Implementing ERP for Small Construction Companies

Understanding the Need for ERP Software in Construction

In 2020, more than 470,000 small businesses were operating in the construction business nationwide. Most of them have implemented some form of enterprise resource planning. You may wonder what it is and how it can help your small construction business grow. In this section, we’ll first introduce ERP for small-scale construction companies.

What is ERP?

In laypeople’s terms, enterprise resource planning (ERP) is an all-comprehensive software package that integrates various business functions under a single platform. It’s like a centralized database that allows different departments within a company to share information and streamline their operations. ERP systems will also cover areas like accounting, procurement, inventory tracking, human resources, project management, etc., to make your construction business successful. An “ERP software” tailored to medium and small businesses will be the tech solution you’ll purchase.

Benefits of ERP for Small Construction Companies

Do you know that only 3 out of 10 construction businesses are investing in technology? That’s because a lot of construction companies are unaware of the many benefits of purchasing ERP tools and other tech solutions. Here is how an enterprise resource planning solution will help your company grow:

• Better Efficiency and Productivity: Are you facing challenges with manual processes, disjointed systems, and redundant data entry? Then, you can implement an ERP system to automate lots of routine tasks and eliminate data duplication. It’ll improve the overall efficiency of your business by increasing the productivity of your employees.
• Enhanced Project Management: A typical project can take 3 months to several years to finish in the United States. It usually involves scheduling, resource allocation, cost tracking, paperwork management, etc. An ERP system will help you easily execute and monitor multiple projects. So, you’ll get real-time visibility into project progress and resource availability.
• Streamlined Financial Management: A critical aspect of this business is financial management. An ERP system will automate many of these processes, such as invoicing, budgeting, payroll, and financial reporting. Thanks to the ERP, you’ll see a stark reduction in manual errors & mistakes to witness better compliance with the laws.
• Smarter Resource Allocation: Resources used in the construction business include manpower, equipment, raw materials, electricity, etc. ERP systems will help you allocate these resources to the right areas. That’s how you’ll optimize resource utilization and avoid overbooking. It reduces the cost of underused resources in the construction business.
• Ensured Regulatory Compliance: Lastly, an ERP software solution will help you comply with the latest laws & regulations, such as safety standards, environmental regulations, labor laws, etc. It is important to ensure compliance by providing the right tools to track/manage the changes and updates in regulatory compliance.

Identifying the Need for ERP in Your Small Construction Company

When do you need to implement an ERP solution in your business? What are the signs that your small-scale construction business is in need of enterprise resource planning software? After all, the construction niche is very complex, and surveys by the US Department of Commerce have stated that only 4% of the companies in this industry are operational after 10 years – suffering from a failure rate higher than any other business in the world. When a construction business is dying, it shows some signs of distress. You should recognize these signs to realize that now you need ERP software for small contractors:

Evaluating the Challenges: 7 Problems in Construction

Do you have delayed projects or poor performance by construction workers? In 2022, US contractors in the construction business lost a whopping $30 billion due to productivity issues. That’s why you need to go through the seven most important issues in this niche to decide if an ERP is right for you:

• Inefficient Planning: Project delays and resource conflicts can arise due to improper planning of projects. An ERP system can streamline project planning. From planning to execution, it has the capacity to take care of everything. That’s how you complete a project in time.
• No Real-Time Visibility: Can you access real-time information about project progress? The lack of visibility can dent worker productivity. However, an ERP will give you a centralized & comprehensive database for data-based decision-making.
• Time-Taking Procedures: Do you find your workers wasting time on manual data entry, dealing with paperwork, generating progress reports, and other stuff? Use an ERP to automate tasks like these for better overall efficiency.
• Inaccurate or Duplicate Data: Do you have trouble with data duplication or inconsistency? You may notice that the data has errors as well. Now, an ERP system can solve these issues by simply eliminating duplicate data entry. You’ll get standardized processing for data management.
• Financial Mismanagement: Are you struggling with invoicing, budgeting, financial reporting, and issues like that? Try your luck with an ERP solution to streamline financial procedures. An ERP in the world of construction will automate invoicing, expense tracking, and even the act of creating financial reports.
• Poor Inventory Management: If you face issues like stock-outs or overstocking, then an ERP can make it much easier to track your inventory. It will offer amazing inventory management & item tracking features. You’ll get better control over inventory levels, procurement, and planning.
• Ineffective Communication: Do you have communication silos? Do different departments often struggle to keep up with each other? Then, you should invest in a robust ERP in construction for the sake of better collaboration and document sharing.

Access Scalability & Growth Potential

What about when you expand your business or start a branch in different cities? You should invest in an ERP solution that offers scalability as well. This is what you should keep in mind:

• Increasing Project Complexity: Are you taking on larger or more complex projects that require better management and control? An ERP system will support your growth by providing scalability. It’ll help you in handling increased project sizes and volumes.
• Expanding Geographic Reach: Are you expanding your operations to other locations or targeting projects in different regions? A good ERP system facilitates centralized control and coordination across multiple sites or branches, ensuring consistency in processes and data management.
• Adding New Business Functions: Are you diversifying services or adding business functions? An ERP system integrates various functions, such as project management, accounting, procurement, etc., for seamless collaboration between departments.
• Compliance and Reporting Requirements: Are you facing challenges in meeting regulatory or reporting requirements? An ERP system provides tools and features to ensure compliance with industry regulations and streamline reporting processes.

Choosing the Best Construction ERP Systems: A 4-Step Program

Finding the best ERP for construction companies can be a little difficult, especially given the trends that are emerging today. The pandemic had a very concerning effect on the entire construction industry. The most recent surveys have calculated that this industry lost over a million workers in March and April of 2020. That’s why choosing the best ERP for small construction companies will be a little difficult. But we’ll explain how you can do it like an expert! Follow these steps to choose ERP software for your small business:

• Evaluate Your Business Needs

First, you should assess your construction business needs. Here’s how it’s done:

• Functional Requirements: Which specific functions and functionalities do your workers require of the ERP solution? For instance, you may require it to handle payroll or human resources. So, always be aware of the reasons why you’re investing in an ERP package. Only then you’ll be able to make it work in your small construction business.
• Integration Needs: Assess the systems and software your company is already using. Ensure that ERP software for small contractors will be a good fit with them. Only choose an ERP that’ll integrate seamlessly with your accounting, inventory tracking, and financial reporting tools.
• Scalability: What are your growth & expansion plans? Can this ERP solution scale accordingly? It is vital to make sure that ERP software can handle increased project sizes and additional users.

• Compare ERP Providers

Next, you should look into different ERP providers only to choose the one that offers the best product.

• Research ERP Providers: You should start by creating a list of ERP providers who sell products & software packages designed specifically for the construction industry.
• Review Salient Features: Then, you’ll go through the features these ERP solutions provide. Look for features that are useful for a small-sized local construction business.
• Check Industry Experience: It’s equally important to go through the ERP provider’s experience & track record of success. Choose a provider with enough industry-specific know-how.
• Assess Customization Options: Determine the level of customization these ERP solutions offer. Construction companies often have unique procedures that beget diverse requirements. So, the perfect ERP solution must tailor itself to match your specific business needs.
• Look into User-Friendliness: You should prioritize software that is easy to navigate and doesn’t keep end-users scratching their heads in sheer confusion. Always go with an ERP package that’ll minimize the learning curve for your workers.
• Seek References & Reviews: Request references from the ERP providers and contact existing customers to gather feedback on their experiences. Also, you should check out online reviews or testimonials online to gain further insights into the provider’s reputation.

• On-Premises vs. Cloud-Based ERP

The third step involves choosing whether you should invest in on-premises or cloud-based ERP.

• Assess IT Capabilities: You should evaluate the IT capabilities and infrastructure of your ERP. It’s vital to determine the right solution based on your unique needs.
• Consider IT Budget: Secondly, you must compare the costs of implementing on-premises ERP to those of implementing cloud-based ERP. In on-premises ERP, you’ll have to take care of the hardware setup issue. However, cloud-based ERPs offer scalability and remote accessibility.
• Analyze Data Protection: You should check the security measures the ERP solutions provide. Do they offer data encryption services? You should also look into access controls and data backups. Also, it’s important to consider disaster recovery plans.

• Making the Decision

Lastly, you can make your final decision based on these factors:

• Shortlist the Solutions: Create a shortlist of ERP providers that align with your needs. Let’s say a list of 2 to 3 best ERP solutions for small construction companies will be enough to show your stakeholders/investors.
• Request Demos & Trials: Next, you’ll schedule product demos and request trial access to all the ERP systems of your choosing. That’s how your teams will experience these software packages & systems firsthand to compare them based on user-friendliness and functionality.
• Involve Key Stakeholders: Don’t forget to keep your stakeholders in the loop. Gather feedback! Make sure that this feedback is from all the departments in your construction company.
• Consider Long-Term Support: In the end, you’ll evaluate the support/maintenance provided by each ERP solution. You have to make sure that these solutions offer ongoing support/updates. 

Implementing the ERP System in Your Small Construction Company

How can you successfully implement ERP for small construction companies? You can refer to this case study done in a Saudi Arabian company; in this study, the author discovered that several human factors were responsible for successful ERP implementation. The KSA-based construction company witnessed a sudden increase in productivity after successfully investing in ERP software. You should follow steps like this to maximize your workforce’s productivity:

Plan and Prepare

Let’s start with the 1st step, i.e., planning and preparing for implementing the ERP for small construction companies. This is what you’ll do at this stage:

• Create a Team: The first thing is to create a dedicated team of experts to implement the ERP in your organization. This team will be composed of stakeholders, project managers, end-users, and – of course – IT personnel.
• Define Project Scope: Next, you’ll define the scope of this project, i.e., ERP implementation. You must set realistic goals by laying down modules to be implemented and giving the team a clear & manageable timeline.
• Do a Gap Analysis: It’s equally important to assess the gap between your business procedures at present and the benefits offered by the ERP solution. Which areas require customization or project restructuring? This is what your team will do at this stage.
• Develop an Implementation Plan: Create a comprehensive plan to outline the tasks, milestones, timelines, and objectives for each phase of the construction ERP implementation.
• Perform Data Migration: The fifth stage involves cleansing your data and validating it. Then, it’s to be moved into the new ERP system. That’s how you’ll finish the first step of implementing the best construction ERP systems.

Training Your Team on the New System

The second step is to train your team. Make sure they know how to work the system. Without training, a non-technical team won’t be able to use the ERP for small construction companies properly. Don’t just assume that your workers are tech-savvy; help them learn how to navigate the ERP software.

• Provide Training: Give comprehensive training to end-users so they become familiar with your ERP software. Train them all as per their job roles and responsibilities. That’s how you can make them understand how to navigate this system like a pro.
• Provide Support: Give workers proper support after implementing the new ERP software. You’ll establish a helpdesk where users can seek assistance or report bugs.

Monitoring and Adjusting the System

The third phase involves monitoring the system and adjusting for any shortcomings. That’s done in these easy, simple steps:

• Review the Solution after Implementation: You should review the performance of the software thoroughly after implementation. If you see any problems or areas for improvement, do let your ERP provider know.
• Monitor Key Performance Indicators: Set these KPIs and use them to measure the efficacy of an ERP solution. These KPIs may be project completion time, resource utilization, accuracy ratio, user adoption rate, etc.
• Get Timely Feedback: Next, get feedback from end-users (not just IT personnel) to see how this ERP solution is doing. You can use this feedback to make adjustments to the software or simply enhance the effectiveness of ERP software.

Continuous Improvement and Regular Updates

Congrats! We successfully implemented ERP for small construction companies. Now, you have to ensure that it’s working fine by doing this:

• Keep Improving Constantly: Keep evaluating and refining your business processes to optimize all construction operations. You should learn how to leverage the capabilities of the ERP system to identify areas for improvement.
• Follow System Updates: Don’t forget to keep the ERP system updated with the latest software releases. Download the latest software patches the ERP provider provides. Also, review any new features made available for users on the ERP provider’s website.
• Engage with the ERP Provider: You should stay in touch with the ERP provider by attending the latest training sessions and participating in user groups (like online chatrooms).

Final Words

Hopefully, you now understand how it’s done – identifying the need for ERP software in your company! It is vital to go through the features of ERP for small construction companies first before implementing perfect resource planning organization-wide. We’ve covered the entire procedure for implementing the right ERP for your business. Follow these tips and set your business on the course of business excellence.

Don’t wait to catch up – it’s time to step up and take charge. Become a leader in this fast-paced niche. Go ahead and schedule a free discovery call with the experts at Alchemy 365. Let’s usher in a brand-new era of excellence in your small construction business with the help of MS Dynamics 365. Give us a call so we can discuss how to be your trusted ERP partner on this ride!

Choose the best ERP powered by Alchemy for small construction companies!