Netfunda offers cloud hosted solutions for real estate companies which have been under pressure for some time now. While credit rating agencies and major investment banks have ruled out a repeat of the 2008 subprime crisis, it is a stark truth that the last few quarters have been tough for most real estate companies. The challenges are many fold. Advances from new projects are decelerating and so are collections from running projects. The net effect – increased borrowings with associated interest costs, which are depleting the bottom-line of companies. On the surface, it looks like a macro-economic crisis. 

However, data on the operational level performance of EPC companies shows a high direct proportionality between the project execution lead-time (and delays) with margin erosions and working capital requirements.  Moral of the story is that delays in project executions lead to direct cash outflow in terms of missing materials and on-site expenses. The residual part of the receivables linked to site handover gets delayed.

Netfunda recommends the following prescription for EPC companies. The solution envisaged by us is aimed at improving billing, receivables management and workload allocation for missing designs and corrections.

Management by Turnover: The Biggest Waste

Billing

It has been observed that EPC companies are obsessed with meeting turnover targets on a periodic basis (month, quarter). Different items of a single project have different billing values, and hence in an attempt to show turnover in the short period procurement and design, focus on billing of high value items. These items may not be required immediately and hence leads to situations where a site has lots of inventory for the future, but work gets interrupted because of unavailability of matching parts.

We suggest that billing be done from an automatic billing and subscription management system so as to centralize billing and inventory management. The missing link between billing and monitoring availability of inventory that is required at every phase of the project is of strategic importance. OneClickBill- the cloud hosted automatic billing system from Netfunda Technologies can be used to set buffer stocks of items, set reminders and integrate with Google calendar to streamline material purchases so that work goes on unhindered.

Human Resource Planning

When work on a site comes to a grinding halt due to material unavailability, execution contractors do not assign adequate manpower to that site. On the other hand, site managers are forced to open multiple work fronts to ensure better utilization, and to prevent direct resources from leaving the site. The net impact is slow progress and interruptions on almost every open site module. The trick here is to allocate manpower to project sites depending on the status of work in progress. This calls for coordination between functions of human resources planning and materials planning. Handling separate teams of workforce for different projects, allocating human resources to fresh projects, transferring human resources between projects and coordinating with each team from a single window calls for data centric manpower planning can be done efficiently with Netfunda People- the cloud hosted online human resource management system from Netfunda Technologies.

When projects approach closure and handover, the managerial bandwidth required is very high as there are many issues to be resolved. At the same time, the bulk of the turnover of the project is usually already booked. Consequently, the focus of management in a ‘turnover obsessed’ company shifts to improving billing from other projects even as the sites that are in the final handover stage continue to stay open. Soon, the last 20 percent receivables start to pile up. In most projects, this 20 percent is the gross contribution. After a few years, when companies try to close old projects, official handovers become difficult and write-offs become the only way to exit projects.

Delays in Vendor Inputs

Delays in vendor inputs arising from conflict of day-to-day priorities between the purchase (order placement) and design departments also cause interruptions in design tasks. Pending information inputs from customers adds to the delays. Design departments have to frequently switch either within the modules of a project or across different projects. This accentuates the lead-time, and forces the department to release drawings with conjectures. These drawings ‘flow back’ for corrections and add to the delays. Delays in vendor inputs, coupled with ‘turnover based’ prioritizing of items lead to “prisoner’s dilemma.”

Real Estate Cash Flow

 

Fire Fighting

At the end of a project, it is felt by project managers that a premeditated mindset to execute planning across all stages of the projects will lead to better coordination between departments and optimum utilization of human and material resources. But as a project evolves last minute changes to initial plans become inevitable. Real time communication is required to tweak initial plans to navigate through a VUCA (volatile, uncertain, complex and ambiguous) environment. It becomes more of a fire fighting exercise that is reactive. The consequence again is escalated lead times and overshooting of overhead costs. Netfunda On –Cloud, is a business app builder with strong API compliance. The extraordinarily simple drag drop user app builder can be used by site managers, contractors and the subordinate project staff of EPC companies to build apps and track last minute tweaks to plans effortlessly.  Netfunda On-Cloud from Netfunda Technologies is the cloud app builder that enables all real estate enterprises to execute service functions from cloud hosted solutions with clinical efficiency.

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