Cost Savings/ROI Achieved from BuilderMT s Workflow Management Suite As companies survive and then grow, the need to maximize efficiencies becomes more essential to maintain the bottom-line profitability. When evaluating technology, builders need to first examine their internal processes and procedures and then implement the right technology that will adhere to these processes. BuilderMT s Workflow Management Suite (WMS) was designed as a workflow/process-based system for singleand multi-family production homebuilders based upon the industry-accepted best workflow processes. These processes, combined with the latest technology, truly equip builders to realize some exceptional return on investment (ROI). For example, if a homebuilder can save an average of 25% of their current staff time by improving their internal processes, they could realize annual savings of $8,750 per staff employee. Using conservative numbers: one staff employee earns $35,000 annually, plus taxes and benefits. 25% savings would be $8,750 per year. 10% savings would be $3,500 per year. Multiply the above scenarios by the number of staff employees you currently have, and you are looking at a serious ROI. Typically, builders will start to add internal office staff as they grow. With the implementation of a true workflow/process-based system, we have seen the contrary. Builders are able to grow substantially without the need for any additional internal staff. That is quite a statement! If you are forecasting growth in your organization, imagine the savings you will realize as demonstrated above. Two other returns can be found in the ability to produce more accurate takeoffs/bids and in our excellent ability to track and manage variance costs that rob jobs of margin. Even with turnkey builders, we are seeing an increased efficiency in more accurate takeoffs/bids and a reduction in the amount of variance dollars per house. Using conservative numbers again: Increase the accuracy of bids by 30% and reduce variance costs, saving between $150 and $2,000 per home. Assuming $300 per unit savings, for example: Increase Accuracy and Variance Control, based conservatively on a 100 units per year. 100 units/year x $300/unit = $30,000 per year or $2,500 per month savings.
Compare these savings to the investment of purchasing the right technology at $50,000 based on a 60- month lease. $50,000 leased over 60 months equals $1,130 per month. Compare this to a very conservative $5,000 per month savings. That is a $3,870 per month, or $46,440 per year, net savings. You have achieved a 343% ROI! Therefore, when evaluating how many concurrent licenses of WMS a builder would need for its organization, the builder must first examine the number of homes it is going to build in a given year and break this down by start packages per day. For example, if a builder is going to build 150 homes per year and start 12.5 homes per month (150/12 months), then it is going to start 2.9 or 3 homes per week (12.5/4.33 weeks per month). Based upon the following, this builder would need only one use of WMS Purchasing to handle these 150 homes per year. The following examples are based upon average number of hours reported by BuilderMT clients. One start package per day: Completing the Purchase Order (PO) Start Package for one start = 45 minutes Approving POs for payment: If using Scheduling and Wireless Scheduling and the superintendent is approving = 0 minutes per day If not using Scheduling or having Scheduling just mark an activity/po as complete = 30 minutes per day Total time per one start package per day = 1 hour, 15 minutes Other tasks within WMS Purchasing: Bidding and maintaining pricing per plan, elevation and option = 2 hours per day Updating vendor, job and miscellaneous information = 30 minutes per day Therefore, BuilderMT recommends one use of Purchasing for every 150 homes built per year. Benefits: The following pages will demonstrate some of the ways that builders can benefit from implementing WMS. When purchasing technology, if the benefits/savings outweigh the expense/cost, then it makes sense to move forward; if not, then stay where you are. Project managers and superintendents do not spend time coding invoices and matching costs to budgets. WMS can reduce AP staffing requirements by 50-70% by eliminating all PO-related invoice data entry through autopay. Electronic updating of contract price changes by vendors reduces amount of time required to update the cost-based model and option database. Completing takeoffs of new plans or major revisions of existing plans is 70% faster and 30% more accurate. Accounting staff no longer has to manually set up jobs, cost codes, original budgets, POs, change orders and variance purchase orders (VPOs), which are set up electronically. 2
With BuilderMT s Bid Management feature, included in the Purchasing Module, builders can cut one to two days off of their bidding process due to the efficiencies of electronic bidding and tracking via the use of the Trade Portal and e-mail. Amount of time required to compile project manager, superintendent and senior management reports is significantly reduced. Senior management s customized reports are available with the push of a button. Report data is reviewed in real-time, providing increased accuracy and improved profitability and trend analysis. WMS report and inquiry tools are easy to use as well as utilize current state-ofthe-art technology. Ten Reasons Why a Homebuilder Should Implement WMS Issues Features Benefits 1. Builder needs to analyze profit margin by project, community, unit, model and options. 2. Builder needs to easily generate and track committed costs to subs and suppliers. 3. Builder needs to track owner change orders effectively through the accounting process. automatically generate base model and option costs. Job Cost Software allows analysis of model and option cost by: Original budget Change orders POs Variances Actual Costs (Payments) quickly and easily generate POs based upon buyer selections. POs can be released in stages to subcontractors and suppliers at current prices. specify a change order at any point in the construction process. Change orders update the budget and PO information in the Job Cost Software. Builder can quickly analyze margin by model, option, and community or across multiple communities using Job Cost. Builder controls costs by defining scope of work and payment schedule. POs double as payment vouchers to subs. Payments can be automatically generated from POs. Builder avoids over paying or double paying a sub or supplier. By managing change orders, builder can prevent profits from slipping through the cracks. 3
4. Builder needs to track variance costs and/or VPOs. Variance costs negatively impact bottom- line margins. 5. Invoice approval process is labor intensive, time consuming, counter-productive and inaccurate. 6. Manual creation of spreadsheets is time consuming, and accuracy of reports and data analysis can be inconsistent. 7. Maintaining a database or price book of subcontractor and supplier pricing for every model and option by community is difficult and time consuming. create a VPO as well as specify the reason for the cost. VPOs can be categorized into definable groups like theft, weather, estimator error, inferior materials, subcontractor problems, sales mistakes, inaccurate architectural or engineering specs, etc. WMS has the ability to use approved POs to automatically generate accounts payable invoice data into Accounts Payable Software. WMS Report, Inquiry and Financial Statement design tools allow for direct reporting of data without re-entry into spreadsheets or external databases. WMS has a price book database that allows the builder to track multiple trades and supplier price quotes for every model, option, task or item. The price book allows the builder to track up to three historical prices as well as up to two future prices. The price book can be updated electronically by a spreadsheet, which can be e-mailed, printed, faxed or mailed to the sub or supplier. Builder can effectively analyze causes of VPOs across communities or projects. VPO analysis can identify problems with subs, designs or materials. By streamlining the payment process, builder can reduce staff costs or reassign workforce to alternate activities within the company. Reduces the chance for error and eliminates the need to handle the information more than once. Designing custom reports allows a builder to analyze information from different perspectives. Builder can reduce the amount of time spent on updating the database. Subs and suppliers can provide data in electronic format for re-pricing a database, lowering staff costs. Builder, sub and supplier can use off-the-shelf spreadsheet software programs to exchange pricing information. 4
8. Labor and overhead costs are too high for the volume of business. 9. Current accounting software does not give you adequate financial reporting flexibility. Reports are produced by recreating the data in spreadsheets or third party products. WMS was designed around the Best Practices Management Philosophies of Home Builders. The product allows total integration from the sales office through production and into Job Cost accounting. WMS requires a fewer number of staff to run and maintain compared to other systems in the market. WMS is powered by two options for accounting Sage Timberline Office and Explorer Contract Manager which offer a powerful General Ledger. The products allow for: Financial statement consolidations at any level. Reporting using cash, accrual or both. Inter-company accounting. Percentage of ownership reporting. Customized financial statements including cash flow analysis. Total Integration allows a builder to effectively manage costs by streamlining workflow and increasing productivity. Builder can easily report financial information to management and lending institutions. Custom reporting eliminates the need of have programmers design and configure financial statements, thus reducing costs of maintaining the software. 5
10. Lack of a comprehensive, integrated data system causes individual departments in the company to do their own thing. WMS was designed as an integrated software package that moves information from the sales office, to PO creation, to production and finally into job cost in order to track: Budget to cost analysis Profit margin analysis Change order and VPO analysis Cost-per-square-foot analysis Cash flow and cash requirement forecasting WMS performs all of the above tasks, eliminating the need for multiple pieces of software that do not talk to each other. Builder can establish consistent workflow processes and eliminate duplication of effort. Improved staff productivity lowers overhead costs. Employees can be cross-trained on various tasks within the WMS process, raising awareness of how the data flows from one department to another. There are no guarantees concerning the level of success you may experience with the software represented above. As with any business, your results may vary and will be based on your individual capacity, business experience, expertise and staffing. The testimonials and examples presented are actual results from BuilderMT clients and are not intended to represent or guarantee that anyone will achieve the same or similar results. The use of our information, products and/or services should be based on your own due diligence, and you agree that our company is not liable for any success or failure of your business that is directly or indirectly related to the purchase and/or use of our products and/or services. 6