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CLAconnect.com

Information Systems – Tune Up or Major Overhaul?

R.J. (Bob) Sniegowski, PE

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Disclaimers

The information contained herein is general in nature and is not intended, and should not be construed, as legal, accounting, or tax advice or opinion provided by CliftonLarsonAllen LLP to the user. The user also is cautioned that this material may not be applicable to, or suitable for, the user’s specific circumstances or needs, and may require consideration of non-tax and other tax factors if any action is to be contemplated. The user should contact his or her CliftonLarsonAllen LLP or other tax professional prior to taking any action based upon this information. CliftonLarsonAllen LLP assumes no obligation to inform the user of any changes in tax laws or other factors that could affect the information contained herein.

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Housekeeping

• If you are experiencing technical difficulties, please dial: 800-422-3623

• Q&A session will be held at the end of the presentation

– Your questions can be submitted via the Questions Function at any time during the presentation

• The PowerPoint presentation, as well as the webinar recording, will be sent to you within the next 10 business days

• Please complete our online survey

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About CliftonLarsonAllen

• A professional services firm with three distinct business lines

– Wealth Advisory

– Outsourcing

– Audit, Tax, and Consulting

• 3,600 employees

• Offices coast to coast

• Serve 3,000+ construction companies

Investment advisory services are offered through CliftonLarsonAllen Wealth Advisors, LLC.

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Speaker Introduction

• Robert (Bob) Sniegowski, P.E. Bob is a principal and consultant for CLA’s construction and real estate group. He joined the firm in 1998 after working within the construction industry for 24 years – and is the principal in charge of CLA’s construction consulting practice. Bob specializes in operations consulting and implementation of technology to construction companies, as well as dispute resolution support services to attorneys.

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Learning Objectives

• Evaluate whether your current software presents a risk to efficiency, reliability, scalability, or sustainability

• Recognize that IT software selection and implementation may demand more time and energy than anticipated

• Understand how to position for success when undertaking IT system implementation initiatives

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Challenges of the Construction Industry

• Mountains of data – little information

• The only constant is change!

• Geographically dispersed operations

• Workforce availability and capability

• There is no perfect IT solution! Only best fit

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IT Paradoxes

• Fully adopting the current software is less costly but also less appealing than buying something new

• Integration is necessary for efficiency but requires more effort at data entry

• Consistent processes are essential for successful integration but “my way is best” is often tolerated

• Efficiency is necessary and highly sought, but not demanded for fear of a staff mutiny

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IT Strategic Planning Is Good Business • IT spend by construction contractors averages less

than 1% of annual revenue-last among 19 industries1

• IT systems provide reliable segregation of duties and internal control if used properly

• Use of technology (or lack thereof) may determine whether a contractor gains preferred status

• Users of construction services expect quicker response and more accurate information

• Those entering the workforce expect to have technology available to reduce their time at work

1Gartner’s 2014 IT Metrics Data

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Information Technology is a System of…

• PEOPLE – personnel, business partners, vendors, customers

• RULES – policies, processes, procedures, reporting

• TOOLS – hardware, software, applications, devices

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Symptoms of Systemic Weakness

• Silos of data with no integration or interface

• Duplicate data entry

• Over-reliance on spreadsheet analysis

• Untimely or meaningless reports

• Billing and collection lag

• Compliance reporting is manual

• Third parties demand better reports

• Management awareness is lacking in critical risk management or cost containment areas

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Threats to Sustainability • The more we grow the less we know

• Accuracy or timeliness of reports or processes are overly dependent on the skill of individual users

• Certain back office or administrative personnel are approaching retirement or life transitions

• Custom or self written programs and routines are poorly documented or undocumented

• Software updates not keeping pace with need

• Software crashes, brownouts, demand for frequent and unexpected maintenance

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Is our software at the beginning of the end? • Consolidation has led to forecasted

end to support

• Certain software companies have not reinvested in development

o Functionality is inconsistent with need

• Lack of integration or inability to interface with peripheral technology has led to:

o Manual processes and multiple data entry

o Inefficiency and wasted investment

o Frustration and lack of accountability

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Decision Point

• Tune up what we have?

– Improve work flow

– Better define a processes

– Training

– Add a module or peripheral application

• Overhaul = Acquire new and rebuild our system?

– Replace accounting and operations software

– Reorganize administrative and accounting departments

– Implement a point solution “best of breed” application

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Whether a Tune Up or Overhaul…

• Financial investment is required

→ Nothing is free

• Internal resources must be allocated

→ Who will see it is done correctly?

• External resources may be necessary

→ What do others do? What is missing?

• A relevant completion date must be identified

→ Management’s commitment to change

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Tune Up is a Solution if…

• Processes or reporting are lacking

• People are open to change and…

– Can learn something new

– Want to improve the quality of information

– Can see beyond transactional accounting

• Tools are appropriate for:

– Annual volume

– Management information

– Customer demands

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Allow Six Months to Tune Up a Process

Activity Typical Duration (Months)

Assemble a team, assess the current situation 1

Team develops solutions and pilots the new process 3

Implement the new process and de-bug 2

Total 6

A tune up is nothing more than • Using what you have already purchased • Doing what you should have been doing anyway

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Planning for a Successful Change Initiative

• Identify the project objectives

• Define the measurement of success

• Name a leader and assemble a team

• Anticipate unintended consequences

• Estimate internal hours required

• Budget the cost and benefit.

• Schedule training requirements

• Set interim completion dates

• Commit to a final completion date

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An Overhaul May be Necessary if… • Software is approaching end of

life or unable to produce the required management reports

• Significant growth has occurred

• Third parties (customers, surety, bank) require improved financial reporting

• Manual processes are untimely

• People with different skills must be recruited and hired

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An Overhaul is Usually Focused on…

• Selecting and implementing a new accounting and operations software…

• Integrating or interfacing other significant tools

– Peripheral software (estimating or project management)

– Hardware (new server or internet connection)

– Data collection devices

• Personnel changes

– Managed service provider

– Controller, CFO, CIO

– Business analyst

– Operations manager

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Allow a FULL SEASON for an Overhaul Activity Typical

Duration (Months)

Decision to shop to buying decision 3

Buy decision to Go-Live with Core Functions (A/P, P/R, A/R, G/L, J/C) 6

Trouble Shooting, Additional modules (Equipment, Project Management)

3

Total = one full season 12

July – December is busy season for implementation First come first served!

A buy decision late in the year or a complex implementation could easily lengthen the 6 month Go Live to 9 months

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A Successful IT Software Implementation

• Commitment of ownership/management

• Business needs are recognized

• Options are considered

• Due diligence

• Life cycle cost

– Initial cost (acquisition)

– Annual cost (operating cost)

– Other impacts

• Purchase agreement

• Implementation, conversion, training

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Rethinking How the Work Is Done

• Begins during system selection

• Work flow (electronic replaces routing slips and paper)

– Time reporting

– Invoice approval and work flow

– Inventory or equipment costing/billing to jobs

– Progress billing transparency/support

• Information management-archiving and locating

– Human resources (personnel, testing, safety)

– Subcontractor management (contract, COI, lien waiver)

– Contract documents (drawings, photos, daily reports)

• Integration of certain functional groups

• Executive management reports (dashboards)

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IT Software Due Diligence

• Scalability

• Structured, scripted demos

• Decisions

– Modules

– Potential users

• Key differentiators among systems

• User reference checking both provided and learned

• Compatibility with provider

• Cost should be a consideration, but not the sole deciding factor

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IT Infrastructure

• Where will the software live? What will it cost?

– Cloud

– Resident server

– Vendor’s server

• Software as a Service (SaaS) a monthly or annual subscription for service and data storage

• Connectivity and internet speed

• Security

– Access and trip wires

– Backups, disaster recovery and business continuity

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Purchase Agreements

• Priced by concurrent user license

• Database (SQL) access licensed by named user

• Implementation typically an additional cost

– Pay as you go $175-$250 per hour

– Allow roughly 70% of purchase price

• Identify custom reports or routines before making the purchase, not after

• Limitations of use, inclusions, exclusions are taken very seriously by the vendors

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Have an Implementation Plan and Schedule

• Server is prepared for new software

• Data bases are created starting with entities, departments or cost centers, and chart of accounts

• Employee, vendors, and customer data bases are converted, scrubbed and uploaded

• Processing is tested

• Training and more training

• Go-live

• De-bug

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Most Common Mistake is Lack of Training

• Poorly timed training is the second most common mistake

• Every user in the organization

– Must be trained

– Starts with different baseline knowledge

– Learns differently

– Learns at a different rate

– Will learn what they must know

• Teachers can be

– Any age

– Any position

• Training should be tracked

• Refreshers are encouraged

• User conferences a good investment

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Always Measure Progress and Results

• Positive trend in the number of personnel using the application and number of power users

• Reduced duration between event and report

• Reduction in average invoice approval time or number of unapproved invoices

• Trending over/under billing over project life cycle

• Improved cash flow

• Reduction in side (Excel) analyses

• Reduced records storage cost

• Increased gross profit per PM 29

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IT Implementation – Lessons Learned

• On-site training is more effective than on-line. Pay the “freight”!

• Designate an IT project manager

• The first few hours with your software implementation consultant are the most critical to success. Be forward thinking!

– Consolidation of entities

– Chart of accounts

– Job costing phases

– Billing

• Plan beyond payroll and accounts payable. The objective must be a JOB SCHEDULE!

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On the Radar

What other IT issues

should you be mindful

of?

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Making Technology work for you

• Every contractor is a hacking target!

– Test your security and improve where necessary

• Skilled workforce in the office and field is limiting growth and profitability.

– Right people in the right seats on the bus

– Eliminate duplicated data entry

– Reduce reliance on spreadsheets

– Increase gross profit per PM

• Interoperability is necessary for efficiency

– Solutions must communicate with each other

– Instances of BYOD will become more common

IT

YOU

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QUESTIONS?

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R.J. (Bob) Sniegowski, P.E. Profile Bob Sniegowski is a principal and construction operations consultant with the CliftonLarsonAllen Construction and Real Estate Group. After working within the construction industry for 24 years, he joined the firm in 1998. He is the principal in charge of the construction group’s specialized industry consulting practice. Experience in serving clients Bob specializes in operations consulting to construction companies, implementation of technology, dispute resolution support services to attorneys and project management training to various contractors and industry groups. Educational/professional involvement Bob graduated from Michigan Technological University in 1976 with a Bachelor of Science degree in civil engineering and is a registered professional engineer in the states of Georgia and Minnesota. Bob began his construction career in 1974 as a student engineer for Bechtel Associates, followed by a twenty-two year career with Al Johnson Construction Co. where he held the positions of estimator, senior estimator, office engineer, project engineer, project manager, vice-president and president of two different subsidiary companies. Bob has worked nationally on heavy civil works projects such as navigation locks, dams, bridges and tunnels; as well as regionally on grading, paving, and utility highway projects and commercial building construction projects. Bob is an active member of the Associated General Contractors of Minnesota and its annual meeting steering committee.

Phone: 612-376-4659 Email: bob.sniegowski@CLAconnect.com

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