By Dan deRoulet, Jr., Co-founder Knowify LLC
Nonresidential construction spending closed out 2014 on solid footing, up nearly 6% from the prior year (https://www.census.gov/construction/c30/pdf/totsa.pdf). This increase in activity is certainly welcome news for the construction industry, but it has left many small- and medium-sized commercial subcontractors in an uncomfortably familiar place: struggling to keep up with their paperwork without losing focus on their jobsites.
While getting their work done on time, on budget, and to the standards of their clients remains every subcontractor’s top priority, the reality is that the managing the immense amount of paperwork that each job can produce – from proposals to contracts to change orders to purchase orders to timecards to invoices and more — often requires more time and more management engagement than managing the construction work itself.
Drowning in paper
Administrative and operational challenges are by no means unique to the contracting industry; what is unusual, however, is just how paper-and process-intensive the contracting business is, and the extent to which even small contracting firms are affected.
While other industries, like manufacturing, logistics, and wholesaling, have benefited from the revolution in business technology that has made companies like SAP and Oracle household names, the contracting industry as a whole has been slower to adopt comprehensive business management software. For the smaller GCs and the great majority of subs, packages that address their needs have proved heretofore to be too difficult to install, to difficult to use, and far too expensive.
The software marketplace has begun to change, however, and small- and medium-sized subcontractors may no longer find themselves shut out from the efficiency revolution. The driver of this change is internet-delivered software as a service, also known as “SaaS”. No longer do businesses have to invest in expensive hardware or an IT staff to launch powerful applications; they only need a web browser and an internet connection. And with the explosion in mobile telecommunications, contractors, for whom the “office” is often quite far away from an office, may soon be able to run their businesses in an efficient, paperless way from wherever they might be.
Knowify, LLC, a New York-based startup founded in 2012, is one company working toward this future by offering online software to help contractors manage time consuming tasks like estimating, change orders, time/materials management, and AIA-style invoicing. Knowify aims to improve workflow efficiency and to minimize costly downtime for contractors, for whom time really is money.
Connecting A, B, and C (also D, E, F, and G)
Perhaps the biggest trouble with a traditional paper-and-spreadsheets approach is the inherent inefficiency that comes from the need to reconcile all the various pieces that pile up over the course of a job. Purchase orders have to be matched with vendor bills; invoices have to be reconciled with the original contract and change orders, and possibly also with time entries and purchasing. The list goes on. What the new generation of business management tools, like Knowify, provides is paperless record keeping, as in the case of preparing Change Orders on a tablet and emailing them for e-signing, combined with powerful data integration. What this really means is that the system will automatically connect purchasing with bill payment, contracts and change orders with invoicing, labor and spending data with your project management. What used to take hours of work, with a lag time measured in days or even weeks, can now be accomplished with a few clicks and keystrokes in minutes, bringing incredible efficiency and a whole new level of visibility to the contracting businesses that adopt these tools.
What really matters
In commercial subcontracting, as with any businesses, the general ledger is where the story of management mishaps and inefficient processes is told. Doing things like scheduling teams to minimize downtime or accelerating change order approvals or even filling out AIA-style invoices correctly the first time can mean the difference between thousands of dollars made or not made, and many points of margin. When a contractor is working one job at a time, perhaps he can manage these things manually; but when, as now, increases in business activity and new opportunities begin to demand quite a lot of his time and attention, software tools like Knowify’s are going to be key to helping him stay organized, stay focused, and stay ahead of his administrative work.
Without question, the SaaS era in the small-to-mid-sized construction world has arrived. Those companies that figure out how to apply these new tools effectively to their businesses will enjoy real competitive advantages in efficiency and cost savings. It may be the early innings, but watch for many subcontractors to begin adopting solutions soon, lest they fall behind.
