As the saying goes, the only constant is change—and that’s particularly true in the construction industry. This makes the data accuracy specific to jobs and resources extremely important. Worker shortages, global supply chain disruptions, and price increases are just some of the many challenges construction companies face today. Because of this, proper data management and agile planning are necessities for construction teams seeking to meet their business goals and remain financially strong.
The pandemic taught construction companies the importance of scenario planning to best address the constant and rapid change that occurs in the industry. Yet many organizations continue to be hindered by cumbersome and inconsistent spreadsheets that are, unfortunately, the basis for critical business decision-making. This slow and inefficient process makes scenario planning quite difficult. Manual financial planning and analysis processes are time-intensive, often taking days or weeks to determine budgets, forecasts, and month-end close. Further, they do not allow for multiple iterations of forecasting and analysis. This means that once market conditions change after budgets and forecasts are set, construction companies often are at a loss to where they are headed and/or how they stand financially.
CONSOLIDATION IS KEY
For construction companies and contractors, information is typically scattered across different groups and departments within the organization. This vital data can exist in individual computers, network drives, mobile devices, and even in boxes locked up in storage rooms, making the process of consolidating information important for specific projects and the overall outcome of the business quite difficult to manage. To make the best possible use of this disparate and siloed data, executives and teams need a more unified and automated system.
At the end of the day, both time and money are wasted when construction companies are looking across multiple departments for missing data. Not to mention the great potential for mistakes and inaccuracies from manual entries, which can lead to financial losses. By consolidating that data into one central location, organizations can quickly access the data they need for generating reports and timely decision making and feel confident in their final outcome.
BETTER FINANCIAL PLANNING
By digitizing the FP&A process through technology tools like corporate performance management (CPM) software, construction companies are empowered with the most recent data, automatically pulled from different sources into one centralized dashboard. CPM enables construction teams to quickly consolidate their data without the inconsistencies of spreadsheets, while benefiting from real-time insights that help them better understand the story behind their data. This helps construction teams know more about the status of their materials, timelines, and available cash, so they can make smart decisions no matter what happens next. CPM gives construction teams the agility they need to run scenarios based on common industry challenges, make quick decisions, and reforecast to maximize profits and achieve long-term goals.
IMPROVE MITIGATING RISK
Another advantage to modernizing the FP&A process is the vast improvement in mitigating risk. Construction teams often suffer when Excel files are passed around to different stakeholders, resulting in broken formulas, errors, and conflicting versions of the truth. For instance, numbers input by the interior design team could be up to date, while initial information added by the contracting team may be weeks old. This results in inaccuracies, confusion, and sometimes direct financial loss. In contrast, CPM solutions give teams across the organization a holistic view of the data, resulting in greater efficiency and more reliable and confident decision-making.
REAL-WORLD EXAMPLE
A great example of this is Colorado-based Encore Electric, which recently standardized its reporting process by switching from an Excel spreadsheet-based program to CPM software from Prophix. By switching to Prophix CPM software, Encore automated its budgeting process and arranged for all of its data to live in a cloud-based system. With Prophix’s standardized templates and workflows, it now takes Encore just 30 minutes to create a new budget and add in each stakeholders’ data inputs. Automating this process has saved the company over 1,800 hours in the budgeting process.
Encore Electric gained the added visibility of key performance indicators (KPIs) provided by the Prophix CPM solution. With the finance team now able to easily capture a clear picture of the status of Accounts Receivables, the company is armed with the information it needs to take action—improving its days sales outstanding (DSO) by 40 days. This has far-reaching benefits in the construction business, from enhancing working capital, to creating greater flexibility with short-term capital decisions—reducing the company’s need to borrow cash in a time when interest rates are on the rise.
FP&A PROCESS AGILITY
For contractors and construction teams, maximum agility in the FP&A process is incredibly important. Companies in this industry must be especially prepared to pivot their operations, adapting to changing market conditions to be proactive instead of reactive. Historically, the construction industry has lagged behind others when it came to technology adoption. But construction companies and contractors now have the ability to centralize their data, track trends, and make use of “historicals” to create the smoothest reporting and projections possible. Businesses like Encore Electric are benefiting from moving beyond cumbersome paper-based tools and leaning into agile technology-enabled planning tools to make the most of data.
CLOSING THOUGHT
Businesses today, no matter what industry they are in, rely on accurate and consolidated real-time data to make timely business decisions. For today’s construction companies, where the only constant they know is change, tapping into agile data management and CPM software tools is key to be able to scale, grow, and navigate their business, within even the most volatile markets.
About the Author:
Daniel Fellows serves as a product marketing manager for Prophix, a global leader in mid-market CPM software. For more, visit www.prophix.com.
Modern Contractor Solutions, May 2022
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