity, even better. And, if you can rely on them to provide support or outsourced IT management, that could be an opportunity to reduce overhead and realize better outcomes from technology. Generally, fewer technology vendors means clearer accountabilities, easier communications, and more efficient resolution of any issues.
Why consider Sikich?
We are proud to enjoy long-standing relationships with more than 500 construction clients. We know the industry well and are committed to its success. Our HeadSTART for Construction approach provides a complete working model of Business Central optimized for the needs of construction companies. With standardized processes that incorporate industry-best practices and our decades of experience, we can usually meet 80 percent or more of your functional requirements out-of-the-box. That includes typical construction workflows, back office management, and such growth areas as field services. With HeadSTART, we can deliver streamlined, predictable software projects in a very short time and with minimal disruption to your everyday activities.
In addition to being a large technology consultancy that serves clients across several important industries, Sikich is also an accounting and business advisory firm. That means you can draw on our expertise for the best of modern ERP and other digital resources, and you can also work with us to address any concerns regarding the often complex financial management in the construction business.
Here to help
In an initial exploratory, no-obligation conversation, we can quickly get a sense of where your business is headed, what you want to achieve, and which issues you aim to address. We can then tell you if Sikich expertise and solutions like HeadSTART for Construction can make a difference. As a next step, we might design a construction software demonstration that begins to address your concerns.
Here are some other next steps: