Outside the world of commercial cleaning, companies have, for many years, invested in ERP (Enterprise Resource Planning) software to help manage their businesses more effectively and costefficiently. In generic terms, ERP is a single, integrated and, yet, modular software system that manages every business process within a company. Each process, e.g. payroll, HR, accounts, invoicing, purchasing, sales, shares a single database of customers, staff, suppliers etc. In simple terms, ERP systems include the following features:
• An integrated system
• Operates in (or near) real time
• A common database that supports all the applications
• A workflow engine to automate decisionmaking and improve productivity
• A consistent look and feel across modules to streamline training and improve usability.
The main benefits are that they reduce systems proliferation, avoid duplication, eliminate errors, ensure consistency and generally save a lot of administration time and resource. On a global scale, well-known examples of this software are SAP, Oracle, NetSuite, systems that are expensive to implement.
Do such systems work in commercial cleaning?
For many years, the answer was no. As all contractors are aware, cleaning is a very labour-intensive industry. It is also unique in the way that a contractor's business involves the management of hundreds of separate contracts, each of which is different from the others in terms of the service provided - in other words levels of supervision, staff deployed, pay rates, equipment used, products supplied, one-off work and so on. This complexity requires a heavy administrative resource, but often without the level of profitability to fund it.
Although investment in ERP software was always an attractive proposition for cleaning contractors, the challenges were firstly that contractors were often too small as well as being, ironically, insufficiently profitable to consider investing in it; and secondly, they did not have adequate internal resource, either from a finance or IT perspective, to manage the process of implementation themselves.
Back in 2010 it is fair to say that despite the industry crying out for affordable ERP software that could allow contractors to manage costs and deliver better customer service, contractors shied away from purchasing it. Then the market changed. The UK cleaning industry, which by international standards is very well-developed, is fortunate that in the early 2010s two competing software developers saw a gap in the market and started building ERP systems specifically for commercial cleaning. Nearly ten years later, following a sustained period of technological development and product promotion, around 70 per cent of the top two hundred UK cleaning contractors as measured by revenue, now use cleaning-specific ERP software.
Why has integrated software become so popular?
Firstly, it is important to note that investment in ERP software is a completely different business decision to simply purchasing lots of different, off-the-shelf apps to manage payroll, time and attendance, accounts, purchasing, quality auditing and so on, none of which ‘talk to each other’. In this scenario, the benefits of integrated software are not available for two main reasons. Firstly, basic data about staff, customer contracts and suppliers must be keyed into each system individually in order for them to function; for example a customer location where staff work, supplies are delivered, invoices are sent and quality audits take place must be entered to each system; and secondly, any meaningful analysis of the business, e.g. profit and loss by customer, is virtually impossible without exporting data between the different systems, or on to spreadsheets in order to consolidate data into management information.
Once this difference is understood, there are five key reasons why integrated software has become so popular.
1. Tighter financial control over key budgets such as labour (typically equivalent to 80 per cent plus of a contractor’s total revenue), with field managers often benefiting from online, real time access to timesheets.
2. More streamlined administration of billing, with all work being invoiced correctly and promptly and nothing overlooked.
3. The introduction of an internal ‘workflow’ system that automatically distributes requests for action or authorisation and alerts users when their attention is required to move a task to the next stage – a feature that dramatically speeds up the decision making and approvals process. Onboarding of new staff is a prime example of how integrated software adds value.
4. Better understanding of expenditure and profitability at different levels of the business, e.g. site, customer, area, region.
5. An increasing demand from customers to access regular compliance and performance data in the form of KPIs across areas such as staff training, quality auditing, attendance and health and safety, something that has always been difficult for contractors to create. Describing his business before purchasing integrated ERP software, Jonathan Smith, MD of Office and General Cleaning said, “It was like driving through fog with the headlights turned off”.
Does investment in an integrated system makes financial sense?
Whereas, historically, growth in revenue was invariably accompanied by growth in administration and contract management costs – now, with integrated software, businesses are confidently taking on new contracts and increasing their net profit margin percentage by increasing sales but maintaining overhead at the same level. The alternative is just as clear. Persisting with systems that at worst don’t talk to each other, or at best are crudely ‘bolted together’ will possibly save money in the short term, but will never realise the longer-term financial benefits that integration is designed to achieve.
Stephen MacDonald is the owner of Stephen MacDonald Associates in the UK - an entity that helps companies within the cleaning industry plan and deliver growth. He was a registered board director of a £20m turnover UK cleaning contractor specialising in business development, marketing, public relations and quality management.