Construct a Better Budget With Cross-Company Planning

Decipher insights captured in data and processes to help improve the way the entire business operates.
By Eric Newton
July 13, 2020

It can be extremely challenging for organizations to accurately and safely budget, plan, and forecast during uncertain times. This is especially true for construction companies considering their complex business model, dependent on multiple projects dispersed among various contractors on differing estimated timelines.

As experienced with COVID-19, market conditions can change overnight, directly impacting a contractor’s revenue planning, costs, production, headcount and overall business performance. With mandatory closures due to the pandemic, this meant delays in material, remobilization, postponement or even cancellation of jobs, liquidated damages and more. As a result, the construction management team and finance team have found themselves under tremendous pressure to manage the business' financial implications, weather the storm and position the company for continued success in a progressively challenging environment.

What is Cross-Company Planning?

Fittingly, construction finance executives around the globe are revisiting their budgets as well as planning and forecasting for every possible “what if?” scenario to help ensure business continuity and minimize business risk during these unprecedented times. But it’s increasingly evident that even with the best traditional process management in place, contractors cannot completely mitigate every deleterious scenario. That’s where cross-company planning comes in.

CCP is a process methodology that provides an integrated approach to business planning, budgeting and forecasting for finance, sales, marketing, operations and HR. Integrated cross-company processes can help decision-makers in the construction industry horizontally align projected costs and needs across projects, jobs, and work orders with greater flexibility and ease. The flat process ensures that all stakeholders are working in tandem to be as efficient as possible.

Reactive vs. Proactive

Even small changes can have tremendous consequences. And those significant consequences can become impossible to predict the longer time goes by. During this unpredictable timeline, contractors consistently rush to triage current and developing situations and re-plan to best weather changes. This ordinary course is typically reactive in nature, and by the time most contractors react, there has already been a financial impact. But what if the company had a more holistic financial picture that was amplified by interdepartmental insights?

Utilizing CCP through robust corporate performance management software platform enables financial teams to quickly and easily leverage data mined across all other departments (i.e., finance, estimating, operations, sales, HR) to make more proactive and informed decisions when executing an effective forward-thinking business plan. This agile CCP model allows decisive stakeholders to collaborate faster and more effectively, and ultimately react to changing conditions faster and often before calamity arises.

Static and Siloed vs. Agile and Aligned

In addition to providing the C-suite with information quickly, CCP encourages collaboration among teams, weaving people, data and planning together throughout the organization (e.g., across departments, business/operating units and geographic locations). Focusing on organizational prioritization, CPM provides a single view of all departmental planning, removing the complexity of siloed data.

This collaboration empowers chief financial officers, controllers and management with data that is aligned cross-departmentally and, consequently, more actionable when an erratic construction market has made it even more valuable. The robust CCP process runs in contrast to rudimentary planning, which is typically limited to budgeting and is usually conducted in a finance department under the constraints of partial, expired and/or error-ridden data.

The jobs that contractors are currently working on were bid months, if not years ago. As a result, none of the estimators who bid these jobs included a COVID factor in them. Currently contractors are working to re-forecast all of their jobs and with cash flow being tight, jobs have to be forecast on a monthly basis rather than just an overall forecast cost to complete. Not only does the cost have to be forecast, but also the cash flows impacted by these costs.

Dynamic Timelines and Benefits

CCP provides finance departments with the ability to conduct long-term financial, operational and strategic planning all at once; it also enables planning and budgeting at a higher level of granularity. For example, CCP allows for a higher frequency of preparation (e.g., weekly or daily) and extends the flexibility of planning to the employee, project, customer, vendor or product. As a result, CFOs have a more accurate, timely and complete picture of their decisions that can positively impact business performance, and avoid risk. The process empowers them to better evaluate short-term and long-term activities and plans.

CCP provides a plethora of other benefits as well, including more cohesive departmental alignment, which unlocks a more comprehensive understanding of performance and profit drivers. This understanding then facilitates better balance sales and operations planning for profitability and provides more fruitful answers to “what if?” scenarios. Executing CCP across a construction organization reduces business risk while allowing decision-makers to deliver nimble and more accurate big-picture planning.

CCP can decipher insights captured in company data and planning processes to help improve the way the entire business operates. And with these powerful tools in hand, finance professionals can fully share their department’s insights to help construction organizations evolve, innovate and remain fiscally competitive even in the face of uncertainty and unanticipated market environments such as those created in the wake of COVID-19. The process identifies the activities that will deliver the greatest financial impact across the company. And by extension, it enables finance professionals to ensure that their companies are more profitable, more efficient and more future-ready.

Consider implementing CCP into long-term strategies across all scenarios seen and unforeseen to maximize financial windfall and versatility.

by Eric Newton
Eric Newton is a senior executive with accounting and sales experience, who is passionate about developing strategies and solutions to help customers drive revenue growth. Prior to joining Prophix, Eric worked as a Senior Vice President at Viewpoint, a leading technology solutions provider serving the construction industry. Prophix is a leader in Corporate Performance, delivering technologies primarily to the midmarket.

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