Wednesday, January 28, 2009

Solutions for a Difficult Economy

We get a lot of questions about what contractors should do during a recession. My answer is really simple – Do What You Should Have Been Doing When Times Were Good! There’s no time like the present to start doing those things that would have made you more efficient and profitable during the good economy.

What sort of things?

  • Don’t waste money on unnecessary capital expenditures or overhead. That doesn’t mean “Don’t Spend,” but just be certain that the spending is for necessary and beneficial costs. If you’re overhead is bloated with more staff than needed, more office space and expenditures than needed, or other questionable costs that you know the company really doesn’t need and doesn’t contribute in a meaningful way to the company profitability, cut it out! How much more profitable would you have been during the good times if you had taken this approach then?
  • Take a Zero Based Budget approach to your overhead. Don’t just accept the rationale that we spent this amount last year, so we’ll spend 5% more this year. Look at every overhead cost and ensure that it is necessary and productive.
  • Don’t stop marketing! Just make sure that your marketing efforts are properly targeted and cost effective. Marketing during a down economy will continue to build market awareness of your company so that when the economy does rebound, your sales efforts should slingshot forward, unlike companies that cut their marketing when the economy started to slow down.
  • Control your job costs as if your company’s life depended on it, because it does! A recent survey showed that job cost slippage, or the difference between estimated job costs and actual job costs was the single largest predictor of success or failure among a select group of remodeling contractors. Failure to accurately estimate job costs and failure to produce the actual work according to the cost estimate result in lost profits that fall straight to the bottom line.
  • Perform job autopsies to learn why you have job cost slippage. Job autopsies should be performed on jobs to determine why you did well on some jobs and poorly on others. The information learned from an autopsy should then be used going forward to improve on future jobs. See my white paper on Job Autopsies for more information.
  • Use your technology wisely. If you have invested in Sage Master Builder, make sure that you are reaping the efficiencies available so that your staff is doing the best with the limited resources available. If you aren’t using a purchasing management system for subcontracts and materials purchases, consider implementing one to increase management control over such costs.
  • Training is a wise investment. Training staff to perform their jobs more effectively is almost a no-brainer! Making sure that your staff knows how to use their tools the right way, whether it’s a new machine in the shop or Sage Master Builder will increase staff efficiency, enabling them to do more work in the time allotted. Like any other cost, make sure that the training is cost effective and time and cost savers like the internet are being used, rather than spending large sums on travel and lodging.

I often worry that the media is stampeding everyone into a doom and gloom scenario during this recession, prompting businesses to overreact to the economic forecasts. Pay attention to your own economic indicators and react to them appropriately.

Monday, January 26, 2009

What Causes Master Builder Data Corruption?

Those Sage Master Builder users that read their original installation instructions (and you might be surprised at how few actually bothered to read the installation instructions!) may remember an instruction to Turn Off Write Behind Caching. Too often, when working with a client that has experienced data corruption evidenced by General Ledger Audit errors, we find that Write Behind Caching is not turned off. Sometimes we find that it was never turned off on a particular machine, or the machine was recently replaced and they forgot to turn off the caching when they installed Sage Master Builder, or a well-meaning computer technician turned caching back on while trying to improve the perceived performance of a computer.

What is Write Behind Caching? Write Behind Caching is a technique used by the Windows operating system to improve the perceived speed of a computer. If a computing process includes a significant amount of writing data to a hard drive (which is a relatively slow process) and there are other processes to be performed, the operating system may decide to hold the data that is to be written to the hard drive in RAM or volatile memory until the operating system decides that it now has the time to write the data to the hard drive.

This can create real problems for most accounting programs that involve complicated postings or writing data to a hard drive. When Master Builder saves an accounting transaction, there are often a large number of posting or writing processes involved. If the entire transaction, with all of its data postings, is not completely and timely written to the hard drive, the data may not be available for use by another concurrent user. If part of a transaction is being held in the cache of computer that suddenly loses communication with the hard drive to which the data is to be written (as with a file server), the complete transaction may never get posted into the data files and data corruption, including unbalanced transactions and unposted updates to records, may result.

The long and short of it is simple – turn off the Write Behind Caching on each machine that uses Sage Master Builder! The nearly imperceptible loss of processing speed is a small price to pay for reducing or eliminating data corruption and those pesky audit errors.

Feel free to send us a note if you need help in checking your Write Behind Caching status.

Thursday, January 22, 2009

New Budgeting Tool for Sage Master Builder Users!

I’m really excited about a new product on the market for use by Sage Master Builder users – zMgtToolkit by Zoom Integrated Products.

One of the more tedious tasks that SMB users face is creating operating budgets and loading them into the General Ledger Account records. The problem is compounded when departments are used as there is no automated process for entry of the department operating budgets into the department sub-account records or roll up of the departments budgets into the consolidated account.

zMgtToolkit solves this problem with a powerful and information packed budget creation and posting tool. At $295 for the first user license (and $59 for each additional user), the program is a bargain and will pay for itself in saved time the first year that you use it for your budgets!

The program is named a toolkit because Zoom is developing a series of modules that will perform a number of other useful tasks, including
  • Budget Forecasting
  • Budget Management
  • Budget Historical Review
  • Break-Even Analysis
  • Cash Flow
  • Charts and Graphs
  • Pivot Grid
  • Reports
  • Department Allocation
  • Unapplied Direct Cost Allocation
  • Overhead to Direct Cost Allocation
  • Archive Import
  • Cost Code Conversion
  • Parts Update
  • Assembly Quick Replace
  • MB Find and Replace
  • Recalc Assembly Totals
  • Recall Jobs

When these modules are developed and available, there may be nominal additional license fees.

Send us a note or leave a comment if you want additional information.

Wednesday, January 21, 2009

Dual personalities

Unlike the majority of independent Sage Master Builder Certified Consultant companies, we work as a team of two separate and distinct individuals. My experience is that of the full charge bookkeeper.

I understand the enormous task of running a one-woman(man)-office. I have kept many companies' accounting books on various systems over the years, starting pre-computer days with hand written 3-ring binder journals. As a CPA's inhouse bookkeeper, I was responsible for the small client bookkeeping service. All taxes, payrolls, standard filing requirements and monthly/quarterly/yearly accounting reports were completed by me.

When I train new users or exchange tips with non-newbies, my suggestions are also from actual experience typing into Master Builder on a daily basis these past 9 years. We use Master Builder to operate our own company. We have scaled down its great potential to fit our needs. I ease my daily typing entry by using its ability to fully integrate into its entire system from one saved record.

Having spent many hours over the past years researching other peoples' mistakes, one of my common pieces of advice is to use the note writing feature available in most of the screens. Leaving a trail of information for the future to understand why something was handled in a different fashion this one time can be an enormous help.

Sage Master Builder is Not for Everyone

Sage Master Builder is targeted to general and specialty contractors and home builders doing $3 to $100 million of work per year, but niche markets with higher volume of smaller jobs tends to make Master Builder an appropriate solution for some companies doing at least $1.5 million annually.

There are several other indicators that we consider before recommending Master Builder to a contractor or home builder:

  • A willingness on the part of the company management to ensure that the Master Builder implementation is a success and that Master Builder becomes an integral part of the everyday life of the production side of the business as well as the accounting and administrative side. This business solution is a top-down product – it’s most effective when management is involved in the implementation and training process. If the owners are active in production and/or accounting and administration, they also must be interested in acquiring the skills to use Master Builder themselves.
  • Recognition on the part of management that full accrual accounting is the best approach for most contractors to manage their business. Other accounting methods, such as cash basis, may indeed be appropriate for income tax purposes, but day-to-day accounting and management of construction companies is best done on an accrual basis. Recognition of income from long term fixed price construction contracts is generally best accomplished with percentage of completion accounting. Master Builder also accommodates companies that must account for the construction of inventory or work in process as appropriate for many home builders.
  • Recognition on the part of management that it is just as important to know how money is made or lost on a project as it is to build a project that makes the client happy.
  • Recognition on the part of management that the accounting and administration function is an important part of their organization. This is usually demonstrated by an investment in hiring a qualified accountant (or a strong full-charge bookkeeper) with significant experience in the industry.
  • An understanding on the part of management that the processes incorporated into an “off the shelf” integrated construction management system like Master Builder are often chosen from among several possible ways of achieving the same result. The developers of Master Builder spent much effort to ensure that the processes adopted represent appropriate best practices for the construction industry. As such, an adaptation of existing policies or procedures to the way Master Builder operates may be necessary.

If we don’t see these indicators, we have to question whether or not Master Builder will be a good fit for the company. More than a few times, we have suggested that a contractor look elsewhere for a solution.

We Love Sage Master Builder

We have great appreciation for the power of Sage Master Builder. It is a well integrated real time construction management system, with
  • powerful accounting and job costing capabilities
  • payroll processing with precise labor burdening and job costing
  • construction industry standard billing processes
  • effective purchasing management
  • project management tools
  • parts and assemblies based estimating
Because the program was originally developed by a contractor, it has the tools and features that contractors, home builders and service contractors need to run their business. Since it was developed by one programming group, the various areas of the program are seamlessly integrated and have a consistent look and feel.

Because we recognize its strengths, we use Sage Master Builder for our own accounting, too!

About Master Builder Notes

Master Builder Notes is maintained by Walt and Gerry Mathieson, Sage Master Builder Certified Consultants. We have provided implementation, training and report writing services and general business advise to users of Sage Master Builder since 2000 and have over 30 years of real-world accounting and business management experience. While based in AZ, we use Internet tools and telecommunications to work with clients across the country. If you have Internet access, we are instantly available to assist you! To reach us, email to info@mathiesonconsulting.com or info@spcconsultants.biz.