Improving the Payment Process for Your Company

How long does it take for most non-publicly traded construction companies to produce financials? A firsthand observation of construction companies shows the average close is greater than 10 days after month end. How about processing payroll? Most companies take several days to post payroll. For every day that reporting lags behind the actual occurrence of work, the ability to use the data to drive business decisions decreases. Companies must move from being reactive to being proactive by speeding up data processing and reporting. There are several key steps to providing timely, valuable reporting:

• Evaluate current systems and processes
• Identify weaknesses and bottlenecks
• Define solutions
• Implement changes
• Evaluate results

In order to provide context to these steps, consider an example: Slow Data Construction Company. This company has been around for 35 years, and its only system is a modern accounting system (ERP). A new generation of ownership has taken over, and it wants to modernize the technology infrastructure of the company. The CEO has issued a mandate for next-day availability of all operational information.

Currently, this company is processing payroll on paper in the field, and it takes 5 days to move from timecard creation to report generation. The first step is to look at the current payroll process.

To do this, the company assembles a cross-organizational team to document the current process. First, the team observes the current process and creates a process map that includes the following steps:

1. The foreman writes time and other important production information on a sheet of paper at the end of every day.
2. Every other day, a company driver goes around and collects all jobsite reporting and brings it back to the office.
3. The payroll sheets are received and processed by the payroll clerk. This step takes 2 days due to the incoming volume of timesheets.
4. The reporting occurs by exporting the data into a spreadsheet, which then takes 2 hours to compile.

Now that the company has a full understanding of the current process, the next question becomes, “What are the weaknesses in the process?” The company then identifies the following weaknesses.

1. The process takes 5 days, from the day of the work performance to the creation of reporting.
2. Because the driver only goes around every other day to collect timesheets, there is not a constant stream of information coming into the office.
3. During the creation, transportation and collection of the timesheet, 5 percent of timesheets are lost.
4. The spreadsheet process is cumbersome, and only one person in the office knows how to compile the report.

Now that the company knows the current process and has evaluated the weakness of the process, the next step is to identify improvements and solutions.

First, the company creates a list of all the requirements a solution will need. The company then looks at its current ERP to see if there is an electronic, time-collection option within the software it already owns. After evaluating this option, the team determines that the ERP software does not meet all the needs of the time-collection process. Next, the company can take the criteria list and looks at third-party options that will integrate with the current ERP. There are several options when it comes to third-party systems, including:

• A prebuilt system that has an integration with the ERP
• A custom-built solution for the company linked to the ERP

The other question the company should ask is whether it has the staff resources and capacity to put in place and maintain a system, or is a third-party needed? Slow Data Contractors builds a list of requirements from the system. Some identified key items include:

• Same backend (database) platform as ERP
• Mobile app with offline entry ability
• Prebuilt integration with ERP for information
• Push data to the time-collection system, like employee ID and job phase
• Pull data to move time-entry information into the ERP
• Modern technology architecture
• Simple interface of time entry

These items are only a small sample of a more extensive list of criteria included in the RFP. Once the company receives the proposal, the three systems that best meet the criteria are selected. The company goes through demos of these three systems to determine which system is the best fit.

Once the provider is selected, the next step is implementation. In this case, the vendor offers an installation and configuration service. Along with the implementation of the system, the company puts process guidelines and goals in place. No system alone can improve a process without operational process change. The company knows it wants to be able to report on the previous day’s work by noon the next day, and the company requires that foremen enter their time by the end of each day. Since the system syncs data to ERP, the payroll clerk is able to come in the next morning and process the previous day’s payroll. The target set for the payroll clerk is to process payroll by 11 a.m. each day. The speed of data processing has increased from several days to 11 a.m. the next day. The final step is to replace the spreadsheet reporting tool with a tool that delivers visually compelling reporting in an easy to access format. Slow Data Contractors looks at the current excel report and decide on four key performance indicators (KPIs):

1. Units of product installed per man hour
2. Labor and material cost versus estimated labor and material cost
3. Material waste percentage
4. Phase completion percentage by day

Now that the company has KPIs, the next question becomes how to display them. When looking at KPIs, the company needs to think across several planes:

• Graphic used
• Pie
• Bar
• Scatter
• Number only
• Comparison factor
• Budget versus actual
• Historical versus current
• Leading and lagging indicators
• Does the material waste percentage affect units of product installed per man hour?
• How does labor and material estimate versus actual affect percentage complete?

These areas should be considered when implementing dashboards and KPIs. After determining the key variables and how they should be presented, the company looks for the correct reporting tool. The same options exist as with the time-entry software: a prebuilt solution or a custom-built solution. The company finds a prebuilt solution that meets their needs with some minor modifications. Some key items to consider in a dashboard tool include:

1. Ability to integrate with multiple systems
2. Ability to access many data types
3. Deep customization tools
4. Cross-platform presentation options
1. Mobile
2. Tablet
3. Desktop
4. Paper

After the time system and dashboard system implementation, time entry and presentation has decreased from a week to next-day availability. The goal of all data improvement and visualization projects should be to create a real-time flow of information that drives decisions.