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How New Technology Can Improve Financial Outcomes By Jason Krankota Historically, the construction and related industries have been among the slowest to adopt new technology, lagging only behind agriculture in digitalization. But that’s changing as software entrepreneurs turn their attention to the needs of the deskless workforce. The ubiquity of mobile devices, cheap and powerful cloud computing, 5G and the Internet of Things (IoT) are all making it possible to put robust technology into the hands of deskless staff, including shop and field workers. The venture capital industry has taken notice—funding for construction technology has seen a steady uptick since 2013. Managers and owners should partner with IT professionals to modernize their back-office systems, and prepare to handle a flood of data from the field as paper processes become digital. They should also figure out exactly what field data they want, what tools work best to obtain it and how to integrate that data into their financial software. Deployed strategically, new tools can help resolve many challenges, including: Business Continuity Planning Family-owned businesses are common in the construction industry, and many thriving mid-market and even large companies are still majority-owned by founding families. Finance leaders need to create business continuity plans, whether that’s figuring out how to transfer company ownership to the next generation, establishing an Employee Stock Option Plan (ESOP) or selling or merging the company. There’s a lot of work involved in valuing the business, figuring out the best planning scenario, and helping negotiate relevant deals. Enterprise Resource Planning (ERP) systems and cloud procurement platforms can give professionals a better view into their numbers, help with planning scenarios, and standardize the purchasing process across acquired or merged companies. Changing Accounting Standards Revenue recognition, when revenue is actually recorded, is always top of mind in the industry. For the past several years, the Construction Financial Management Association (CFMA) has sought to ensure that the new Financial Accounting Standards Board (FASB) rules around revenue recognition are favorable—or at least not punitive—toward the construction industry. As these new rules are implemented, business managers and owners seek to refine their strategies for how to bill against contracts, and tie revenue to either a percentage of completion or work-in-progress schedules. Mobile technologies that expedite communication between the office and the field can also help speed the flow of information. Risk Management Construction-related businesses carry more risk than many other industries—and insurance costs are rising. Some companies are investigating captive insurance programs, in which multiple companies pool their assets and fund their own risk by placing money under management so they don’t have to pay such exorbitant premiums. Insurance companies have responded with more flexible products to try to help companies control their costs. Business owners and managers need to evaluate their options—and if they want to participate in a captive insurance program, every participant needs to undergo a thorough assessment of their financial stability. While modern ERP systems can facilitate most of that process, the assessment would also look at safety and security practices. There’s a lot of technology that can help reduce potential risks. Sensor-equipped wearables can alert workers to hazardous exposures, and geo-fencing can provide alerts when they’re entering hazard zones. In the office, payment automation software can mitigate payment fraud as part of an overall risk-management program. Attracting and Retaining Talent Many companies today face growth opportunities while lacking enough employees to do the work. With unemployment at new lows, it’s been difficult to hire and keep good employees. Upper management is working with HR—and, occasionally, external strategists—to refine their hiring, retention and benefit strategies. Mobile training technology can help onboard unskilled workers faster, allowing companies to draw from a larger talent pool. Improving Job-cost Accounting Tablets and smartphones let field staff capture data and send it back to their offices electronically. GPS-enabled time cards can record employee work hours and location on a mobile phone. IoT devices can even measure equipment run time. Cash Management Strategies Cash management is a big challenge at any fabrication company, and effective work-in-progress (WIP) schedule management is critical. Key to the challenge is coordinating between project managers verifying completion, perhaps subcontractors confirming their work is done, and having the accounting department billing the owner and syncing everything with the WIP schedule. This is also an area where mobile apps can increase the speed and accuracy of data delivery to your financial system. Finance and accounting also need visibility, flexibility and precision control over making and timing payments. With cloud-based payment-automation software, a project manager sitting in a truck can review a payment file, prioritize payment schedules and approve payments immediately, without having to return to the office to sign a stack of checks and backup documentation. Everyone gets paid faster and the job keeps moving. With all the new purpose-built technology coming down the pipe, we’ll finally start to see some real movement toward digitizing the industry. Owners and managers should prepare by enabling themselves with modern cloud systems for accounting, spend management and payments. They need to enable the field with tools that communicate data back to the office in near real-time. Most importantly, they need to work out how to coordinate it all toward productivity gains and growth, and join the ranks of data-driven businesses that have done the same in other industries. About the Author
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Jas
