In today’s technologically advanced world, the construction industry is rapidly embracing automation software to streamline operations and improve efficiency. One critical aspect of this transformation is implementing a new construction industry Human Capital Management and payroll (HCM), Enterprise Resource Planning (ERP), and time tracking system. This article will guide you through the process of implementing these systems and highlight the benefits of achieving a fully automated solution.
1. Start With Simple Payroll
The first step towards a comprehensive payroll, ERP, and time tracking system is to establish a simple payroll process. This includes accurately recording employee hours, calculating wages, managing deductions, and generating pay stubs. Implementing a reliable and user-friendly payroll software solution simplifies these tasks, reduces errors, and ensures compliance with labor laws and regulations.
Why is it important to start with payroll? Payroll is the “lynchpin.”
In the Construction industry, finance teams are under pressure to deliver process automation, accurate job costing and detailed reports. However, because the Construction industry faces the largest amount of compliance penalties of any modern industry, it’s critical to ensure new payroll processes are in place before proceeding with any additional aspects of your overall implementation.
- ERP implementations can face unexpected delays when payroll technology is not configured in advance
- Projects, jobs and costs are highly correlated with payroll data and may require rework if they are set up prematurely; implementing payroll first can prevent costly project tracking revisions
- Accurate payroll processes can prevent tax, union and/or prevailing wage audits
Can I set up simple payroll before purchasing an ERP or time tracking system?
The answer is – yes! In the Construction industry, it’s common to launch payroll systems without any electronic time tracking or project costing (at first). Simply key in hours, ensure Prevailing Wages and Union pay items are correct, and submit payroll to ensure workers are paid accurately and on time. (If your organization is already using an electronic time system, it’s also possible to auto-import hours from the existing time system as part of establishing a simple payroll process.)
2. Align Payroll Actuals with Job Costing
To enhance project cost management, it is crucial to align payroll actuals with job costing. Integrating the construction payroll system with the ERP software allows for the accurate allocation of labor costs to specific projects or cost centers. This alignment provides real-time visibility into labor expenses, enabling project managers to make informed decisions and control costs effectively.
Adding job numbers to your simple payroll process:
The first step in aligning payroll with job costs is to ensure job numbers are tracked for all payroll hours. For example – whenever an employee works 40 hours on “Job 123,” their hours can be costed to that job.
Reviewing a Job Cost report – Labor and Labor Burden actuals:
Assuming job numbers are tracked as part of the payroll process, you will be able to see actual Labor (regular pay, OT pay) and Labor Burden (tax, employer-paid benefits) associated with project labor. Most payroll systems will be able to show a job costing report, as long as job numbers are being tracked alongside hours worked.
The power of payroll job costing reports:
Eventually, you will want to connect your payroll job costing reports to your ERP system so you can see a full snapshot of all job costs including equipment, materials and other items. However, because labor is typically the single highest cost category on any construction job, beginning with a simple payroll job costing report will enable your finance team to deliver real-time insight on projects, even before your ERP system is fully implemented.
3. Connect an ERP and/or General Ledger System
After simple payroll and payroll job cost reports are implemented, it will be time to implement your preferred ERP and/or General Ledger system. Sometimes, these are the same system – other times, construction contractors may prefer to use two different systems. Regardless of your choice of ERP and/or GL systems, you will want to ensure the following processes are managed using modern construction software tools:
- General Ledger (GL) accounting
- Job cost accounting (job level)
- Job cost accounting (employee level)
- Project management
- Equipment, supply and other asset management
- Accounts payable
- Accounts receivable / billing
- Service / work order management
Which ERP system should our company choose?
Selecting a good construction industry ERP system is crucial for efficient project management, streamlined communication, and accurate financial tracking, ensuring timely completion and cost control. It empowers construction companies to optimize resource allocation, enhance productivity, and make informed decisions based on real-time data, ultimately driving overall project success and organizational growth. Visit HCM TradeSeal’s ERP systems page to learn more about popular construction industry systems.
Are ERP and GL systems always the same thing?
Traditionally, construction contractors have placed significant value on using a single system for project management, cost tracking and also General Ledger accounting – perhaps because project-related costs and trackable items are so closely related to overall business costs. However, as the construction industry continues to adopt new technologies, an increasing number of contractors are choosing to separate field service management / project management from accounting.
- Examples of systems that handle both project management and accounting: Sage 300, CMiC, NetSuite.
- Examples of systems that handle mainly project management, without accounting: ServiceTitan, Procore.
How does payroll job costing connect to ERP and GL systems?
Payroll Labor and Labor Burden costs are an important part of overall accounting. After payroll is complete, most ERP and GL systems can accept accounting data imports for both payroll general ledger (GL) and job costs (JC.) Using a tool like HCM TradeSeal, you can ensure GL imports have complete job and employee level costing detail.
4. Connect a Time Tracking System
To achieve precise payroll and job costing, it is essential to connect a time tracking system to the overall solution. Time tracking systems enable employees to record their working hours accurately and assign them to specific projects or tasks. This data integration enhances the accuracy of payroll processing, automates the allocation of labor costs, and provides insights into productivity and resource utilization.
What are the construction industry’s minimum requirements for time tracking?
While there is no official construction industry requirement to use any particular time tracking system – it’s important to select a software system that can track enough detail to effectively support Davis Bacon, Union and Job Costing requirements:
- The time system must capture daily hours
- The time system must differentiate between Regular, OT, and other types of hours worked
- The time system should capture job number, position/craft worked and other costing information associated with hours
5. Achieve End-to-End Automation
The next stage in implementing a fully automated solution is integrating the payroll, ERP, and time tracking systems to achieve end-to-end automation. This integration allows for seamless data flow across the various modules, eliminating manual data entry, minimizing errors, and reducing administrative burden. Additionally, automation enables faster processing, improved data accuracy, and enhanced decision-making capabilities.
After completing the important steps of establishing payroll, adding job costing to payroll, connecting payroll to an ERP and connecting a time tracking system, your company will be able to enjoy the benefit of multiple systems working together to achieve a smooth, compliant payroll, costing and accounting process. Because multiple systems will be operational, creating seamless integration between systems with strategies such as API connectivity will save end users several steps and further reduce the likelihood of administrative error.
Conclusion: Benefits of a Fully Automated Payroll, Costing, and Time Tracking Solution
Implementing a fully automated construction software system that includes – payroll, ERP, and time tracking, offers numerous benefits to the construction industry. These include:
- Increased Efficiency: Automation streamlines processes, eliminates manual tasks, and reduces the time required for payroll processing, cost management, and time tracking.
- Improved Accuracy: Automation minimizes human errors associated with manual data entry, resulting in more accurate payroll calculations, job costing, and time tracking.
- Enhanced Compliance: Automated systems help ensure compliance with labor laws, tax regulations, and industry standards, reducing the risk of penalties or legal issues.
- Real-Time Insights: Integration between payroll, ERP, and time tracking systems provides real-time visibility into labor costs, project progress, and resource utilization, empowering managers to make data-driven decisions.
- Cost Savings: Automation reduces administrative costs, eliminates duplicate efforts, and enables better resource allocation, resulting in overall cost savings for construction companies.
The implementation of a new construction industry payroll, ERP, and time tracking system is a crucial step towards achieving a fully automated solution. By following the outlined steps and integrating these software systems effectively, construction companies can reap the benefits of increased efficiency, improved accuracy, compliance, real-time insights, and cost savings. Embracing automation in payroll, job costing, and time tracking enables construction businesses to stay competitive in today’s fast-paced industry landscape.
Ready to get started with Step 1 – Simple Payroll? Book a free consultation with HCM TradeSeal!