The TOM Homebuilder System from TOM Systems has stood the test of time for builder T.W. Lewis Co. in Tempe, Ariz. The bottom line: After T.W. Lewis started using TOM Homebuilder in 1992, net income jumped from 7 percent to 11 percent annually, even though gross margins have only increased to 28 percent from 25 percent over the same period.
"By cutting 'fat' out of the system, our net income has been up over 11 percent consistently for the past two years," says Laurie Gryder, controller at T.W. Lewis.
"The software helped us transition from a company that built 200 tract homes a year with 99 options to a builder that's looking at closing 300 homes this year and offers nearly 500 options," says Gryder. "I think it's kind of amazing that we ... added only one position in the accounting department since 1992 and two construction coordinators."
Here are three ways TOM--short for The Office Manager, a name the company stopped using several years ago--helps T.W. Lewis increase profitability:
* Cost management tools. The average T.W. Lewis home buyer selects about 50 options, many of which are customized. One of TOM Homebuilder's strengths is that it lets builders track gross margins on a per lot basis--as opposed to per community or per phase. Keeping this level of detail on 50-plus options lets T.W. Lewis track to the penny what each house costs. Tighter cost management lets T.W. Lewis price its products more realistically and gives its salespeople solid information to go back to the customer if prices are adjusted from the original estimates.
* Phased releases. With TOM Homebuilder, T.W. Lewis has customers select options in three phases: framing, appliances, and landscaping. Under the old system, customers used to select all the options up front, which led to an excessive amount of costly change orders after construction had started. Selecting options in phases creates a more even work flow and reduces change orders, since buyers are making decisions later in the process than they had been.
* Automated bill paying. Under the old system, subs had to track down T.W. Lewis superintendents to get them to physically sign off on a purchase order. The process was time consuming. Now, once a week, when the supers update the weekly schedule, they simply check off all completed tasks on the system. The TOM system then automatically finds all purchase orders associated with each task, and an accounting person clicks "Process Auto Pay." On the 10th of each month, the accounting department faxes a list to the subs of all the bills the company intends to pay. The subs call, e-mail, or fax back changes, and checks are made available on the 25th of the month. Subs must still come and pick up checks in person and sign a lien waiver.
"The Auto Pay has freed up two weeks of an accounting clerk's time," says Gryder. "Now, she can focus on other projects, such as additional financial reporting."
|The Long View|
|Here's a snapshot of T.W. Lewis, comparing when the company first started using the TOM Homebuilder System in 1992 to today:|
|Average home sales price||$200,000||$490,000|
(as % of total revenue)
Learn more about markets featured in this article: Phoenix, AZ.