June 2014 Newsletter
“Aahh! It’s finally here.”
Bike rides and beaches, sweet summer corn and drip-down-your-chin peaches. Sun burns and itchy bug bites, family picnics and water balloon fights. Lemonade, iced tea, or a frosty cold beer; hooray, hooray – summertime’s here!
This month’s newsletter is a summer’s sampling of industry reports, musings, and lean construction principles. And appearing faithfully in each edition, check out our Tips and Tricks for Accounting, Sage 100 and Sage 300. We would like to thank our contributors who steadfastly give their time and knowledge each month to provide you with relevant knowledge to help YOU work more efficiently! Rick Kratz, (Pittman & Murdough, CPAs) and Bryan Eto, (BeachFleischman CPAs) for providing Accounting Tips; Walt Mathieson (Mathieson Consulting) for Sage 100 Contractor Tips; and Kyle Zeigler, (Sage Certified Senior Consultant), for the Sage 300 CRE Tips.
Who Put the DDDDDD’s in BIM?
From the Ledger blog by Joanie Hollabaugh
While researching some material on BIM recently, I began to wonder who or what are responsible for the development of 3D, 4D and 5D BIM…
Obviously, everyone on the planet understands “3D.” So, when was Time, the 4th dimension of BIM introduced? British industrialist and nobleman, Sir John Egan (interestingly, the CEO of Jaguar cars from 1984-90), was the catalyst for the notion that industrial processes and techniques could cross over into the construction industry, in his report Rethinking Construction, published in 1998.
To be wiki-specific, “4D BIM provides construction project visualization, CPM scheduling, supply chain management, cost management, risk management, interoperability with 3D CAD and industry standard project management software all focused on virtual construction engineering simulation.”
Sir Egan’s vision of adding time to 3D modeling propelled the construction industry into options where they had not traversed previously – exploring options, managing solutions, and optimizing results. It has the ability to be used in a sequence of events that can be shown on a time line that has been populated by a 3D model. Talk about a fast train to Profitville!
OK, so when did 5D BIM come into play? Again, from my little wiki-friend, “The use of the term 5D is intended to refer to the addition of fourth dimension: time and fifth dimension: cost to the 3D model, i.e. 5D is 3D + schedule (time) + cost.” Or more simply, 4D plus cost.
This is where it gets really interesting. The Fifth Dimension (flashback to the song Wedding Bell Blues) is more of a concept than a product, say like 3D BIM; or a process, like 4D BIM. Five D BIM is described on the internet alternately as a development tool, a workflow, and an applied methodology. Huh?
I found a reference to 5D BIM as far back as 2007, when the AIA talked around it, describing IPD (integrated product delivery). Then in 2009, ASHRAE released “An Introduction to Building Information Modeling (BIM) and included a definition which oddly enough flips the 4D and 5D attributing cost to 4D and time to 5D as observed in a post by Patrick Villella.
My conclusion is that 5D BIM cannot be attributed to a source or owner. I have even heard it referred to as “vaporware” around the water cooler. Imagine my surprise when I stumbled across 6D BIM! This element actually makes sense to me that it is a “close out” model with all the relevant building information included. Kind of a virtual three-ring binder, with “product data and details, maintenance/operation manuals, cut sheet specifications, photos, warranty data, web links to product online sources, manufacturer information and contacts, etc.” (Source: wiki.com).
I have big plans to author 7D BIM and create a wiki page with a nebulous description. The seventh dimension will only be viewable through Google glasses however, and available only to Warren Buffet and Stephen Hawking. Or maybe on the 7th D, I will just rest…
In case you feel the need to add D’s – by integrating Sage Estimating, Autodesk Revit and Innovaya software you can fundamentally create 5D BIM modeling. Find out more from Tony Merry at Ledgerwood Associates!
Predicting Construction Trends? It’s a Mixed Bag!
When two of the largest homebuilders have exactly opposite results for a quarter, how can you possibly forecast the forecast for construction recovery?
The nation’s largest builder, D.R. Horton, reported a 10% increase in homes closing for Q2 of 2014; while number two builder, PulteGroup posted a 10% decrease in closings. This is odd, as Pulte sells more expensive homes, and according to an article by Daniel James, pricier homes seem to be most in demand.
James writes, “Some worrying numbers have emerged on the state of the U.S. housing market recently. New home sales tanked 13.3% year over year in March for the worst monthly performance since April 2011, which may indicate that the period of solid recovery is coming to an end. Strangely enough, prices shot up at the same time with an 11.2% sequential rise.”
Even stranger, is that the demographic for lower priced homes is being addressed by Horton, as they launch a new product line of “Express Homes” which range in the $120-$150k price category. One would assume as former owners emerge from the short-sale 2-7 year penance to repurchase a home, the demand for affordable housing would be through the roof (pun intended). So, where are all these emerging buyers? And shouldn’t this indicate a burst in housing starts? Evidently, this may be D.R. Horton’s master plan to address that demand…
Three years ago, the Phoenix market had 100,000 empty houses, by 2013, there were only 10,000! With investors scooping up the short sales and foreclosures and renting them out to those caught in short sales and foreclosures the inventory has shrunk by 90%. That’s dismal for buyers!
Over to the greener side of the fence, construction starts are always a dependable indicator of economic recovery. Sage conducted a 2014 Construction IT Survey and wrapped up their finding in a nifty infographic (click for the entire image) quoting NAHB’s outlook for the housing sector: analysts predict a healthy 30% increase in single family starts, and only 10% multifamily. Just a few years ago, the multifamily sector was the leader due to the renting demand.
Image source: Sage Construction and Real Estate
So, no matter if you’re a half-full or half-empty type of personality, it seems whatever you predict for construction trends — you’ll be right!
Lean Construction versus Regular Project Management
Last month we shared seven (plus) areas of waste identified in Lean Construction. This month, we are taking a step back and dissecting a bit more about the practical application of Lean Management for Construction.
The name explains it, right? “Lean” meaning spare, bootstrapped, trimmed. It’s a contextual clue that implies that most construction companies can ASSUME they’re practicing some type of lean measures. Not true! Lean construction actually CONTRADICTS the typical schedule-driven type of project management that bakes losses of time, resources, and profits into every project estimate.
The Lean Construction Institute (LCI) contends that there are KEY DIFFERENCES between lean construction and “ordinary” project management:
Control is redefined from “monitoring results” to “making things happen.” Planning system performance is measured and improved to assure reliable workflow and predictable project outcomes.
Performance is maximizing value and minimizing waste at the project level. Current practice reduces total performance by attempting to optimize each individual activity.
Project Delivery is the simultaneous design of the facility and its production process. This is concurrent engineering. Current practice, even with constructability reviews, is a sequential process unable to prevent wasteful iterations.
Value to the customer is defined, created and delivered throughout the life of the project. In current practice, the owner is expected to completely define requirements at the outset for delivery at the end, despite changing markets, technology and business practices.
Coordinating action through pulling and continuous flow as opposed to traditional, schedule-driven push with its over-reliance on central authority and project schedules to manage resources and coordinate work.
Decentralizing decision making through transparency and empowerment. This means providing project participants with information on the state of the production systems and empowering them to take action. In summary, Lean Construction is a production management-based project delivery system emphasizing the reliable and speedy delivery of value. It challenges the generally-accepted belief that there are always trade-offs between time, cost and quality.
A new study conducted by McGrawHill Construction (MHC) and Dassault Systèmes published in the “ Lean Construction Leveraging Collaboration and Advanced Practices to Increase Project Efficiency SmartMarket Report” revealed that too few contractors were familiar with lean practices and the benefits they offer. In fact, the ‘contractor panel’ involved in the study revealed that 37% were totally unfamiliar with lean, and only 28% reported utilizing ANY of the six principles of lean.
In an article published on the ENR site reviewing the MHC study, the authors summarized (our bolded type), “Lean construction offers the promise of higher and more stable profit margins for the construction industry as a whole, but the relatively low industry-wide implementation of lean practices suggests that there is a need for leadership in adoption, a role that trade contractors may be well positioned to fill. Wider adoption by the trades can help spread awareness of the benefits in the industry, especially since exposure by other project team members to the benefits of lean on a project can spread knowledge and interest in lean throughout the industry.”
To review, the six areas of lean practices include:
- Lean Construction: Elimination of waste from design and construction processes.
- Pull Planning: A targeted, specific tool involving the definition and sequencing of events on a project, working backward from a target completion date.
- Last Planner: A comprehensive trademark approach developed by the Lean Construction Institute that includes several layers of planning and full commitments to schedules from the entire project team.
- Just-in-Time: Delivering just the amount of material needed when it is needed.
- Toyota Way: A system for providing the best quality, lowest cost and shortest lead time by eliminating waste in processes and procedures.
- Six Sigma: A set of strategies, techniques and tools for process improvement that identify and solve root problems.
Do you want to know more about how your Sage 300CRE or Sage 100 Contractor software can help you implement lean practices? Talk to Mark Jensen (S100) or Tony Merry (S300) by calling 480.423.87300, or visit the LCI website at http://www.leanconstruction.org/.
Upcoming Skill Savor Lunch, June 19th – “Digging in the Data”
Everyone wants great reports, right? And that sometimes means getting your Sage data into Excel so you can slice and dice the way you want. We get that! Join LAI’s Sage Certified Consultants and staff for a FREE, hot lunch at our Scottsdale Headquarters as we discuss how to Dig for that Data! Topics include:
- SQL Gateway/Interface
- Open Database Connectivity (ODBC)
- Office Connector
TimberScan Webinar – June 25th at 1pm (MST)
TimberScan is the premier paperless A/P approval system designed specifically for full document management in Timberline!
TimberScan automatically routes invoices to the right approver based on your business rules. You define your users and how you want invoices routed. Once that’s set, all other data is coming from your Timberline database. Easy to set up, easy to us!
TimberScan’s newly released capabilities:
- TimberSync – an application that periodically transfers data from the Timberline database into TimberScan’s SQL database. It monitors Timberline and updates the TimberScan database every few minutes
- AIM – Scan a document, categorize and validate it against data in Sage and AIM will automatically attach the documents to the corresponding record in Sage
- CAPTURE – expands TimberScan’s capability to easily create invoice templates using a menu-driven program. Once a vendor’s invoice structure is set-up and saved in a template, the next invoice for that vendor will be recognized automatically. Capture also supports multiple template profiles for one vendor.
You have to see TimberScan to truly appreciate its power and flexibility. Join Piracle and LAI for a FREE
Reserve your seat now!
Spotlight on Tony Merry
With capital construction companies like Yellowstone Electric, Klondyke Construction, Elemental Energy and Skyline Steel in his resume, Tony is a natural fit for translating Sage Construction and Real Estate software into practical business solutions.
Not only has he USED Timberline software, Tony knows how to leverage the system to optimize performance to budget. He sells to his peers — his credibility is on the line! Customers and consultants alike use Tony as their go-to guy for translating the tactical into the technical.
Having studied Construction Law and Managerial Economics, Tony has served as Contract Manager, Project Manager, and Assistant Safety Director for the previously mentioned companies.
Upcoming LAI Online Training and Networking Events:
Sage 100 Contractor often uses grid structures for data entry. Grids look like your excel spreadsheets, with columns and rows. In grids, users can copy data from excel or other spreadsheet sources and paste the data into the Sage 100 Contractor grid. There are a few exceptions where the grid may have formulas embedded in specific protected columns, but the program will tell you if you attempt to paste data into a protected column. Just like with copying and pasting in excel, after you have copied a block of cells from your source, put your cursor in the top left cell of the target range, right click and select paste. In some circumstances, users may find it easy to assemble data in a spreadsheet and then copy and paste it into a Sage 100 Contractor grid.
Grids in several modules of the program permit the use of special files that function as templates. When a user has a grid of data in one of these modules that the user may want to use again, the module permits the user to Export the grid into a template file specific for that particular module. This Export is usually found in the Options dropdown menu of the module. Then, when a user wishes to use a previously saved template, the Import function found in the Options dropdown menu will load the template data quickly and completely. These exported grid files may also be used to temporarily save data while a user is performing what-if analyses or other testing – when the analyses or tests are complete, the user can import the saved grid file and bring the data back to the starting point. Modules that employ these grid templates include:
- 6-2 Budgets
- 6-9 Proposals
- 6-10 Unitary Proposals
- 9-5 Takeoffs
- 10-3 Schedules
Contact your Certified Consultant for additional information about these useful tools.
Submitted by Walt Mathieson, email@example.com, Ledgerwood Sage 100 Consultant
Improving the Bottom Line by Improving AP Invoice Processing
Many Sage 300 Construction and Real Estate users are small- to medium-sized companies that use only the core accounting modules with no third-party document management software, such as Timberscan. For these companies, the AP invoice processing workflow typically consists of paper invoices being received in the mail, routed to project managers or job supervisors for authorization and job cost coding, and then returned to the accounting office for data entry into the system. Often times, shipping or delivery receipts are collected in the field and submitted to accounting prior to vendor invoicing to be matched to the invoices once they are received. Almost always with this manual method of AP invoice approval, invoices get misplaced, misfiled, or altogether lost, and job cost reports can be missing potentially large dollar amounts of work completed on the job. Incorrect job costs, in turn, can result in unanticipated losses on a job, over or under billings, and incorrect revenue amounts recognized on the company’s income statement.
To help address this issue, Sage 300 CRE includes a pending invoice tracking system in the AP module. With AP > Tasks > Enter Pending Invoices, you enter invoices before you have all of the invoice information. If you receive an invoice from a vendor and need to send it to someone else for approval and coding, you can enter as much information as you have before forwarding it on so that the receipt of the invoice is documented in the system. Enter Pending Invoices also allows you to enter a Due Back Date so that you can track invoices entered in the pending system. When you receive the invoice back, you complete the data entry for the invoice and mark it as complete, which creates an open invoice in the system that can be posted. Accounts Payable not only prints a journal of the pending invoices entered, but includes additional reports and inquiries that allow users to review pending invoices and due back dates to help expedite the return of invoices and make sure none are missed. And Enter Pending Invoices lets you enter a session description for grouping pending invoices, such as by project manager or supervisor name, so that you can manage groups of pending invoices most efficiently.
Creative users of the pending invoice system may even enter shipping or delivery receipts to record the future expectation of a vendor invoice. In this scenario, the receipt number is temporarily entered as the invoice number and can be changed to the actual invoice number once the invoice is received. If there is value to the user in storing the receipt number along with the invoice number, a Misc Code field can be enabled to cut and paste the data to this field.
If you don’t see the Enter Pending Invoices task in AP, you may need to check with your Application Administrator to adjust AP Settings or security permissions in Security Administration. If you would like help exploring the features of the pending invoice system or implementing it into your present workflow, please contact us at Ledgerwood Associates.
Submitted by Kyle Zeigler, Sage Senior Certified Consultant
Increase Profits with Successful Project Close-out Meetings
Hindsight is 20/20. You can take advantage of that hindsight by holding regular project closeout meetings to find pieces of truth about how the project went and learn from them.
Not every project makes money for your firm. You can find ways to improve project and accounting management if you set a tone of openness to genuine feedback that will filter down to your project managers and other key employees. Here are some guidelines for success in this endeavor:
Distribute Relevant Reports Weekly. No one likes extra paperwork, but your project managers will appreciate your weekly financial reports if you include the information in a way that is useful, relevant and on-point. How do you format the reports? What to include? Well, what not to include is just as important a question.
Hold Close-Out Meetings on All but the Smallest Projects. Even when jobs are extremely profitable, there is much to be gained from a 30-minute review after the project’s final numbers come in. The meeting should include you, the chief executive, the chief financial officer, the project executive, project manager, project accountant, and the office manager who prepares and distributes the reports. Bring the following specialized reports with you to ignite discussions and keep it on-point:
- All construction costs incurred that were not assigned to any of the jobs. This will give the project manager a chance to claim any of his or her costs that would otherwise go to formless overhead.
- Itemized list by vendor of all the materials and supply purchases on this job. This will put the project manager on the spot to justify any expenditures you deem as excessive.
- Weekly labor utilization showing the number of men by pay grade and the number of hours worked — for the entire lifespan of this project. If the project took longer than a few months, then a well-designed chart or graph may be easier to read and discuss than a report.
- Job profitability
- Timing of cash flows. Weekly net cash inflows pitted against weekly net cash outflows, with a net overall weekly and project-to-date cash in- or outflow.
Let your finance, accounting or tax adviser who specializes in construction design configure these reports for you.
The Discussion Format
Project close-out meetings should be brief and productive. Set the tone and state the goal upfront. The primary purpose is to extract and develop insight from the financial results of this project for two purposes:
- The project manager to better manage future projects, and
- Help senior management train and guide rookie project managers.
Open every project close-out meeting by working through the above reports, not only explaining what every column means but also the significant events that affected cash flows, job costs, and profits.
Then, use these questions as a guide. Pose them to the project manager one-by-one, and be sure to the manager answers them completely:
- Why did you make (for example, 47 percent profit, 3 percent profit or a 33 percent loss) on this project?
- What were your biggest costs and why were those specific items the biggest costs?
- Looking at this complete list of materials supply costs by vendor on this project, what is the first thing that comes to your mind?
- How could you have saved money on this project?
- What kept your labor costs so high over the course of this project?
- Why did (or didn’t) this project hold its own with timing and net size of incoming and outgoing cash flows? How could cash flows have been improved?
- Does anything on any of these reports surprise you? What surprised you and why? How does that realization change your frame of reference?
Once the project has been put under the microscope and all cost, revenue, and cash flow matters have been brought out in the open, turn the meeting over to your CFO to hammer home any points that executive wants to make and to create takeaways for the project.
Submitted by Bryan Eto – CPA, CCIFP, Shareholder Accounting and Assurance Services Beto@beachfleischman.com
Would you like a copy of our newsletter in PDF format? Email Joanie@ledgerwoodassociatesusa.com and we will email it to you!