Posting operational work (resource costs/price calculation) – part 6

Using NAV4Construction, we can use specific resource cost or price models. When we post resources, we have next quantity fields:

  • Quantity – total time of resource engagement
  • Waiting time – time when resources do not make usage, because poor site organization
  • Extremely Stagnation Time – time when resources do not make usage, because force majeure
  • Effective Time – calculative field = Quantity – (Waiting time + Extremely Stagnation Time)

In NAV4Construction, we use Cost field for actual resource cost and Price form internal resource cost (transfer price for internal needs). Cost and Price are not calculate in the same way. Definition of them are placed on:

  • Quantity:
    • Cost – ‘Direct Unit Cost’ on Resource Card
    • Price – ‘Unit Price’ on Resource Card
  • Waiting time:
    • Cost – same as Quantity Cost
    • Price – ‘Standby Unit Price’ on Resource Card (using of this price depends of setup)
  • Extremely Stagnation Time:
    • Cost – no
    • Price – no

Cost Calculation

Cost Calculation is always the same. This calculation is based on resource usage and we calculate it by next pattern: Direct Unit Cost X ( Quantity – Extremely Stagnation Time )

If we want to use total quantity in calculation, we need to put ‘Extremely Stagnation Time’ blank.

Price Calculation

Price Calculation is more complex and depends of setup in ‘Res. Utilization Margin %’ field at Construction Setup. In this field we need to configure what is ‘acceptably utilization’ for us. In our example I will define that it is 70%. That means that if (Quantity-Waiting Time) is 70% or more in regard to total Quantity, this is good usage. Based on this, we have two different models of price calculation (we will use factor 0,7 instead of 70%):

Model 1: ( Quantity – Waiting Time ) >= 0,7 X Quantity

( Quantity – ( Waiting time + Extremely Stagnation Time ) ) X Unit Price

Model 1: ( Quantity – Waiting Time ) < 0,7 X Quantity

( ( Quantity – ( Waiting time + Extremely Stagnation Time ) ) X Unit Price ) + ( Waiting time X Standby Unit Price )

These Costs and Prices are the base of Construction Position cost and price calculation, based of their actual consumption.

Posting operational work (posting differences) – part 5

What is a main difference between using Output Order and Job & Position Journals?

As I wrote in my first post for this theme, we can post the operational work on next ways:

  • Using ‘Output Order’ – posting of Construction Position output work and Resource and Item consumption per Project in the same time;
  • Using ‘Position Journal’ – posting only Construction Position output work per Project; we need to post consumption separately;
  • Using ‘Job Journal’ (standard NAV functionality with some specific customizations) – posting only Resource and Item consumption per Project; we need to post output separately;

Advantage of the first method is that we can post all entries with the one document. We get posted document with ‘Navigate’ functionality. Also, this method enables us to have complete statistic of cost per every Construction Position for each Project.

As we look up in Construction Position Statistic for position posted using Output Orders, we can see Using (position cost), Sales (position revenue) and Profit:

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On previous picture we see position cost for each period.

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In previous example, I presented Construction Position Statistic from NAV, and this is shown only costs, revenue and profit, without analytics. Also, if we use Output Orders for posting, we can make deeper analysis with complete analytics of resources and items cost or quantities, as picture bellow (from BI4CONS):

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Failing of this method is that if we have many complex position works per day, it is too complicated to make evidence and post it.

If we choose posting without ‘Output Order’, we get simply procedure for posting. We use ‘Position Journal’ for evidence of work per all Construction Position we have and separately we use ‘Job Journal’ for evidence of consumption all Items and Resources, not linked with Construction Positions. On this way we get simpler method, but we lose connection of consumption with Construction Position output. Using this method of posting, we know revenue for each position on project, but we don’t know position cost and profit. We could know cost and profit only per complete project or combination project and project task, and of course we will know this data per required period. As we look up in Construction Position Statistic for position posted using Position and Job Journals, we can see only Using (quantity, not a position cost) and Sales (position revenue):

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On previous picture, we cannot see position cost.

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Position sales data (previous picture) are the same as when we use Output Orders. But when we try to see profit, we will get a wrong data with 100% margins.

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We cannot get all things and we must to decide what method we want. Good thing is that we can choose different method for each project, depend of complexity and project requirement. Good thing is also that we can set filter on Position Statistic and we can see complete data for position posted using Output Order on each project.

Posting operational work (Recurring Journals) – part 4

If you do not use Output Order and you have many similar entries for posting, you can use Recurring Journals. There are Recurring Position Journals (NAV4Construction functionality) and Recurring Job Journals (NAV standard with customization). You can use them, when you do many days the same works. E.g., you can make many days one-by-one, on first building-site excavation, on second building-site wall building, on third building-site concrete works. If you do this the same works for e.g. 10 days, you can use recurring functionality. You need to input these position works by projects at one Recurring Position Journal and resource and item consumption, again by projects at one Recurring Job Journal. Everything you need is to fill quantities for each day and post it.

Recurring Journals has the same columns as standard Journals, except two fields:

  • Recurring Method – The recurring method determines what happens to the quantity on the journal line after posting. For example, if you use the same quantity each time you post the line, you can reuse the same quantity after posting as the same main data (Type, No., Position no., Description, Location Code, Work Type Code, Ongoing Code, Division Code, Division Type…). If you want to use the same accounts and text on the line, but the quantity varies each time you post, then quantity should be deleted after posting. There are two recurring methods:
    • Fixed: The amounts (Unit Costs, Unit Prices, Standby unit cost and/or Position price) on the journal line will remain after posting as all quantities (Quantity, Waiting Time, Extremely Stagnation Time, Ongoing Quantity, Mileage).
    • Variable: The amounts (Unit Costs, Unit Prices, Standby unit cost and/or Position price) on the journal line will be deleted after posting.
    • Recurring Frequency – Enter a recurring frequency if you have indicated in the Recurring field in the job journal template that the journal is a recurring journal. The recurring frequency determines how often the entry on the journal line will be posted. The field must be filled in. For example, if you want the journal to be posted every month, enter 1M. After every posting, the date in the Posting Date field will be updated to the same date in the following month. The codes for recurring frequencies are:
      • D (day)
      • W (week)
      • M (month)
      • Q (quarter)
      • Y (year)

If you want to post an entry on the last day of every month, you should post the first entry on the last day of a month and enter the formula 1D+1M-1D (1 day + 1 month – 1 day). With this formula the program takes into account the different number of days in each month.

After posting, we get the same data as posting standard Job Journals or Position Journals.

Posting operational work (Job Journal) – part 3

If you do not use Output Order for complete posting and you use Position Journal, you need to use Job Journals for posting item and resource consumption on projects. In this variant, we use Position Journals for revenue posting and Job Journals for expenses posting (COGS and resource cost). This is in principle standard NAV Job Journal with some customization as Output Order lines.

We use the Job Journal to post usage for a job. Each entry on a job journal line must be related to a job. As all NAV journals, the information we enter in the Job Journal is temporary and can be changed as long as it is in the journal. After we post a journal, the journal will be empty and the transactions will be posted to individual accounts and entries.

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When we start to enter data, we must fill ‘Job No.’ and ‘Job Task No.’ and after that we need to choose line Type (Resource or Item) and choose desired Resource/Item. After that, process is different depend of line type (as Output Order lines):

Item

For Item, we need to fill ‘Location Code’. We can get default location code for project if we make this setup on Project Card. We need to fill item quantity, as well and this is all. All costs and prices for the item will be filled automatically.

Resource

For Resource, we can fill more fields. There are not all mandatory and this depend of setup for company and/or project. It is necessary to fill quantity per Unit of Measure and we can choose ‘Work Type Code’ for different Unit of Measures/Cost/Price. If this is people type of resource, this is enough and as items, costs and prices will be automatic filled. But if we choose machine resource type, we can fill more fields.

First of them are ‘Waiting Time’ and ‘Extremely Stagnation Time’. ‘Waiting Time’ is time when resource did not work because bad organization. System will be calculate cost for all quantity time, but price for (‘Quantity’ – ‘Waiting Time’) if ‘Waiting Time’ is acceptable. If this time is not acceptable, system will calculate price based on specific formula (this is very complex setup, and I will explain it in independent post). ‘Extremely Stagnation Time’ is time we use only for evidence. This is a time when we was prevented for work (nasty weather or some other force majeure).

We can fill ‘Mechanization Resource Code’ if we know exactly what machine is worked. System can propose only machines for choosing resource. If we in advance know what machine worked, we can fill this field, and ‘Resource No.’ will be filled automatically. If we have configured machinist for mechanization resource, this field will be filled automatically, but if we have not it, we can choose ‘Employee No.’ for machinist from filtered employee list only from departments who use machines.

Know we know what time machines spend for making position, but we don’t know what they are worked exactly. Because of that, we have ‘Ongoings Code’ where we can define what our machine really do. ‘Ongoings Code’ list has Unit of Measures and they are configured depending resource types. When we choose this code, we need to fill ‘Ongoings Quantity’.

If our machine is the vehicle, we can fill additional fields: ‘Mileage’ and ‘Tour Quantity’.

We can post this Job Journal as standard NAV journals.

In next posts, I will explain Recurring Position and Job Journals and after that result differences between presented two methods of posting in construction.

Construction Project Management Software

This article is borrowed from Dexter+Chaney blog, because I think it is a great story and it is related with my topics:

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When it comes to project management software, contractors have numerous options, from spreadsheets and generic applications to software designed for the construction industry. I recently read an industry survey on the subject that not only provided some interesting insight, but also confirmed the things I’ve been saying about project management software.

The Benefits

It came as no surprise that ranked in the top five project management software benefits were access to detailed project documents, better collaboration, and faster document approvals. In my opinion, the next generation of project management software will not only provide document storage in a centralized location, it will foster better communication between project team members, resulting in more efficient and profitable projects. In fact, survey participants indicated that specialized software for construction had the best record of helping contractors come in under budget on their projects.

The Results

I know I’ve talked a lot about the potential benefits of construction specific project management software, but you may be wondering, “What about the real results?”Well, according to the survey, participants indicated that by using project management software they saw improved accountability from document control, better financial visibility, and improved collaboration. Considering the fact that these three issues are the ones that come up most often when I speak to project managers about their challenges, I feel pretty good about the role software plays in addressing them.

4 Mistakes to Avoid in Construction Bidding

This article is borrowed from Dexter+Chaney blog, because I think it is a great story and it is related with my topics:

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I’m pleased to introduce Byron Largen, CPA from Mountjoy Chilton Medley LLP (MCM), as this week’s guest blogger. MCM is a CPA firm with a team of accountants dedicated to construction accounting.

Construction markets remain competitive, so it comes as no surprise that construction companies have to be at the top of their game throughout a project. One of the biggest stumbling blocks, though, is often at the beginning of a project – during bidding – but there are key areas to avoid in order to make sure your teams stay on track.

1. Overlooking Your Indirect Costs

With advanced construction software to help you, identifying your direct costs on a job is probably pretty easy. But one area that leads to problems is forgetting the indirect costs — those not directly attributable to the project at hand but still likely to be in play.

For example, if you completely own a piece of equipment, you probably estimate the amount of fuel that it uses on a job, but may not consider including the depreciation, insurance, maintenance, and other costs associated with running it. All of these expenses are important to include for your bid to be accurate.

2. Missing the Mark on Profitability

With an ongoing shortage of construction jobs, it can be tempting to bid at every one that comes along, whether or not they’ll actually earn you a profit. That said, calculating profit margin can be tricky, so be sure you don’t undercut your own profitability as the number start flying. Use historic job performance as a predictor, be sure you have the latest labor rates and material prices, and if the math doesn’t add up to profitable work, be prepared to walk away.

3. Not Keeping Up with Technology and Construction Software

Used correctly, technology can give you a competitive edge For example, bids generally begin with estimates. And how can you improve your estimates? By upgrading your technology.

With the multi-dimensional capabilities of BIM now integrated into many software applications, estimators can see all angles of their work in vastly more detail than before. For instance, an estimator can separate construction components from the overall structure to scrutinize them individually.

4. Ignoring the “Other Guys”

Don’t make the mistake of underestimating your competition. When working on a bid, you’re assessing the project with respect to your company’s capabilities, but if you consider the competition, it may change the way you bid, or even your decision to bid. If two of your main competitors are known for bidding low, you may have to reduce your bid comparatively. Is the job still worth it?

Science Meets Art

Some contractors might say that bidding is a science — you crunch the numbers and stick to them. Others might say that it’s an art — when your gut says a project will be profitable and elevate your visibility in the marketplace, go for it.

The truth probably lies somewhere in between. Now more than ever, you’ve got to do the math and make sure your cash flow can handle the burden of every job. But, at the same time, no one knows your local market and construction company like you do. So your gut certainly deserves a say.

Posting operational work (Position Journal) – part 2

If we decide to use Position Journal, we will get easier operational work, but less of analysis quality (we cannot get COGS and resource cost per position). In some other post, I will detail explain different between Output Order using and Position/Job Journal posting. Also, posting results are not in posted documents, but there are only in Position Entries.

Position Journal is standard journal as all other journals in NAV. As standard NAV journals, Position Journal also has Journal Batches. This table contains the batches we set up for our position journals. Batches let us group entries in a posting session and place a unique stamp on that session. This provides an additional measure of audit control. Whereas, source codes and reason codes tell us the source of an entry and why the entry was made, batches tell us when the entry was made and in what group of entries it was made.

Entering data in Position Journal is simply and fast. Data are the same as Output Order header, but we can put them for many different Projects, Construction Positions and Dates. When we start to fill Position Journal, we need to input:

  • Document No. (automatic from No. Series or manually)
  • Document Date and Posting Date (there are usually the same)
  • Project No. and Project Task No.
  • Position No. (system will make automatic filter for positions and we get only positions we define on Bill of Quantities, as on Output Order; if we eventually must post position out-of-BoQ, we can press ‘Show All’ and we will get complete Construction Position code list.)
  • Quantity (in Cons. Position UOM)
  • Dimension Values and some other groups

All other data (UOM, Costs, Prices, Posting Groups…) will be entered automatically from setup. If this is not first posting for this position on this project, we can see previous posted quantity for this position. We also can see contracted position quantity from BoQ. On this way, we have control before posting this values. All of that data are placed in bottom statistic area.

There are some another small additional functionality, but globally, this is all for input. After that, we only need to post journal. Posting is easy, by press Post or Post and Print button. Posting result will be placed (only) in Position Ledger Entry.

All posting of COGS and resource cost, we must do with Job Journal. About Job Journal in my next post.