Guide
Construction has its own accounting, its own contracts and its own way of losing money on a job. A generic ERP handles none of it well. Here is what a construction ERP has to do, how the main options compare for UK contractors and how to choose one that survives contact with a site.
By Christopher Fagan, Managing Partner, PEF Consulting Partners
Job costing is the heart of it: every pound of labour, plant, materials and subcontract has to land on the right job, phase and cost code, and the system has to show cost to date against budget and forecast cost to complete. Then there are applications for payment and certificates rather than invoices, retentions, the Construction Industry Scheme deductions, the domestic reverse charge for VAT, subcontractor management and compliance, plant and equipment, and work in progress valuations that the auditors will test. Housebuilders add plot by plot costing, sales and completions. A system that treats a job like a stock item will fail at the first valuation.
The specialist construction platforms, including COINS, Eque2, Integrity, RedSky and Procore on the project side, are built around jobs, applications and CIS and need little configuration to behave like a contractor. Their weakness is often the wider business: group finance, reporting and integration with modern tools. The general platforms, Microsoft Dynamics 365 Business Central with a construction add on, NetSuite, Sage Intacct Construction and SAP for the largest groups, bring stronger finance and reporting and depend on the partner’s construction extension for the job costing. Larger contractors increasingly run a general finance platform with a specialist project or commercial system beside it, which makes integration the critical design decision rather than the choice of either system.
For a UK contractor turning over £20m to £200m, an ERP implementation typically runs from around £75,000 to £1m all in over the first two years: a smaller contractor on a specialist platform, or on Business Central with a construction extension, sits at the lower end, and a large contractor on a full construction suite with several integrations sits at the upper end. The costs most often missed are the migration of live job history, which cannot simply be left behind, the integration with estimating, site and HR systems, and the training of commercial staff who have run their jobs from spreadsheets for twenty years and will not stop because a system arrived.
Make every vendor demonstrate an application for payment with retention and CIS, a subcontractor payment run, a mid job cost to complete forecast and a work in progress report on data that looks like yours. Ask who in their team has worked on a site or in a quantity surveyor’s office. Check how the system handles a job that changes scope three times, because yours will. Weight the partner’s construction experience above the platform brochure. And keep someone independent at the table who earns nothing from the licence you choose.
The cost code structure is copied from the old system instead of designed for how the business now bids and reports. Commercial staff are not involved until testing, so the system cannot produce the valuation they need and they go back to spreadsheets. Live jobs are migrated mid way without a reconciliation, so cost to date is wrong from day one. And the go live is set for the year end when the finance team is least able to absorb it. Across nineteen years of systems delivery the pattern in construction is the same as everywhere else: the software was rarely the problem, and the plan usually was.
Related reading: best ERP software for UK businesses, ERP implementation partner UK, ERP selection consultants, how to choose an ERP system, the ERP implementation plan, the ERP business case guide.
For most contractors it is either a specialist construction platform such as COINS, Eque2 or RedSky, or a general platform such as Business Central, NetSuite or Sage Intacct with a proven construction extension. The right choice depends on whether your complexity is in the jobs or in the wider business, and on the partner more than the brochure.
The specialist platforms do out of the box. The general platforms rely on the construction extension or the partner’s configuration, so make the vendor demonstrate a subcontractor payment run with CIS deductions and a reverse charge invoice before you sign.
For a UK contractor turning over £20m to £200m, typically £75,000 to £1m over the first two years, including licences, implementation, data migration, integration and internal time. Live job migration and commercial team training are the costs most often underestimated.
Usually yes, and often you should. The design question is how estimates, site records and commercial forecasts flow into the ERP and back, which means the integration plan deserves as much attention as the choice of platform.
If you are choosing or replacing an ERP for a construction business and want independent advice before the vendor demonstrations, a short confidential conversation is the right first step.