Solutions based on Microsoft Dynamics NAV for property developers
Property development industry experienced a significant drop during the economic recession. This has happened to properties for commercial use as well as properties to residential housing. Despite that, developers can now use this "time out" to automate and streamline existing processes and enhance their competitiveness to be ready when industry recovers. Unfortunately, current market does not offer many software solutions especially software offering different levels processing quality and functional specialization. Let's imagine an interesting industry solution with great ambitions based on the Microsoft Dynamics platform.
Real Estate Development (RED Online) - that is the name of the new vertical solution developed by Essence International, one of the leading suppliers of Microsoft Dynamics NAV in Czech and Slovak Republic. Essence operates on ERP since year 2000.
Company was originally founded as a development branch of British company. Essence provided mainly programming services. At the beginning all the services were exported abroad. The company has entered Czech market in 2003. Currently 70% of activities are realized in Czech Republic and 30% abroad.Why vertical solution
The original focus company to the software development also affected its further direction. Essence is known for an excellent product knowledge and related technologies. There is less emphasizing on business and marketing. But slower progress in the commercial activities sector is balanced out by the quality of domestic and foreign projects. To give just few examples of the successful implementation of NAV: Baumatic, which also included tailor-made solutions to managed warehouse, Adast, a leading Czech manufacturer of printing machines, or international implementation project for one of the world's largest music publisher, EMI.
Experience gained during international and domestic projects, was capitalized in the development of vertical solution. Our company management sees the vertical solution as an essential feature of corporate strategy. "Without a specializing on selected verticals, the IT companies will not have such market share as in the past. To build long-term relationship with customers it is important to have detailed understanding of their requirements, speak their language and offer them modifications of the original solution which will respect the trends in their industry, "justifies the need for vertical solution Martin Borusík, Sales Director.
Two directions of development and the beginning of the RED Online project
Essence offers the vertical solution for project-oriented companies - typically for companies doing business in IT, marketing, service and manufacturing companies. The manufacturing companies benefit from detailed planning features, serial number management and unit production management based on an extensive multi-level bill of materials which are then used to assemble the final product which contains tens of thousands of components (such as printing machine manufactured by Adast). On top of vertical solutions our company can also offer business intelligence system based on TARGIT Business Intelligence Suite. Even though the Targit BI solution is not very known in the Czech Republic, it is one of the top European products with more than 3 100 customers.
The second branch became the design, building and financing of properties for commercial use or building of living spaces - in other words, property development. The development of the developer vertical solution became in 2005 by co-operation with Sekyra Group Company, for which we developed specialized finance management system. On top of that Essence has custom developed modules for centralization of the management accounts, CRM, financial information consolidation with customer's 80 former subsidiaries, replication module and others.
(For a more details, please see the picture)
(The picture shows the RED Online solutions based on Microsoft Dynamics NAV - a list of units and unit card.)
After the experience with the Sekyra Group, Essence was asked to design a complex solution for the company Crestyl, which is operating in 15 locations with investment more than one billion Euro. This challenging project was successfully delivered. The success was also thanks to the contribution from other clients such as Avia, a member of Odien Group, or companies for which also firms, which Essence developed some less specialized modules. It's mainly the re-use of already developed functionality, which was consolidated and standardized in NAV version 5.
The replication module allows select any database and table and set a replication model for any NAV company. This generalized technology was used in Property Developers vertical solution, but it was also successfully used by other companies, such as My Dva Holding, manufacturing and marketing company providing interior equipment for development projects or European Data Project Company - who manufacture and rent slot machines.
Specifics of the Property Development business
Business in the property development is not possible without the founding of individual companies for individual projects, merging and liquidating. These activities are necessary in each developer company. The whole process is started by a search of opportunities that occur at the parent company. After such an opportunity is found and evaluated prospect investors are contacted. The parent company creates a specific project for the subsidiary to ensure transparency of all financial flows and ownership structures, particularly to banks, shareholders and other institutions involved in its funding.
(For a more details, please see the picture)
(The picture shows a report which is used by managers and report for construction workers detailed for each department. Each line can be expanded to see more details. The upper part contains costs according to chapters in the budget; the lower part contains statistics and indicators for senior managers.)
Already during the construction the developer is looking for future tenants. After the completion the object is rented to these tenants or is sold to new owners. Developers usually build commercial objects to be sold as complete functional unit. In order to optimize tax costs, whole subsidiary company is sold together with the property. During the construction of residential buildings the property developer is also selling the residential units (dwellings, garages, basements, etc.). After completion, acceptance and handover of the building housing the original developer still owns the subsidiary as an "empty shell". This is then settled to the investors - as shares, guaranteed income, etc. After some time the subsidiary company is liquidated or is acquired by the parent company.
Why is replication so important for developers
It is apparent from the explanation above that the replication is an important tool for the developer which is used to manage and consolidate the data base in the complex and frequently modified structure of the entities. From a technological point of view, the replicated databases make a distributed database system. If any change occurs in any database table, it is captured, saved locally and then forwarded for consolidation to the central database. Replication provides users with fast local access to shared data. By creating an alternative access this system also increases the availability of the data.
Information system with replication allows developers to create in the database any number of parent companies and work with their master data. The parent company can then establish a subsidiary, which is then used for individual development projects.
For example: we have to create a parent company in the Czech Republic and the Slovak Republic and for each of them set up a subsidiary company - so that the individual development project's database tables containing customers, suppliers and account setup can be centrally managed by parent company. The set-up of any new company means just a simple operation which takes just few minutes.
Why implement a central information system
Users of property developer application can be described as highly competitive, which is manifested mainly in the very specific requirements during design of the custom solution. The problems are fragmented agendas, where the individual departments create their own database and data structure, which is specific to each department.
This is often causing errors in data processing. It also leads to time-consuming processing of reports (banks, shareholders, management), because it is necessary to process and store a department specific data. Another area that has to be covered by the system is administration, authorization, and archiving of the documents. The central information system should also support all business processes.
(For a more detailed look, please see the picture)
(In the picture is a report for the sales department and managers, which shows the status of units, their individual state and the percentage of the total grouped by price, area and number of units.)
The main objective of the deployment professional solution is to consolidate and centralize data and to introduce reporting so that management can on line monitor compliance with budgets, cash flow and the risks to the return on investment.
The basic building blocks of the Red Online
The RED online vertical solution consists of a basic part (Microsoft Dynamics NAV), which contains modules for the management of common accounting packages and project management. Other optional components are the document management system (DMS), the reservation system (especially for booking housing units), and the data interface (for external sales and marketing Website, etc.).
The basic building blocks of the Project and other agendas a project card and budget functionality. The project and simplified budget are defined in parent company during acquisition stage, when subsidiary company not yet exists. If the project is evaluated as a viable, subsidiary company is defined. System allows evaluate the Project at any time and compare results of individuals Project stages.
(For a more detailed look, please see the picture)
(In the picture is a report for the sales department and managers, showing sales by booking date by individual buildings and type of units (apartments, parking spaces, basements, etc.)
Authorization and document management
Because during implementation of property development project are involved large amounts of money, it is necessary to manage the actual costs according to set budgets, which would not be possible without document authorization and budget control systems. Any amendment to the budget requires proper authorization, and depending on the extent of change (change in chapter, financial impact on the chapter, the impact on the budget for the whole project). If the status of the project is changed or if other selected events occur the budget is automatically archived. This allows to ompare budget with any other version, or compares two archived versions with one another.
To the developer it is necessary to have a document management system, especially for contracts registration. DMS (Document Management System) is a solution offering complete functionality to cover document receipt, storage and managed access to electronic documents. The objective of the DMS is to provide immediate access to the relevant documents, regardless of their location and format. They allow not only the quick access to the documents, but also to ensure their safety due to the precise definition of access rights defined for each individual user. They provide an organized, transparent and efficient management of all documents in your organization. Integral part of the DMS system is the implementation of approval processes and link between document management and the financial part of the solution. All documents that are received into the company must be converted into electronic form. Subsequently, they are flowing trough company according to predefined authorization procedures. Accounting documents (invoices, etc.) are automatically transferred and loaded in the agenda, where they wait for posting.
Cash flow management, sales plan
System contains a fully automatic calculation of cash flow of individual projects and aggregate cash flows across all companies in the group. This can be used for example to establish the financial commitment of the bank across all projects, including modelling of the future state. On the revenue side, is the calculation of cash flow preceded by calculation of the sales plan. Based on the defined parameters for each milestone system calculates the sales plan. The plan is then included in the cash flow modelling. System offers the ability to create various versions of sales and cash flow plans. All costs and revenues can be planned by assigned arbitrarily defined milestones, where based on the actual day meeting all data in the system, including cash flow, is updated.
Sales cycle and the reservation web site
If a development project is ready and approved then it is carried out. The information system should provide full support to the sales purchase processes. The sales process itself must be supported by the functionality of the system covering all stages of the business cycle. For residential housing, this cycle looks as follow.
(For a more detailed look, please see the picture)
(The picture is a preview of the reservation web page - sales representatives, real estate agents, sales department, etc. - on top is the filter options, in the window is the listing of the units specified by the filter.)
The task of the sales department is to find clients who purchase the housing units. If the client is interested, then the unit is reserved in the system. Subsequently, a pro forma invoice covering booking fee is issued, the contract is drawn up and registered. After the booking fee is paid, it is highly probable that the client will purchase the housing unit. The system can then monitor the specific parameters of the letters of intent, payment schedule, billing and other entities and sub processes.
The sales department is also responsible for providing of an overview of the changes required by the clients and for complaint management. Based on the payment calendar, and after a particular milestone, the system automatically generates documents (Invoices for clients), or records receivables. Reminders can be automatically sent to the responsible salesperson or directly to the customer. This procedure ensures that each customer is on time notified about the documents issued and that the responsible salesperson is notified about any receivables. External sales representatives and estate agents can use reservation web site, fully integrated in the system. The web site allows users to see the state of housing units, or make new reservations. The system also ensures that the unit has been sold only once.
Technological aspects of the RED Online
Solution RED Online uses a standard functionality of Microsoft Dynamics NAV, as well as modules that have been specially developed. All modules are fully integrated into a single unit, making it possible automatically to generate a pro-forma invoice or invoices for the final bill, including the quantification of land ownership, according to a statement from the owners. All documents created from primary agendas are then part of the standard accounting in Microsoft Dynamics NAV.
Document Management System is based on Microsoft SharePoint Services. Authorization components and reservation site are based on the Microsoft.NET.
Microsoft SQL Server is used as a database platform for the solution.
Reporting is developed using SQL Reporting Services and we have prepared about forty final reports (sales of commercial objects, residential projects, sales reporting, project reporting, budget monitoring, compare versions of budgets, cash flow, etc.). We have also prepared data warehouse with data cubes, so the users can so the users can create their own reports and views. These views can be then presented in as pivot tables in MS Excel or can be viewed in specialized BI front end solution like for example TARGIT.
Peter Sodomka is chairman of the Center for Information Systems Research, Associate Professor at the Faculty of Management and Economics UTB in Zlin and CEO of consulting company CVIS Consulting.
Hana Klcova is the Chief Editor of Portal CVIS.cz, Lecturer at the Faculty of Management and Economics UTB and analyst of consulting company CVIS Consulting.