Keeping track of material values in construction has specific industry features. Typical accounting systems do not take into account these features of record keeping and write-off of materials for completed work takes a lot of time for communication between accounting services, estimating department, supply, materially responsible persons on the construction site and storekeepers.
Usually, when setting up company`s material accounting, the accountant faces such problems as:
● not getting receipt documents on time;● the actual receipt of materials and the one stated in the invoices may differ in terms of quantity, product range and cost;● the names of the resources of the estimate may differ significantly from the names that the supplier indicates in the documents, which greatly complicates the work of selecting materials for write-off;● the write-off of the actually spent materials and the established norms of the cost of the work in the estimate differ not only in terms of nomenclature and quantity, but also in units of measurement;● it is almost impossible to obtain operational information on the remaining materials, which often leads to a delay in the supply of materials to construction sites, which in turn affects the observance of work deadlines;● full or partial transfer of work materials to subcontractors, control of volumes and prices of materials for work performance;● everyone keeps their records (the storekeeper, the materially responsible person on the site, the accountant) and has "their own truth", and it sometimes takes a long time to get to the truth etc.
The solution to all problems lies in two planes: administrative setting of business processes and automation of accounting and business processes.

How to keep records of materials in construction

The full cycle of planning and keeping track of building materials includes planning the need for material resources for the project, the process of closing needs and purchasing materials, the process of accounting for stocks and writing off materials for the performance of work according to planned norms. And also the following control processes:
● material needs - procurement within the plan,● the rate of consumption of materials for work - actual costs by quantity and value,● delivery of materials to construction sites on time,● control of transferred materials to ensure subcontractors according to standards and prices.
The main task of setting up business processes at the company is to make the materially responsible person (hereinafter MRO) really responsible for the material values that he accounts for.
All the processes described above are automated in the program for accounting for materials in construction - Dedal Construction Project Management Software (Dedal CPMS).
In the methodology of our software, the terms material resources and nomenclature are split. These are different directories located in different areas of influence: one in the estimate department, the other in the supply and accounting department.
Material resources is what is used in project planning and operational accounting of material resources (line staff level).Nomenclature are names of materials used in management and regulated accounting.

These two directories interact with each other using a table of correspondences between resources and nomenclature. With the help of saved correspondences and the available display of planned write-off of resources, the process of writing off materials according to acts is significantly optimized/simplified.
The Dedal CPMS product concept uses the following two control points of material expenses:
● Costs of material resources is the actual use of materials on the construction site and the display of operations in the accounting system by line personnel in terms of resources.● Write-off of materials in construction is a write-off of materials in management and/or regulated accounting, reflection of write-off in the accounting system by accounting in terms of nomenclature.
Depending on the processes that were implemented in the company earlier, it is possible to choose one of three options for accounting of materials in the construction organization in the system (and different options are possible in different projects):
● Simplified;● Full;● End-to-end.
Simplified accounting of material resources provides:● planned rationing of resources for project work,● expense of resources during actuation of works and write-off of the nomenclature under resources.
So only the norms of resource consumption during the execution of works are indicated.
During actuation of works, balances of the nomenclature are written off according to the norms of resources. Balances of the nomenclature are downloaded from an excel file based on the data of management or regulated accounting, which is maintained in another accounting system.

Full accounting of materials in construction involves a full cycle of managing resources from planning - purchasing - accounting to writing off resources from accounting for project costs. So accounting provides such functions as:
● formation of material needs for the project,● receiving an order from the construction site, ordering materials from suppliers,● arrival and return of materials,● moving between warehouses,● consumption of materials during actuation of works not only according to cost norms, but also according to the remaining resources in warehouses.

End-to-end accounting of construction materials provides not only full management of resources, but also full integration with the accounting system, including the exchange of such documents as Orders to suppliers, which are formed according to the resource information of the project or according to Internal orders from the construction site, movements and expenses-write-offs during operational display performance of works and write-off during actuation of works.

When implementing software products, all services record the results of their work in the system, so the main principle of implementing ERP class systems is fulfilled - information is entered into the system at the places of its origin, then the main problems are solved, such as obtaining reliable, operational, transparent, controlled information, which means the following:● obtaining reliable information is information that is consolidated in one place and all participants in the chain of planning - deliveries - write-offs use the same data, and do not have their own unique (unique - because everyone has their own data) excel at each step, with the appropriate delimitation access to data;● obtaining operational information is the entry of data day by day, in the places where this information appears, by those persons who are responsible for this information;● obtaining transparent information - available to all users with appropriate access, at any time, without the need to ask someone to provide such information, the ability to track the entire chain from order to write-off;● receiving controlled information - all actions are recorded in the system according to the time of fixation, therefore excuses such as "I did not have information, or it was in a different form" no longer work, all entered information can be monitored by the time of entry, by the user who entered the data, compare changed data between each other.
When choosing the Full accounting of materials in construction, the following business process is implemented in the system:
1. Formation of the need for material resources for the project as a whole. The Estimating department prepares an estimate for the project. The allocated work in the period is distributed by the Project Manager or the PTD Department in terms of material needs in resources, in proportion to the volume of work that must be performed in the period.
The need in terms of the calendar plan changes in volume when the project changes (replanning, new works, other volumes of work, etc.), so the need for materials is fixed by documents that are transferred to the supply department. The need can be transferred to a part of the project or in full. When transferring the need for materials in full, all subsequent needs are recorded as changes to the primary one. In this case, the Supply Department always has the most complete operational information, so it makes much fewer assumptions, which in turn minimizes overspends. And an additional bonus is a clear demarcation of the area of responsibility.
The need for materials is formed by the PTD Department in material resources, and it is the PTD Department that administers the Resources directory.
2. The Supply department selects a supplier of materials and concludes supply contracts, forms a supply order upon receipt of invoices for payment. Administration of the Nomenclature directory is also under the responsibility of the Supply Department.
3. Financially responsible person or FRP (storekeeper, foreman, manager of the construction site) on the construction site or in the warehouse enters the arrival of material values on the basis of the order - the invoice entered by the Supply Department. Data on the receipt of materials are entered on the day they were actually delivered, that is, promptly. Accounting only confirms the correctness of the entered data, the date of delivery according to accounting (it may differ), the availability of original documents for delivery, and such an operation is carried out by Accounting at a convenient time, that is, not promptly.
4. The consumption of material values is carried out when the completed volumes of work are reflected, the FRP forms the consumption of materials according to the norms. This operation should be carried out every day or at least once a week. If less often, then the information can no longer be considered operational.
5. Materials are written off by the Estimating Department or the PTD Department or the Operations Department once a month after confirmation of the completed works. Accounting only confirms the correctness of entered data, the availability of original documents, and Accounting carries out such an operation at a convenient time, that is, not promptly.
With such a logic of the business process, Accounting has the function of audit and control, as it should be. All operations are carried out by specialists, each at his workplace and only in his area of responsibility. Such an organization allows receiving operational and accessible information and quickly reacting to it, so communication chains between departments are significantly shortened, which frees up a lot of time. And most importantly, everything is recorded and documented, which significantly increases the level of responsibility of everyone in their place, and reduces the possibility of shifting responsibility to management.
Finally, here's some advice: if you (the management) want to pay wages for the result, and not for the process, you need automation of the company's key business processes.For a free consultation on construction company automation, fill out the web form on this page or call us. We will be happy to help!We also recommend that you read other useful information on our website - the article "How to write off materials in construction".