The Importance of Equipment Management Software Applications for Mid-Market Contractors

By Sheldon Needle

Larger organizations of virtually any type now have risk management departments. Their role is to look at all matters of corporate governance in order to minimize exposure to errors which can lead to lawsuits or accusations of mismanagement. This involves an ongoing evaluation of any and all company activities in order to protect shareholders and management in the execution of their duties. Risk management can involve everything from contract reviews, auditing and control standards, human resource management, insurance coverage and more.

It might seem that only larger organizations need be concerned with this but, in truth, contractors of all sizes must be aware of their legal and fiduciary responsibilities.

For contractors, risk management is particular sensitive since its agents are out doing work under contract that involves people skills and the tools and equipment used in carry out out the work being performed.

In particular tragic accidents sometimes occur at construction sites which can involve the use of onsite heavy equipment.

This article focuses on the use of construction software to manage and mitigate risk exposure associated with equipment service and associated record keeping along with financial record keeping for financial reporting purposes.

Heavy highway, site work contractors, homebuilders and civil contractors all work with equipment of various types. The cost of the equipment is charged to the job usually by mileage or labor hours spent operating the equipment so its operational efficiency is essential to performing the job within budget. But safety procedures and staff training are also important in avoiding accidents.

Equipment used on Federal contracts is subject to strict regulations that require carefully maintained records management where equipment records must be physically counted and reconciled to computer records as well as an internal control system to safeguard and maintain the equipment.

In very large organizations, such as nuclear power plants, physical asset management involves the practice of managing the whole life cycle (design, construction, commissioning, operating, maintaining, repairing, modifying, replacing and decommissioning/disposal) of physical and infrastructure assets such as structures, production and service plant, power, water and waste treatment facilities, distribution networks, transport systems, buildings and other physical assets

Larger contractors who have hundreds of pieces of equipment hire managers to do nothing but manage and control that equipment since it is such as important part of their business. But even smaller companies, who may have only 50 – 60 pieces of equipment or less have become very alert to the importance of tracking and keeping service records on their equipment to insure its readiness and safety worthiness.

Fixed Assets vs. Equipment Accounting in Construction
The Fixed Assets module maintains a systematic charge of the assets over their useful life. It is designed to track assets and calculate depreciation amounts for financial reporting purposes. Monthly depreciation amounts are automatically posted to the correct General Ledger Asset Account and to the Equipment Control module if desired.

Here are some of the uses of Equipment record keeping that small to midsize contractors are concerned with. These features are available in several of the mid-market construction specific software solutions available.

Preventative maintenance tracking: when is maintenance due, what work has been done, what is the cost of that work for labor and materials, and follow-up work needed

Service schedules are tracked by each piece of equipment with inquiries available on service history and future service scheduling. The service schedule can be established based on the miles of use, hours of use or date for service.

Equipment Repair work orders can also be created to track all time and materials associated with equipment repairs. Integration with the Purchase Order and Inventory modules makes it easy to charge parts to the work order

Location tracking where the equipment is located so it can moved as needed to job sites through GPS functions

Equipment costing, what costs have been charged to the job ledger for specific jobs where that equipment has been used

Depreciation rates and depreciation to date for financial and tax reporting purposes

For each piece of equipment you can establish equipment codes which are the operations that are either done to, or by the equipment. There are essentially three types of equipment codes available: revenue, cost to own, and cost to operate. These codes determine how the equipment transactions are posted to the general ledger and job cost ledger.

Some software vendors offered tiered capabilities for equipment costing and management where the basic capability supports charging equipment costs to jobs and perform basic cost tracking along with an upgrade option which provides for preventative maintenance and work order capabilities.

Most mid market construction software vendors only sell their equipment management applications as part of an integrated system with all the accounting applications and not separately. This would include software vendors such as Dexter Chaney, Viewpoint, Penta, Foundation, Timberline, Computer Guidance, Jonas and others. However, there are vendors who sell standalone equipment management or fixed assets applications.

Summary
Small and mid-size contractors who extensively use heavy equipment on their jobs are becoming sensitive to the importance of managing and controlling these assets for purposes of resource allocation, job profitability, and to promote equipment safety and longevity.

Using application software for this purpose is rapidly becoming a necessity for contractors who have as few as 30-40 pieces of equipment.

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