Last Updated on August 28, 2024
Effective cash flow management and data accuracy are crucial to maintaining financial health and operational efficiency for construction and service businesses, like specialty and mechanical contractors.
With cost overruns being a reality, contractors may struggle to improve cash flow while balancing the budget and meeting deliverables on a job.
Costs that hinder cash flow and profitability can arise from day-to-day occurrences like equipment maintenance or change order requests, which can be difficult to budget for. They can also stem from economic and industry challenges like fluctuating interest rates and shortages in skilled labor, which businesses have even less control over.
With numerous factors affecting profitability and cash flow predictability, plus a growing trend of incorporating construction technology and software to mitigate these issues, mechanical and specialty contractors have to rely on robust construction and accounting software to accurately depict their true costs and stay competitive in the industry.
To help you better understand construction software available in the marketplace, this blog will explore the different types of software designed for specialty and mechanical contractors, and the essential features to look for when choosing the right solution for your business:
- The challenges mechanical & specialty contractors face
- How construction software benefits mechanical & specialty contractors
- Types of software used in construction project management and service management
- How to choose the right construction software?
- Manage cost overruns and protect profits with Jonas Construction Management Software
What challenges do mechanical and specialty contractors face?
In today’s competitive and operationally complex construction industry, businesses face numerous internal and external risks. Specialty and mechanical contractors must be aware of these risks in order to adopt the right strategies and make cost-effective decisions to increase operational efficiency and protect their profits.
Labor Shortages
According to the U.S. Bureau of Labor Statistics, the construction industry saw a year-over-year (YOY) increase of nearly 32% in unfilled job positions as of November 2023, along with a 28% YOY increase in employee resignations.
The labor shortage trend continued into 2024 with the Associated Builders and Contractors (ABC) estimating that an additional half a million construction workers were needed in 2024, on top of the usual hiring, to meet the growing labor demand.
The service and construction industry is not just facing a worker deficit- there’s a skills gap as well, with over 1 in 5 workers being 55 years old or older and nearing retirement. This shortage can result in increased labor costs and lower work productivity for businesses, thereby impacting their project timelines and profitability.
Fluctuating Costs
According to the U.S. Census Bureau, non-residential construction spending reached $1.209 trillion in June 2024, reflecting a 5.33% increase from the previous year. In Canada, non-residential building construction costs rose by 0.8% in the first quarter of 2024.
This can be attributed to industry and economic challenges such as skilled labor shortages leading to higher labor rates, fluctuating material costs, interest rate pressures, and updates to building codes.
These costs also vary during the project lifecycle due to changes in the project scope, equipment maintenance issues, and unforeseen site conditions. Contractors must do their best to account for these fluctuating costs when they estimate project costs and budgets to bid realistically for the project that aligns with the project’s scope and financial constraints.
Cost Overruns
With 9 out of 10 construction projects experiencing cost overruns, it’s a common challenge for mechanical and specialty contractors, especially when working with fixed-price contracts.
Contractors further limit their ability to identify and manage cost overruns by relying on inefficient jobs and service processes, which can lead to double-data entry errors and misallocating costs to incorrect jobs, contracts, cost types or G/L accounts. These inefficiencies ultimately threaten their profit margins and overall project success.
Lack of cash flow predictability
Contractors face challenges in accurately forecasting cash flow when their current system fails to provide accurate estimates and visibility into true costs in real-time. This lack of predictability can hinder their ability to effectively manage day-to-day operations, make informed financial decisions, and ensure the timely payment of suppliers, workers, and subcontractors.
Effective Employee Management
Mechanical and specialty contractors may face significant challenges in managing their field staff and technicians, particularly when handling multiple job sites and contracts with a labor shortage. Key issues can include effective field service management and dispatching for better tech utilization, as well as monitoring work progress and daily logs. When resources are mismanaged, it can significantly impact business operational efficiency, leading to miscommunication, delays, increased costs, and reduced profitability
What are the Benefits of Construction Software for Mechanical and Specialty Contractors?
If any of the above challenges sound familiar to you as a mechanical or specialty contractor, construction software can help by offering specialized solutions designed to manage specific construction challenges, such as project and service management, accounting and payroll, construction reporting, and job costing.
If you’re still unsure about investing in construction software, let’s explore some of the benefits construction software can add to your business.
*Please note, the following benefits discussed are not offered by all construction software solutions. They are benefits typically found in integrated construction software – solutions that connect your accounting and field operations in real-time.
Contractors that rely on manual processes or standard business tools that do not communicate with each other are prone to miscommunications and dealing with inaccurate data due to data silos and double data entry errors. Some integrated construction solutions act as a bridge between siloed processes by unifying field and back-office operations on one centralized platform.
By having critical data input from the field flow to the back office in real-time, service and construction businesses can reduce data inefficiencies, minimize errors, and reduce miscommunication between key stakeholders, so that they can work together with the most up-to-date data to achieve desired project outcomes.
Accurate and Timely Data
As a specialty or mechanical contractor, it can be challenging to maintain healthy cash flow while managing job costs against estimates on projects. It becomes even more difficult when traditional manual processes and disjointed solutions prove inadequate in accessing accurate cost and financial data. Construction software helps address these issues by providing timely and accurate data on costs and operations so that contractors can effectively manage expenses and improve cash flow.
By integrating the field with the back office, construction software ensures the field data like daily logs, POs, time entries and change orders flow seamlessly in real-time to the accounting team for processing and allocation to the appropriate project phases, cost codes and cost types. This produces the most up-to-date Work in Progress (WIP) and cost reporting that enables contractors to know the true state of their job costs and operations and make effective business decisions to manage cash flow and minimize cost overruns.
Improve Communications
Effective communication is vital for the success of construction projects. Construction software facilitates this by offering robust project scheduling capabilities that ensure that all tasks are planned and tracked efficiently. In addition, the software should support team members by helping them be aware of their responsibilities, task dependencies, and deadlines.
It also provides real-time updates to the project schedule and streamlines communication and collaboration by promptly informing all the team members of any adjustments. In addition, features such as document management time entry, daily logs and RFIs, transmittals and submittals facilitate clear communication, and standardize the sharing of the latest project information.
Enhance Operational Efficiency
Integrated construction software improves back-office productivity by automating workflows for accounting & payroll, job costing, cost and WIP reporting, which helps reduce manual data errors and inefficiencies, allowing teams to focus on high-value tasks and improve overall productivity. It also helps extend this back office efficiency into the field by empowering staff with more mobile functionality to do more from the field – create and complete work orders PMAs and scheduling and technician assignments, ultimately boosting overall enterprise efficiency.
Maximize Profitability
When a business’ operational efficiency can be optimized – whether it be through construction software or a combination of construction technology solutions, they can inherently begin to minimize their costs to improve cash flow and profitability.
Construction software improves profitability by automating processes, enhancing data accuracy, and improving communication between field operations and the back office. It helps owners, project managers and other stakeholders know the true state of their costs versus estimates, which makes it possible to identify potential cost overruns early and enable informed decisions to protect profits.
What types of software are used in construction project management and service management?
Now that you understand how construction software can help mitigate risks, improve operational efficiency and protect profits, let’s explore the various types of construction software solutions and their functionalities so you can select the best fit for your business needs.
Construction Accounting Software
All service and construction companies require an accounting solution to manage their business costs and help the business stay compliant with tax laws and regulations. As such, it can be argued that construction accounting software is one of the most important types of software a construction business should invest in when it comes to understanding your business and job costs, and improving profitability.
Whether it’s with a generic accounting solution like Quickbooks or with specialized construction accounting software can depend on a number of factors, such as the business’ budget, plans for future growth, or a desire for increased visibility and accuracy into job costs.
Unlike general accounting software, construction accounting software addresses the unique nature of the construction industry’s project-based models, which include fixed-price contracts and variable costs Construction accounting software is designed specifically to meet the financial accounting and managerial accounting needs of a construction business. This may include features that handle multi-company accounting, change orders and POs, unions, compliance regulations, and reporting.
A robust construction accounting software solution automates and integrates standard accounting features like accounts receivable, accounts payable, and general ledger with features that impact job costs like job costing, work order and purchase order management, and payroll. By doing so, construction accounting professionals can effectively manage business cash flow and budgets and owners can know the true state of their costs and operations to improve profitability.
Construction Project Management Software
With all the stakeholders and several moving parts involved in a construction project, having a construction project management solution is crucial for coordinating all the phases of a construction job, in addition to managing the resources and staff required to complete the job on time and within budget.
Construction project management software is designed to streamline the entire project lifecycle, from planning and scheduling to execution and monitoring. It integrates various aspects of project management, including job estimation and forecasting, procurement, job scheduling, document management, job costing and billing, and WIP and cost reporting.
This ensures project managers can better track and communicate job progress, monitor job expenses, schedule resources, and streamline workflows, thereby enhancing productivity and improving project delivery.
Service Management Software
Fulfilling maintenance agreements and emergency work orders in service and construction requires effective scheduling, resource allocation, and coordination with the site technicians.
Having construction service management software that connects contractors, dispatchers, and technicians to provide real-time visibility into service operations can make it easier to manage scheduling, ensure the right technician and equipment are available when needed, and streamline billing and invoicing.
With service management software, contractors can better manage work orders and PMAs, control labor and equipment, and satisfy clients.
Construction Job Costing Software
As a mechanical and specialty contractor, it can be challenging to manage job costs against the estimates. This can be caused by manual data entry errors, misallocation of costs, lack of real-time cost tracking, or poor communication between the field and the office.
This is where job costing software can help provide better visibility into your costs by helping to track costs associated with a specific project, including direct costs such as labor, materials, equipment, and subcontractor, as well as indirect costs like overhead expenses.
With effective job costing software, you can access more accurate and reliable job cost data have a better understanding of your job costs and operations, identify cost overruns earlier, and implement tactics to reduce profit fade or other issues.
Construction Management Software
As you can see from the options mentioned above for specialty and mechanical contractors, construction businesses have many ways they can utilize construction software to streamline certain areas of their business. Construction management software helps address multiple areas of a business like project management, accounting and payroll, and service management in one solution.
By serving as a centralized hub for all field and back-office processes, construction management software helps businesses automate and synchronize workflows between office and field operations, thereby improving data accuracy and reducing the inefficiencies with manual software integrations. As a result, contractors can enhance productivity, maintain operational efficiency, and allocate resources more effectively, all while reducing the time and effort required to manage projects.
How to Choose the Right Construction Software?
Since investing in construction software is a long-term and significant decision, it’s important to thoroughly evaluate its features and how they align with your budget, team’s needs, and business goals.
Usability
The software should be user-friendly and intuitive. Ensure that your team can adapt and make the most of its features (suitable to your business needs) with proper training. When evaluating the usability of software, consider the following key questions:
- How many users can the software support?
- What is the learning curve like? How easy is it for new users to learn and use the software?
- Can the software be customized to fit your workflow?
- Can your team access the software on the go using mobile devices?
Integration
Evaluate if the software has integration to reflect your business needs and workflows. For example, if your company completes projects as well as work orders and PMAs, does the software integrate project management capabilities with service management? As you evaluate potential software options, ask these essential questions:
- Does the software support real-time integration between the field operations and the back office?
- Does it support API integrations or offer compatibility with other software solutions?
Scalability
The software must accommodate the growth of your projects and business, offering features and capabilities that scale with your expanding needs. Reflect on these questions while choosing the right software for your service and construction business:
- Does the software have multi-company accounting capabilities?
- Is the software scalable to support multiple projects, PMAs, and work orders as the business grows?
- Can it efficiently manage projects across multiple locations or regions?
Support
Ensure the software provider offers ample customer support with training resources and knowledge base articles for all your team members. Key considerations include:
- What are the available support channels and response times(emails, e-tickets, phone calls)?
- Are there comprehensive training resources and documentation provided?
- Is there a dedicated account manager or support representative for support issues?
- How are software updates and upgrades taken care of and communicated?
Cost
Evaluate the cost of construction software against its value to your projects, considering the initial investment and ongoing maintenance expenses. Make sure it aligns with your budget while delivering the necessary functionalities. Assess the following aspects:
- What is the total cost of software, including implementation and maintenance (on-premise vs cloud)?
- Is there a clear pricing structure?
- Does the software offer a ROI by enhancing productivity and reducing costs?
Manage Cost Overruns and Protect Profits with Jonas Construction Software
Jonas’ integrated construction software, designed for mechanical and specialty contractors, unifies the field and back office operations in real time. By providing timely and accurate WIP and cost reporting and data, Jonas helps you make cost-effective decisions to improve cash flow and maximize profitability for jobs and service contracts
With Jonas Construction Software, you can seamlessly integrate various construction processes and tasks into one cohesive platform, empowering your team to work more efficiently. From accounting and project scheduling to field service management, Jonas provides a complete suite of solutions to meet your service and construction management needs.
Learn more about how Jonas can help you minimize cost overruns, enhance cash flow predictability and improve profitability.on your projects and services. Request a demo today!
