by Kenny Ingram
With inflation increasing costs for construction and engineering (C&E) businesses already operating on low profit margins, rigorous financial control processes become a key focus. The following are four critical steps to economically managing a project beyond the simple accounting systems of yesterday.
It’s not just post pandemic recovery and price fluctuation that is overcomplicating financial planning in construction. Some 72% of contractors face longer project times due to supply chain issues, and 84% highlight higher-than-expected costs. For an industry with an annual productivity growth rate of 1% since 2000, control processes, project execution, and fiscal management are critical.
Solid financial management strategies reinforced by emerging technologies control variables including quality and revenue, as well as meeting client expectations, allowing construction managers to proactively plan advanced projects. Here’s a few simple ways to retake fiscal control:
Project control is more than quantifying figures and progress at each period end; it is predicting final costs, margins, and future requirements to forecast and mitigate risk. By integrating real-time data with predictive analytics, managers can preempt issues to avoid budgetary overruns and delays, improving reliability in the process. Information breeds efficiency.
Limit the Unknown with One View of the Truth
Coordinating business functions, suppliers, and subcontractors are all the responsibility of the project manager, so resources need to pull together simultaneously to keep projects on track. Without an integrated, standardized, and shared approach, resource shortages and reactive firefighting can become the norm, not the exception. A common source of data improves project delivery performance, delivering high-quality, profitable outcomes.
Use Purpose-built Construction Software
Microsoft Excel is no longer trustworthy; 90% of spreadsheets used by construction companies contain errors, and resultantly are unable to effectively manage processes including variation control and contract management. Using multiple disconnected spreadsheets reduces specificity and accuracy, making project monitoring difficult. Instead, dedicated industry-specific software can collate many complex datasets into a reliable, single source of truth.
A Simple System Architecture is Required
With the growth in project complexity, construction managers need to integrate innovative technologies for financial management into existing operation systems. However, adding on different types of software technologies that are incompatible with one another through patchy API integrations can create a complicated web of disconnected tech, reducing the ability to effectively manage systems.
For this reason, a purpose-built, future-proof system architecture that seamlessly integrates different technologies and allows evolution is ideal to guard against disruption from inadequate, archaic systems during future financial digital transformation.
Financial Control is Critical to Successful Projects: Every Step Counts
The steps outlined above present solutions to some of the key pain points in C&E project management, but a granular approach to financial management is key. Ultimately, identifying areas for improvement and making incremental changes to business models by deploying new technology can ensure full control is maintained throughout change management processes, to optimize C&E organizations for on-time, on-budget and high-quality projects.
Kenny Ingram is vice president of C&E at IFS.