Craig Schweikart, a senior consultant at Shinn Consulting who follows builder technology closely, has some simple advice for builders looking to deploy an accounting and construction management system: Figure out why you are buying a new system and what business problems you hope to solve.
"The best thing you can do is determine your own internal value proposition,'' says Schweikart. "Ask yourself, 'If I spend the money, what will I get in return?'"
For example, Kipling Homes in Shorewood, Ill., wanted to get control of its costs, so the company went with an integrated system of Timberline for accounting, Builder MT for generating purchase orders, and Builder1440 for a sales management system, often called a sales front end. Wonderland Homes in Lafayette, Colo., opted for MasterBuilder to automate its purchase order process. And Taylor Woodrow in Bradenton, Fla., is looking to roll out NewStar because it wants a single enterprise, resource, and planning system for all its North American operations.
Taylor Woodrow is a large builder with $816 million in 2002 revenue and more than 800 closings, so it makes sense that it would opt for a product like NewStar, which costs well in excess of $100,000 to deploy for a large company. The great thing about NewStar, though, is that it's comprehensive: It includes everything from accounting, job costing, estimating, purchasing, and even a sales front end.
Other enterprise software packages from FAST, Mark Systems, BuildSoft, i4synergy, and J.D. Edwards will do the job for large- and mid-sized builders. But most small-sized builders can't afford the price tag for one of those systems, and even if they could, a builder running at about 50 to 200 closings a year often doesn't have the interest or the staff to absorb an integrated solution all at once.
Although Debbie Kilhafner, assistant vice president at Kipling, admits that integrating Timberline, Builder MT and Builder1440 cost close to $50,000, starting with Timberline as a base for accounting and job costing offered Kipling a more comfortable migration path.
"With Timberline, we knew the accounting part and we were able to add on slowly,'' says Kilhafner. "We started with purchasing, went on to customer care, then added the sales center, and we'll have scheduling up and running by the end of the year.''
Kipling Homes is shooting for 200 closings this year. Kilhafner says the company decided that if it wanted to keep growing, it needed the business information and efficiencies only technology can deliver.
Here's how the integrated system works at Kipling: Land development and estimating is done simultaneously. As land is developed for the company's new projects, Kipling draws up its initial estimates and gross margins in Builder MT's ProHome and puts the data into Timberline.
When the lots are ready, the sales process begins and the company's salespeople help customers choose options on the Builder1440 sales front end. The sales information comes over the Web from Builder1440 and into ProHome. The information is reviewed and accepted and sent to Timberline's job cost application, which calculates a profit margin for the job. Once the margin is calculated, Kipling will look over any cost variances and adjust for the next job.
The final profit margin is sent to ProHome, which generates purchase orders. When the field supers sign off on the POs that the work is complete, the subs submit invoices, and an accounts payable clerk checks the invoice to make sure it matches the PO. Assuming it matches, the clerk sends the PO to Timberline to be paid.
Schweikart says one of the most interesting parts of this process is that Kipling is actually looking at its cost variances and adjusting the system as it moves forward. The integrated system Kipling deployed offers a way for the company to change its plan midstream, a technique he calls "managing exceptions.''
"Managing exceptions changes a person from being a builder to managing a home building company,'' says Schweikart. "At that point, you're running the business, not just building houses.''
One basic goal
Sometimes it just makes sense to start with one basic goal and build from there. For Wonderland Homes, the company went from building 35 homes a few years ago to about 100 this year, so it needed a system to help reduce the time the company's field supers spent working on invoices and purchase orders.
John Ammon, the company's systems coordinator, says since Wonderland deployed MasterBuilder about 18 months ago, its supers report spending one-third the amount of time on invoices. That's a profound improvement, especially considering that when Wonderland started with MasterBuilder it didn't even issue purchase orders. Ammon says that under the old system the supers would check the invoices against the original subcontractor contracts, a process that was cumbersome and completely paper-based, since the contracts were piled into paper folders.
"Now, the POs are generated electronically, and the information is readily available on the computer,'' says Ammon. "It's much more efficient.''
The next step for Wonderland is automating the sales process and integrating the sales information into MasterBuilder. Ammon says Wonderland is working to deploy SalesCloser to cut down on the amount of paperwork on the sales side.
The best advice for the average builder is to learn from the experiences of Kipling and Wonderland and start small. Unless you really understand the technology and plan to manage growth by evaluating your business processes, it doesn't make sense to run with one of the expensive back-end systems.
Start off with Timberline or MasterBuilder, and grow from there. Timberline can integrate with Builder MT and Builder1440; MasterBuilder can integrate with SalesCloser and is also working to integrate with Builder1440. Sure, it takes some work, and it takes a commitment from management and the staff to stick with it. But if you really want to take advantage of these bustling times for builders, plan on spending at least $20,000 to $30,000 to get one of these systems up and running. If you're not ready to do that, stay small and go with QuickBooks (see "No Small Matter").
No Small Matter
Intuit's new edition of QuickBooks for contractors is geared toward making small builders more productive.
Not every builder wants or needs to grow from 50 closings to 350 closings in the next few years. However, small builders looking to run their companies more efficiently should take a close look at the new features Intuit has packed into QuickBooks Contractor Edition 2003.
Gary Wiessinger, senior product manager for QuickBooks contractor solutions, says that roughly 75 percent of the contractor edition's new users are former QuickBooks Pro users. He points to three of the enhancements in the new edition for contractors:
* Enhanced job costing. When builders bring up a job in QuickBooks, the software can now query the database for expenses that haven't been assigned to a job. A report is generated that includes a full list of a job's costs and then assigns the expenses to the job--a handy tool, since builders are notorious for not keeping control of their costs properly.
* Automated change orders. Builders lose time and money when they don't have an efficient way to document change orders. With the new software, when a builder edits an estimate, the software detects the estimate and automatically provides the builder with the option of creating a change order. Now, builders can create change orders in a couple of mouse clicks, moving them away from the old system that could take up to a half-hour of typing.
* New contractor-specific reports. The new version features nine new reports, one of which is a job status report that lets builders do project management on a smaller scale than, say, Microsoft Project. Builders can track a job's status, whether it's open, closed, awarded, or declined, as well as tracking a job's projected and actual dates.
A single-user site license for QuickBooks Premier Contractor Edition 2003 is $499.95, and existing QuickBooks users get a $120 rebate; QuickBooks Enterprise Contractor Edition is $3,500 for a 10-user pack. Visit www.intuit.com for more information.