Construction companies deal with several different aspects simultaneously. Materials are delivered to various locations, subcontractors bill, labor rates fluctuate and project costs keep climbing as projects go on. When these activities are tracked on spreadsheets, in paper and in different accounting systems, it is hard to determine the true cost and profitability of each project.
A construction ERP software Pakistan solution Like hisaab.pk integrates project costing, procurement, inventory, subcontractor management, billing, and accounting into a unified solution. Management can track the project costs as the work is completed, rather than waiting until the end of the month to find out how the project is doing.
Why Project Costing Matters in Construction?
All construction projects start with an estimated budget. This can involve materials, the work force, equipment, subcontractors, transportation, overheads etc. But during execution the actual cost may vary.
An ERP software in Pakistan for a construction firm links the authorized budget with real-life expenses. Purchase orders, material issues, subcontractor bills, labour costs and other costs can be allocated to the appropriate project or cost category. This enables Managers to track their budget versus actual cost and detect any overrun in the early stages.
A modern ERP can also monitor user approved costs like approved purchase orders and subcontractor commitments prior to receipt of invoices. This will give a truer picture than if you only consider paid invoices.
Managing Site Materials With ERP
Materials are a major component of the expenses of construction, and it is vital that inventory control is in place. A variety of materials including cement, steel, bricks, sand, aggregate, electrical materials, and others must be delivered to the right project at the right time and right quantities.
Using construction project management software Pakistan, businesses can generate material requests, purchase orders, goods receipts, site issues and keep a track of material utilization.
The need for 500 bags of cement, for instance, can be associated with a particular project and can be an approved number of bags. Upon receipt and issue of the material to the site, the ERP records it to that project.
This provides increased visibility into material usage and enables businesses to detect any abnormal usage.
Material Wastage Control Construction Site Solutions
Material wastage control construction site is one of the significant advantages of digital material tracking.
When the quantity of material planned is compared to the quantity actually issued and consumed, then significant differences would be investigated. The reasons for excess consumption can be inaccurate estimation, damage to materials, poor handling, theft, rework or changes in project requirements.
While an ERP cannot stop physical wastage, it does give you the records to spot where and when material use is higher than expected. Site inventory controls also can minimize pilferage and ensure accountability.
Managing Subcontractor Bills
Subcontractors are typically responsible for major components of the construction projects, such as electrical, plumbing, masonry, flooring, painting, steel work and other specialties.
Manual payment handling may cause issues if bills aren’t matched up with work completed.
A construction ERP can link a sub contractor’s agreement, a work order, agreed rates, project, progress measurement, and payment records. The project team can confirm the work performed before approving a bill, as it can check whether the work is done in accordance with the scope agreed on.
The system can also keep track of advances made, deductions, retention of money and previous payments. This will establish an unmistakable subcontractor log and minimize duplicate or unsupported payments.
Project-Wise Profit and Loss Reporting
When there are multiple projects in the works, it isn’t sufficient to just know the construction company’s total profit. Management must be aware of which individual projects are adding or taking away margins.
A project wise profit and loss report is an instrument that can be used to compare the costs and revenue of a project.
If revenues and expenses are tied to the right job, management can gain insight into the financial status of each project, instead of the company as a whole.
Project-wise reporting is beneficial especially when a business manages to run residential, commercial, infrastructure projects, and/or multiple contractor projects at any given time.
Bill of Quantities (BOQ) and Procurement
The BOQ is a significant milestone on the construction project. But a BOQ should not be seen as a total costing, as the cost can also include materials, labor, equipment, subcontractors and overheads.
An appropriately configured ERP can integrate BOQ needs and procurement/site usage.
Cloud Based Construction ERP
Using a cloud-based construction ERP means that the information on a project is accessible to authorized users from different locations and through internet-connected devices. This system works well for multiple construction companies, where project managers can check the costs on site, while accounts are working from the company’s headquarters. It reduces the need of exchanging spreadsheets and simplifies the process of managing project costs, procurement, billing, labour and site activities.