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Chelsey Stevens | Senior D365 Finance Consultant

Interview by:  Sarah D. Morgan, SIS Senior Marketing & Brand Manager

This week I sit down with Chelsey Stevens, Senior D365 Finance Consultant with SIS, to answer the question, “What is the difference between standard financial processes and construction finance processes?” Not only does Chelsey have a great day to day understanding of finance, but you’ll also learn she is a great asset keeping ERP implementation teams’ spirits high.

The premise of this THESIS edition is the notion that financial processes for businesses in the US are standardized and can be replicated from business to business. That not much has changed in the chart of accounts or general ledger processes and “every journal entry has a debit and a credit.”

What we’ll talk about here are the many differences between standard financial processes and day-to-day processing of financials in construction companies – especially specialty contractors. It’s important to understand these when companies try to create project-based processes with out-of-the-box standard ERP solutions. Let’s get into it.

Q: Before we get started, Chelsey, I understand you have quite an origin story getting into construction finance consulting?

A: Yes, I do have a unique story compared to most software finance consultants! I received my BA in Finance from Hawai’i Pacific University where I enrolled with a scholarship as a competitive cheerleader, after achieving five national titles and earning a spot on Team USA’s competitive cheer team for three years. When it comes to finance, I come from a family of engineers with construction backgrounds – I love math. After college, I faced the 2008 recession which bled into 2011 and no one was retiring. For my generation you had to compete to get a job, so I continued my education and went to graduate school. I earned an MBA at Georgia State University in Corporate Finance and a Master of Science and Investments. To pay for school I was the Assistant Cheerleading Coach and a graduate teaching assistant for 1st and 2nd year business courses at Georgia State University. These experiences are the reason I love to teach, and these moments have carried over into my work today as a consultant encouraging success at every step of the process.

My first job out of graduate school was a Finance Leadership Associate with The Coca Cola Company, where I completed projects for specific finance groups, and performed the job as a financial manager, then rotated to a new finance group every six months. I gained experiences in financial forecasting and budgeting, financial auditing, supply chain finance, capital planning, mergers and acquisitions, financial business analysis, managing shared services, business process leadership (BPL), and other areas of finance, at a fast pace. I graduated from the program and became a Senior Finance Manager at Coca Cola.

After having multiple experiences at Coke, I wanted to go into a role that not only enhanced my finance skill set, but also complemented my teaching abilities as well as data management. After learning about SIS and their niche in construction, I interviewed and landed a role in 2020. When I joined SIS, I became the senior Microsoft Dynamics 365 Finance Consultant, and later working my way through the company also become knowledgeable in Equipment Asset Management and Construction Operations.

Q: Getting into the heart of the discussion, what are key differences between standard finance and construction finance in general?

A:  With standard finance, these universal financial processes are essential for any company to maximize shareholder value. They are executed for any company, in any industry. They include:

  • Posting transactions to the general ledger
  • Identifying and analyzing business transactions
  • Recording adjusting entries
  • Preparing the trial balance
  • Preparing financial statements
  • Closing the financial books for the year

These are processes that all financial accountants must learn and perform, from a US GAAP perspective, must be followed and reviewed by auditors. I say all this to point out that these standard financial processes can be carried over from one business to another. The entry itself might drive different balances to your financial statements, but the actual process steps are no different than how they would be performed at another company.

With construction finance, you are executing daily financial processes (as listed above), but now you are focused more on the project level. Construction finance accounts are now posting costs directly to a project, generating bills that can either be directly posted as revenue or deferred till the project is at a certain percentage of completion, tracking actuals to budgets at the job level, and analyzing costs based on tasks performed. Financial statements are a bit more detailed versus at the general ledger level, and how each project is managed, financially, can be different, project to project.

Q: In the construction ERP software industry, do users generally understand there is a difference between standard finance and construction finance?

A: Many people in construction companies are told by software vendors that their product can be used out of the box or with minimal customizations to meet their project needs. But construction projects are complex and taking that out of the box approach causes more customizations to meet the needs of construction projects, and we find some of our clients also need partners that can offer more education around project management best practices. We often help clients learn this after the fact.

For example, say we have a company that is on a very basic finance system, which means they can’t pull a profit or loss report by job or project. They can’t analyze their cost and see which materials or products they are spending money on and can’t track if they are spending more on one job against their budget. Say, they can’t analyze their cost, can’t do job costing by task or by task codes, and can’t do an analysis by project or compare two jobs to see which is more profitable than the other. They can’t easily apply a change order to a project budget, so they can’t see what drove a change to the project budget. Let’s say in that company half do project accounting and half do not. It would be very eye opening to see how much a true construction solution can help jobs and projects than their basic system.

Q: Do construction specialty contractors understand Microsoft Dynamics 365 out of the box doesn’t solve their project financial needs?

A:  I’ve seen software companies or Microsoft partners sell D365 to construction companies thinking that a few customizations are all they need. If they stick with that partner, then they find their way to us for our integrated SIS Construct Project Cost Management (PCM).

I have also seen people even try to form fit us but when we demonstrate the true process flow including change management, they really understand how it impacts their project profitability.

As an example, there may be a company who has never performed job costing. We would work with them and teach them how all their data can be managed in the system. I’ve seen their excitement when they realize they don’t have to spend a month piecing reports together or working “blindly” because they don’t have a way to manage profitability for each project – that this system can pull the reports for them and have visibility to the details, by project, that they have been looking for.

What we are doing is helping these clients with resource constraints. For example, with our PCM solution we help with labor cost savings and structured best practices with project management. For specialty contractors, we are a one-stop-shop rather than the multiple excel spreadsheets we see many clients try to report within. We help them get in line with industry best practices and accounting controls.

A lot of companies are used to taking short cuts in their current financial systems – but they have auditors. We help them understand those SOX controls, making sure they are followed so that they’re getting the best practices from the industry and can help grow their bottom line and their business. Now that we are in this remote working world, these companies don’t have to hire directly in that area, they can go international, if they have the budget, and they can go remote with more talent. And use of a project-based ERP system helps them not have to be tied to travel. They can manage their projects remotely.

I’ve had a client who showed a large increase in cost and found they had duplicate entries. The had no financial controls or a way to track project entries. They needed more visibility to their job cost – putting it in categories – showing what they have already paid and what they have not recorded. With our Project 360, we gave them the ability to see what has been paid and what has not. This helps them optimize profitability and visibility into their project and determine the margin.

Q: What are key differences between out of the box finance in Microsoft Dynamics 365 and our SIS Construct 365 PCM?

A: From a project manager standpoint, with out of the box Dynamics 365, users are not getting access to construction project-based solutions and accounting controls that can maximize shareholder profitability for these construction companies.

For companies who do have D365 project accounting, our IP solution handles all financial processes, including complex rate structures, related to project and field service operations as well as procurement which is critical to customers who drive fixed fee projects. SIS Construct 365 handles complex billing and follows Construction Standards Institute (CSI) guidelines for standard code setup.

In one instance a client who turned on standard Dynamics 365 Finance and came back to us because our PCM solution met their business needs and they needed more guidance around construction financial management and accounting. Part of our success comes from hiring employees who know construction and who came from construction companies.

Q: What challenges do finance managers in construction face that others do not?

A: The challenges they face are being able to manage the financials for the jobs, including:

  • Visibility to what details make up profitability, overall and by project
  • Reporting for project managers
  • Understanding project financial status
  • Understanding what invoices are open for which projects
  • Tracking the profitability for each project
  • Being able to manage the financials for all projects at one time (which is quite a lot in the construction industry)
  • The accounting treatment for fixed price projects vs time and material projects

This is where SIS Project Cost Management gives construction users a way to manage that one stop shop – everything is where they need it to be. There is now one place to pull reports, and this reduces the stress of trying to build a manual P&L which gives them a better environment to manage projects. PCM for construction gives them a way to manage cost and jobs and aging based on a project – more visibility.

Ultimately, when it comes to Microsoft Dynamics 365, users can learn D365 from any financial system they are on today. They would be teaching themselves new steps even though like we said earlier, “every journal entry has a debit and a credit.”

THESIS Statement: Construction finance involves the use of solutions designed for commercial construction enterprises that support management of the projects, interactions with the field, and support of complex accounting and billing processes for these projects.

Construction finance accountants must have a financial system that supports not only their standard financial processes, but also their project financial processes, which is why SIS Construct 365 is essential for any construction company.

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Enterprise Asset Management
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ERP Implementation Projects
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Construction Finance
Chelsey Stevens
ERP Project Managers
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Construction ERP Pain Points
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Women in Construction and Why it Matters – to Everyone
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On-Premise, and Other Construction ERP Insights
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Construction ERP Visibility
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Changes in Construction Technology
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