Price inflation and supply chain disruption threaten the bottom line for many construction and engineering (C&E) firms, struggling in an industry where profit margins are already low, and increased costs are sparking uncertainty for financial planners. It is clear C&E project and commercial managers need to revise traditional methods of financial control and look beyond simple accounting solutions to overcome these challenges. Project managers need a shift in mindset to proactive fiscal management supported by purpose-built technology—which will ensure construction businesses remain profitable in the face of increasing price fluctuations.

Many construction contractors reported higher than anticipated costs and longer than expected project delays due to ongoing supply chain disruption and price fluctuations in the past year. This adds pressure to an industry already facing low productivity growth rates of only 1% annually for the past 20 years and overall profitability of just 5%. C&E firms must update outmoded methods of accounting and project management to meet the demands of growing project complexity and fiscal instability.

Current management styles are not future-oriented and only serve to manage short-term finance outlooks. This lack of forward planning can leave construction businesses vulnerable to market disruption. Proactive project planning reduces the impact of market shocks, improves business resilience and paves the way for long-term profitability. Construction managers need data-driven control processes and complete visibility over all factors impacting project delivery to revamp financial control.

Here are four steps to achieving proactive fiscal management with innovative practices and construction-specific technologies.

1. Prevention is better than cure: proactive measures offer more than a fiscal band-aid

The C&E industry needs to reexamine traditional approaches to project management and shift from a reactive to a proactive mindset. It is no longer enough to simply add up total outgoings at the end of the month. Project and commercial managers must be able to foresee where project budgets and progress is headed and take pre-emptive action against drawbacks that could cost the business in terms of finances and reputation.

Proactive management can be achieved with the integration of real-time data to provide project managers with a constant flow of information and the use of predictive analytics to foresee potential risks. Better informed projects are more efficient, as greater insight means greater control. Real-time data and predictive analysis equip managers with the best tools and insights to act before it is needed and avoid unexpected delays and budget overruns. This, in turn, improves the reliability of construction projects and could help avoid project crises altogether.

2. Tried and tested workflows make for best practice and best results

The management of complex construction projects requires seamless coordination of many different elements, from materials to subcontractors. These resources must be deployed to the right place at the right time. Failure to coordinate effectively will cause disruption to project progress and create costly delays. Here project managers need standardization and set protocols for all project activities to help simplify the complexity of operations.

The standardization of operations reduces the element of uncertainty, increases the predictability of project delivery, and makes it easier to plan timelines and forecast revenues and profits. It enables improved resource management, especially where supply chain disruption can significantly damage construction project progress. Standardization produces accurate data shared by all team members to create an even and equal view of the truth. This enhanced visibility will provide greater insight over project progress and profits.

3. Limited functionality leads to limited profitability—it’s time to invest in construction-specific software

Excel spreadsheets are an outmoded method of data collection and storage. Given the level of complexity that construction projects have reached, C&E firms need more advanced means of data organization. Spreadsheets offer limited functionality and are prone to data discrepancies due to the human error of manual data input by multiple parties. This results in a staggering 90% of spreadsheets used by construction companies including clinical errors. These disparate and inaccurate spreadsheets reduce visibility over project operations, hindering overall project delivery.

Successful project management and control require accurate and detailed real-time data to facilitate enhanced visibility and predictive analysis. Project monitoring cannot be maintained with multiple disconnected excel spreadsheets. The level of accuracy, visibility and control needed to manage complex construction projects requires a dedicated industry-specific software solution that can collate the many complex data sets involved in the management of largescale and high-stake construction projects into a reliable, single source of truth.

4. Streamline control systems into an integrated digital control center

Construction projects have become increasingly complex, requiring new modes of technology to keep up with this process of change. However, to make up for the lack of advanced functionality of existing systems businesses often supplement existing software with a concoction of different types of software solutions as they appear and link them together through patchy API integrations. This results in a complicated web of disconnected tech that has low transparency and is difficult to manage and update quickly.

Construction firms should deploy a simple, purpose-built system architecture that is not only designed for the industry but will evolve with it and that functions as a digital control center for all processes—providing central control over all project activity. An effective system architecture should seamlessly integrate different technologies and allow functions and processes to evolve as the industry changes. This will future-proof C&E businesses from the disruption of future digital transformation as technology continues to advance.

Financial stability comes from action over reaction

A change in financial management takes more than a simple software update. Businesses need optimization at every level of the project value chain, including the standardization of procedures and improved lines of communication and information feedback. Project managers must obtain an enhanced overview of all project activities with real-time data and centralized control systems. Only with this can project managers gain the oversight to foresee and forecast budgets and activity and take proactive action before it is truly needed. Purpose-built C&E financial software needs to be powerful enough and have the specific functionalities to facilitate this proactive fiscal management—even in the most complex construction and engineering project.