Garco Construction Cuts Payroll Processing Time in Half With Dexter + Chaney Spectrum

by:
on December 8, 2015

Dexter + Chaney Case Study: The Impact of Implementation

The Chief Financial Officer for Garco Construction, a $125 million plus general contractor in Spokane, WA, Jim Morrison took a circuitous path to his current position.

The son of a plumbing contractor, Morrison received his accounting degree from Eastern Washington University in the early 1980’s. Dismayed by the job prospects in his field, however, he moved to Alaska to work for a plumbing company, where he spent days installing plumbing fixtures and evenings doing the company books.

When the company opened a branch in Seattle in the late 1980’s, Morrison seized the opportunity to return to the Continental U.S. He passed the Certified Public Accountant (CPA) exam and went to work for a small, local CPA firm that specialized in construction and real estate.

In this Dexter + Chaney case study, you’ll learn the payroll processing benefits Garco Construction realized after implementing the new system, including:

  • Processes complex union payroll for ~300 employees in half the time
  • Tracks $5 million worth of equipment to determine ROI
  • Runs detailed reports in 5 to 10 seconds, compared to 10 to 15 minutes

“The database allows us to get reporting in ways that we’ve never been able to before. Extracting information from a standard Spectrum report to Excel for customized analysis is very easy to accomplish.”

Jim Morrison, CFO of Garco Construction, Inc.

A few years and several mergers later, Morrison took a position as the controller for one of the firm’s clients. It was here that he first encountered Dexter + Chaney Spectrum construction accounting software (then known as Forefront), the system he currently uses at Garco.

“I was using Forefront to account for the financial, payroll and job cost aspects of the company, and I really grew to respect how well the system worked from an accounting standpoint,” Morrison says.

“The job cost, payroll and AP functions were tightly integrated with the general ledger, allowing detailed and accurate reporting from many aspects. John Chaney and Mark Dexter were very active with the development and support of their product, and really valued and acted on the ever changing needs of their customers.”

A few years later, married with a young child in tow, Morrison and his wife moved back to Spokane to raise their family and care for aging family members in the area.

He took a job with a small general contractor, which then led to a position as a certified consultant and business partner for Timberline construction accounting software, where he serviced Eastern Washington, Idaho, Montana and Northern Wyoming and competed against Dexter + Chaney for clients. 

While at this position, Garco was one of the many contractors Morrison serviced. In December 2005, Morrison joined Garco in a newly-formed CFO role, which was created based upon the company’s growth and the complexity of the projects it had taken on.

After 20 Years, a Search for New Software

Garco is a commercial and industrial general contractor that self-performs a significant portion of the work it contracts for. The company’s scope of work includes projects for all branches of the U.S. military, public and private schools, wastewater facilities, heavy industrial and manufacturing facilities, arenas, auto dealerships and government housing facilities.

The company has approximately 300 employees250 union field tradesmen (and women) and 40 that work on the administrative side of things.

There are roughly 100 ongoing projects at any given time, 20 to 30 of which have contract amounts ranging from $300,000 to nearly $70 million and can take up to three years to complete.

Garco Barton Auto Dealership
The Barton Auto Dealership in Spokane, WA, one of Garco Construction’s
recent projects completed with Spectrum

Evaluating Dexter + Chaney

In 2010, Garco learned the construction accounting system they had been using for the past 20 years would soon become static, so they began to search for an integrated, construction-specific job cost, accounting and project management system.

The company wanted a product that would continue to grow and adapt with the ever changing regulatory factors in the construction industry, and Morrison’s positive experience with Dexter + Chaney made the software an obvious choice.

“[Dexter + Chaney] always seemed to be enhancing their software with new functionality and feature sets,” he explains.

“I had observed and competed against them for many years, and had great respect for how they seemed to move their customer base from one technology platform to another as times changed, with very little impact on the customer’s day to day operations. Changes in technology platforms as well as upgrades were also covered under Dexter + Chaney’s software maintenance program.”

SDX Tool Allows for Quick, Accurate Implementation

Garco purchased Spectrum in late October 2012, and implementation began in mid-November. “Given our self-imposed compressed schedule, the process was pretty hectic,” Morrison says, “but the Dexter + Chaney staff were there to assist at all hours of the day and night and were quite helpful and supportive.”

Data from Garco’s old system, including employee payroll records, general ledger records and detailed job cost history, was extracted from the old database and imported it into Spectrum using an Excel-based tool called Spectrum Data Exchange (SDX).

Morrison says SDX allowed for an extremely accurate data transfer process. Over a single weekend, for example, nearly 400,000 records were extracted from the prior system, scrubbed and imported into the new system with very few errors.

“It was amazing how well the SDX tool worked,” he says. “When errors did occur, the Spectrum SDX tool rejected the item back into the SDX Excel template, returning an error message on a line item basis that told you exactly why the records were rejected. Then you could simply go into Excel, correct the data record and click ‘sync’ to resolve the rejection.”

It took just three weeks for Garco to be running its union and salaried payrolls on Spectrum, which the company went live with on January 2, 2013. Job cost functionality, including cost information from the prior system, was up and reconciled a few weeks later, followed by the customer billing and project management functionality.

A Cloud-Based System Helps Manage a Complex Payroll System

Garco’s previous system was on-premise, whereas Spectrum is cloud-based. Morrison says this is one of the system’s biggest benefits, as work can now be done securely and remotely from any computer with an Internet connection.

“The bandwidth required to run Spectrum effectively and efficiently is quite minimal,” he explains. “I frequently work with a cell phone class wireless card and have very few issues as long as at least a couple of bars of connectivity are available.”

In the past, Garco used Citrix, an online collaboration tool, as a bridge to connect their old system to a public cloud network so it could be accessed via the Internet. With Spectrum, Garco no longer has to pay for Citrix licenses each year, which results in annual savings of approximately $3,000.

Garco chose to have Dexter + Chaney host their system and data at a data center that has banking level security and access controls in place. Morrison says downtime has been nearly non-existent over the last year. “We believe we’ve saved another $8,000 to $10,000 annually in hardware maintenance and data backup costs,” he says.

One of the main functions Garco uses Spectrum for is the company’s payroll, which is an extremely complicated process to oversee. Without a computerized payroll system in place, Morrison estimates the company would have to hire four additional employees to handle everything.

All of Garco’s field employees are union members, and Garco is signatory to five different unions across six states. Each state has anywhere from six to eight local union branches, each of which has different pay rates, deductions and fringe benefits that apply to the employees within that branch.

To top it off, employees can work on three to five different jobs and even cross state lines during a single weekly pay period. Garco’s monthly union benefit liability encompasses some 30 different reports and an average monthly benefit outgo in excess of $500,000.

“Our payroll is very complex and it has to be right the first time,” Morrison says. “Given our weekly volume, there will always be a few errors here and there, but Spectrum handles error correction quite effectively.

“With our prior system, our annual payroll related unlocated difference balance (error corrections) ran at least $50,000 per year. As of early December 2013, the figure with Spectrum is under $3,000. This is tribute to the product and to the understanding and attention to detail that both our and Dexter + Chaney’s staff had as our payroll system was being designed.”

As per union regulations, Garco must pay all employees for the prior week’s work by the time they leave the job site on the last scheduled work day of the following week. With their previous system, the payroll took around 3.5 days to turn around.

Time worked for the previous week was collected on Monday mornings, and signed checks had to be out and on their way to job sites by Thursday in order to be distributed in time.

Given the size of Garco’s weekly union payrolls, penalties for paying the field crew late could easily amount to $25,000 or more. “It was always tight, and we were always pressured,” Morrison says.

With Spectrum, field employees input their time into an Excel template and send it to the system via email, and the data is automatically imported within the system. This drastically cuts down on the time it takes to calculate everything.

As a result, a single payroll administrator/manager at Garco can now complete the payroll for all field employees across trades and unions in just 1.5 daysa full two days less than the previous system.

Spectrum Payroll
Spectrum’s Payroll application simplifies the complexities of construction payroll,
including multiple pay rates across different states and diverse union fringe benefits

Job Cost Projection Tool Provides a Clear Picture of All Projects

The majority of the projects Garco works on are won via a hard bid process. Estimates for all projects, hard bid or negotiated, are created using Sage 300 Construction and Real Estate’s (formerly Timberline) estimating product.

Each project is broken down into phase and cost codes, with various cost types and categories within each phase (e.g. material, labor, equipment). Each phase contains specific codes that identify the various activity(s) the phase will require for completion, along with the cost of each.

These estimates are imported into Spectrum, and the system compares them to a standard phase code list Garco has set up for all projects to validate that they’re part of Garco’s standard format.

Exceptions to this format are noted, and the project manager is given the opportunity to make corrections to the imported item, or approve as is. According to Morrison, errors are much easier to correct compared to Garco’s previous system.

This data is then formally uploaded into Spectrum’s job cost application, where it’s used as the baseline for comparing estimated versus projected costs as the project progresses, helping Garco stay on track and on budget.

Spectrum job cost projection

Spectrum’s job cost projections provides at-a-glance views
of real time job cost performance against budgets and projections

Change Orders Allow Flexibility in Ever-Changing Conditions

Garco self-performs nearly 50 percent of the scope of work it contracts for. The other half is subcontracted out, and normally includes heating, ventilation and air conditioning (HVAC), electrical, plumbing and excavation activities. As with many construction projects, changes are extremely common as projects progress, so Garco uses Spectrum to create change orders for self-performed and subcontracted work.

Spectrum change requests
Spectrum’s Change Request application enables users to easily create, route,
track and approve change requests
 

For example, there are instances where work that was initially going to be self-performed is subcontracted out, or vice versa. When the change order is issued, Spectrum moves the estimated cost for this labor to the appropriate phase and cost type within the system and includes an audit trail, which allows Garco to track these changes so nothing is overlooked.

At any point during a project, Garco can track how much their subcontractors have billed them for and how much the company has paid out to date, which helps determine the cash flow and progress of the project by scope of work.

The system can also break down the scope of services by phase codes in order to determine cash shortfalls and overages by phase items so the appropriate customer billing can be prepared in a timely manner.

The system also helps Garco monitor material costs. The company works on many projects that require the same materials, so the company built and imported a database into Spectrum with “Garco-preferred items,” or items the company uses most frequently. This gives them a better idea of how well they’re estimating costs for these items.

“For example, we self-perform a lot of concrete work,” Morrison says, “so we can code the different types of concrete work we do and track production and dollars spent to see how it compares to how we took it off (estimated it).”

Equipment Tracking Helps Determine Machine ROI

In addition to project and employee costs, Garco must also manage the nearly $5 million worth of equipment it uses for various projects, including cranes, loaders, excavators, boom trucks, forklifts and trucks. The company’s previous system didn’t have an effective and efficient way to track the whereabouts or useage of this equipment.

Spectrum allows Garco to track where each piece of equipment has been dispatched to and what its status is, as well as maintenance repair history and fuel costs over time.

This allows Garco to see how much revenue a piece of equipment has generated relative to the acquisition and ongoing maintenance costs so they can decide if the equipment is worth owning, versus renting a similar piece of equipment from an outside vendor.

Spectrum’s Equipment Management application provides full visibility of equipment deployment, cost, maintenance status and more

 

This information is key for a company like Garco, as big pieces of equipment can cost anywhere from $20,000-$1 million and are expensive to run and maintain. The ability to see exactly how an item is being used and whether or not it’s worth the money spent helps drive future spending decisions.

Reporting and Customer Service Top the List of Benefits

Of all the benefits Spectrum has to offer, Morrison says the two that stand out the most are the software’s reporting capabilities and customer service. “The database allows us to get reporting in ways that we’ve never been able to before,” he explains.

“Reports run much faster in Spectrum compared to our previous system. All standard reports are easily exported as CSV, PDF or formatted or unformatted Excel files, allowing staff to use a variety of methods to analyze data. Extracting information from a standard Spectrum report to Excel for customized analysis is very easy to accomplish.”

Morrison runs monthly flash reports, which provide a snapshot of Garco’s overall performance and health. With these reports, he’s able to sort the data by project manager, job size and completion date to get a detailed view of what company profits will be.

He can also run detailed accounts receivable reports that reflect what Garco is owed by customer and project, which pull from numerous data sources and are often time consuming to create. With Garco’s previous system, these reports took anywhere from 15 to 20 minutes to run. With Spectrum, they take just 10 to 15 seconds.

On the customer service side, Morrison says Dexter + Chaney’s employees are extremely knowledgeable about the industry.

“Many of their people are CPAs that understand the construction industry and related accounting requirements very well, so if you call support, it’s likely they immediately understand exactly what you’re talking about,” he explains. “We work together very well as a team to resolve any issues that come up very quickly.”

The customer service team is also extremely hands-on. In one particularly unique instance, Morrison says that just 10 weeks after Garco implemented the software, John Chaney, the president of Dexter + Chaney, and Geoffrey Falk, Spectrum project manager, traveled to Garco’s offices to see how things were going. The two men spent the entire day speaking with staff and assisting with training.

“It’s not very often you see the president of a software company that engaged with a customer and knowing how to operate and train customer staff on how to use the product,” Morrison says. “It added a lot of credibilitythese guys really know what they’re doing.”
 

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