The construction industry has over 7 million employees and creates over $1.3 trillion worth of structures annually, according to the Associated General Contractors of America, making the industry a significant contributor to the U.S. economy. The industry is directly affected by the economic environment but simultaneously has the ability to significantly impact it through its job creation capabilities and links to other economic sectors. It is clear that the COVID pandemic made it a very volatile year for the construction industry.
COVID’s impact on the industry:
- Abrupt shut down of project sites
- Reduced workforce due to illness or quarantine requirements
- Slowed production cycles causing delayed completion dates
- Immediate need for remote work capabilities
- Supply chain disruptions
- Decreased margins forcing reductions in workforce
This is only a small list of the major impact the pandemic has had on the industry. In order to make a full recovery, organizations must begin by assessing their current financial strength and building an effective strategic plan moving forward. This plan should incorporate strategies that take every negative impact stated above into consideration.
Earlier this month, Tim Cummins from Aronson LLC, in collaboration with Neuberger & Company and HMS Insurance Associates, released a Case Study that examined the Impact of COVID-19 on the Construction Industry. The case study found that 47.3% of construction companies stated that their estimating/pre-construction departments remained about the same. In fact, most contractors workflow remained steady throughout the industry. It is therefore critical that efficient technologies be utilized in order to handle the organization’s steady workload.
According to Tim Cummins, in order to stay profitable during hard times, organizations must manage cash flows by accelerating cash receipts and decelerating cash disbursements. They must obtain credit which makes timely financial statement management and reporting crucial. Most importantly, they must continually monitor cash and evaluate strategies, especially during and after the pandemic. For additional recommendations, please see the case study linked here.
Analyzing and implementing software and technologies that take all of the above into consideration can set any organization up for continued success.
Efficient technologies as part of strategic plans can meet all of the above needs and more:
- Timely reporting of key performance indicators (KPIs) allows management to make managerial decisions based on current data and not outdated information.
- Cash flow reporting that is automatically available to executive management can make it easier to remain profitable.
- Automated and immediate communications to customers on accounts receivable (AR) billings decreases days sales outstanding (DSO).
- The longer an invoice remains on the AR aging the lower the likelihood of collection.
- Automated communications to accounts payable (AP) personnel can notify them of upcoming discounts.
- Advanced reporting capabilities allows construction companies to pin point exactly what scopes are causing overbudget situations and project delays.
- Increased employee productivity, morale, and retention are benefits of up to date software and employees that have been through proper training within their functional role.
- Budgeting and forecasting tools allows management not only to forecast future revenues but to plan workforce needs accordingly.
- Cost reductions can be seen from the added management and analysis of timely information as well as the reduced cost of duplicate data entry and manual reporting processes that can be performed by efficient technologies.
- Timely project management reporting and distribution allows project managers to properly manage job cost information posted to their projects. This can be done through automated software reporting capabilities.
- Minimize risk from uninsured subcontractors by utilizing automated notifications to external parties.
- Workforce connectivity provided by many softwares along with collaboration tools in a now greater remote workforce.
- Paperless/automated environments streamline processes and reduce the need for documents to be physically delivered.
Investing in the right technologies for the organization is critical for the post COVID environment. This will allow companies to understand the current health of their organizations and achieve their strategic goals and initiatives. The timeliness and quality of information, as well as efficient and streamlined processes that can be obtained through the right technologies, allows executive management and owners to set their organizations up for success!