Software Solutions: Equipment as a Profit Center

Heavy equipment can be a heavy expense for a construction company. Yet, by effectively managing equipment and not treating it as an overhead expense, your equipment could work for you and turn into a profit center for your company.

Equipment is often the largest expense for a construction project and if not managed properly the contractor’s profitability could be negatively affected.

So, how can managers and owners ensure that each piece of equipment is achieving the highest productivity possible and at the lowest possible cost? There are three ways: 1) maximizing utilization; 2) minimizing downtime; and 3) recovering costs.

To address these three areas efficiently, successful construction businesses are using equipment asset management tools in their construction business management software, which works seamlessly with their estimating, project management, financial management, and other applications. Doing so, contractors can effectively manage equipment throughout a project lifecycle as well as throughout the life of a piece or fleet of equipment.

Boosting Utilization

Utilization is a must-discuss issue when addressing equipment costs. Knowing how many hours a piece of equipment has been utilized during a year helps determine the rate at which fixed annual costs can be recovered. When equipment is underutilized (frequently sitting idle) there are no costs that can be billed to jobs and the ownership or rental cost of that equipment is an unbillable expense. By boosting equipment utilization, you have more opportunity to bill its cost to projects and thus can increase profitability.

Having the right tools in place to monitor equipment utilization on an ongoing basis enables contractors to identify equipment that is underutilized and find ways to control and correct it. In order to maximize utilization, a business management software solution can help a contractor better analyze their utilization by tracking idle time, down time, and productive time. Having the right equipment in the right place at the right time for the right job is essential to achieving optimal utilization and will give project managers the confidence that the right machine is being used for the right task.

Minimizing Downtime

Many consider that a piece of equipment being used is more costly than one sitting idle since it has added costs, such as fuel, electricity, wear and tear, etc. However, idle equipment can negatively impact profitability even more. When a piece of equipment breaks down, not only do you have to factor in the cost of a repair, but you also must consider the fact that it may disrupt the project schedule and hinder the productivity of the employees as they will be focusing on fixing the equipment and not getting the job done. With unexpected break downs, contractors must rush to bring mechanics to the job site and get the necessary parts delivered. This is often a much more expensive and frustrating option than performing regular maintenance on your equipment. Making sure your equipment is operable and available when it is needed is critical to turning your equipment into a valuable asset versus a financial burden.

Preventative maintenance is critical to optimal profitability. Yes, it requires an expense of time and money, but it is a worthwhile investment that will help improve reliability, reduce future repair costs, and increase the lifespan of your equipment.

Using software to manage equipment you have the necessary information at your fingertips about each piece of your equipment and can schedule predictive repairs before your equipment ever breaks down. By automating your preventative maintenance schedule you will be able to consistently service your equipment, ensure the right preventative maintenance plan for each piece of equipment is followed, and extend the life of your equipment fleet.

Automating your equipment asset management processes also enables you to track warranties, preventing you from paying for a replacement part or repair that is still covered under your warranty. The automated alerts that business management software provide make tracking warranties easy and enable contractors to avoid unnecessary costs.

Having detailed information on each piece of equipment also enables a contractor to make more educated decisions on whether to sell, replace, or rebuild a piece of equipment. With all the operational, financial, and mechanical data available in a business management software solution, the decision makers can drill down to the information they need and make an intelligent decision. You can also set the requirements for equipment acquisition and disposal, enabling you to make informed decisions about when to return rental pieces, when to dispose of unused equipment, or when to acquire additional pieces of equipment.

With tools to track P & L by equipment or group of equipment, managers can monitor return on investment for an equipment fleet and recover costs associated with equipment fleets by appropriately charging projects and plants. Understanding the makeup of your equipment fleet and achieving peak performance of your equipment investment are two important steps toward increasing profitability.

Recouping Costs

To significantly improve your overall profitability you can make equipment management a profit center for your company. If you consider equipment an overhead cost and not billing costs of equipment to your jobs, you are missing an opportunity to make your equipment really work for you.

In the same way that labor and materials are billed directly to individual projects, equipment usage and associated costs should also be billed to the individual jobs on which they are used. An equipment management solution can make recovering equipment expenses on each job an easy task. By using construction-specific software to handle job costing and project management processes and capturing equipment usage costs, contractors can bill their equipment expenses directly to the appropriate project on which the equipment is used. For those contractors who have always accepted the cost of equipment as their own, this re-allocation of expenses can create a new profit center for their business.

Extending the Value of Your Equipment

Today, it is more important than ever to control costs. Contractors tend to center their attention on cutting labor and material costs during tough economic times; however, equipment costs, especially for heavy contractors, can dramatically impact their financials even more than their workforce and material costs.

Implementing the right construction management software to streamline processes and improve accuracy from bid-to-cash can be a great solution to keep jobs on schedule and on budget, as well as to help gain a competitive edge. Using business management software you are able to obtain the highest productivity possible from your equipment, at the lowest possible cost, and extend the lifespan of your equipment -- helping turn what you might consider your equipment burden into a true profit center for your company.

About the Author
Dan Lehman is Vice President, Product Management of Maxwell Systems, a leading provider of complete construction business management software solutions. For more information, please visit www.maxwellsystems.com.

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Sigfusson Northern LTD

Sigfusson Northern LTD uses Maxwell Systems StreetSmarts as its job cost accounting and project management software solution. With StreetSmarts, SNL manages all of the accounting practices and job costs for their seven entities across the U.S. and Canada; maintain information in one place, in one format; manage payroll in-house; track and bill equipment expenses; and streamline workflow between the office and job sites.

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Our Story of Complete Construction Software

Maxwell Systems provides construction software solutions that help contractors to streamline workflow, increase productivity, and improve profitability. Furthermore, we understand that today's contractors must optimize processes across all business areas to gain or maintain an increasingly important competitive edge and ensure a successful business. Critical, to that end, is timely and efficient communication and information access among estimating, job cost accounting, and project management teams.

By using a Maxwell Systems complete construction software solution, you'll be able to better operate your business with increased efficiency and streamlined operations, and confidently increase profitability on every project. You will have the tools you need to accomplish more in less time; taking the guesswork out of reaching true profit potential; and improving financial stability for long-term benefit.

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Maxwell Systems is truly unique with its ability to offer contractors a complete, seamless software solution that allows:

A new level of continuity and productivity among estimating, job cost accounting, and project management
Better insight, analysis, and financial oversight for owners to make informed and timely decisions
Improved operational efficiencies, cost reductions, and increased profits

Contractors value having an end-to-end solution from one company:

All applications work together seamlessly
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A stable technology partner committed to customer success

How Your Business Benefits

A complete construction software solution from Maxwell Systems provides end-to-end control of your business so you can see a day's profit potential at a glance, identify and prevent potential financial losses, spot discrepancies and errors, and manage projects with accurate information in real-time.

With tailored features designed to fit each member on your team, construction company management software ultimately allows your business to:

Attain end-to-end control and increased visibility
Achieve easy and accurate reporting with real-time data
Optimize project execution for maximum profitability
Streamline operations with seamless workflow

The Bid-to-Cash Cycle Explained

Managing each of the key process areas of a construction business – Estimating, Construction Accounting, and Project Management – requires vastly different talents and areas of expertise. The reality is that each of these functional groups is related and dependent on one another.

For your organization to run in an optimal fashion, the groups much work together in an optimal fashion. Together, these functional areas compromise what we describe as the Bid-to-Cash Cycle. And our goal at Maxwell Systems is to provide software for construction so you can bridge the needs of the functional groups, better manage this cycle, and so maximize profitability.

When construction estimating software, construction accounting software, and construction project management software are working together in a seamless system as a complete construction business management software solution, then a contractor is truly poised for optimal profit and productivity.

How does a complete solution fit your part of the cycle? Here are a few examples:

Owner: It's all about reducing waste, uncovering lost opportunity, exposing shortcomings, and maximizing resources – all which impact profit and the bottom line. With end-to-end visibility of every project, executives can hone business strategy, improve control of cash flow, and keep financials in the black with accurate ROI.
Estimator: Beyond estimating projects, the estimator can access more accurate information in regards to how the project actually performs. This will allow the estimator to improve accuracy on future estimates with actual labor and production rates, updated material prices, and other resource related items.
Accounting: Not only a company's construction accounting system, a complete solution helps to streamline the procurement processes for optimal efficiencies and produces more accurate purchasing processes. Additionally, billing processes, inventory issuances, and many other processes are streamlined. Less data entry, better accuracy, and reliable audit trail allow convenience and peace of mind.
Project Manager: The seamless workflow from Estimating to Project Tracking allows for a streamlined method of creating the job and then tracking performance against the estimate. Within the complete solution, the construction project management programs also provide the detail required for the Project Manager to understand what the Estimator was thinking when the bid was put together. Plus, by accessing real-time information whether in the office or in the field, the project manager can track progress, be more agile, and better handle all aspects of jobs from beginning to end.

Bottom Line

To succeed in today's competitive marketplace, construction business owners must improve productivity and have end-to-end visibility to see how jobs perform (and turn profit) from start to finish. Maxwell Systems knows construction company software and can be your partner by offering truly unique products (as well as support and services) that address the entire construction project lifecycle – from digital takeoff through final cash payment. Our seamless system provides your company with all the capabilities you need for estimating, job cost accounting, and project management, and ultimately for superior insight and analysis of your business.

Imagine the flexibility and insight by having one solution for estimating projects, for construction accounting programs, and for construction project software! All that and more in one system will help your business be more competitive and profitable.

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