Turning a Crisis into an Opportunity: How to Manage the Cyclical Nature of the Construction Industry
Even as the economic outlook is starting to look a little brighter, nearly all businesses face unprecedented amounts of uncertainty about the future. This anxiety is even more acute in the construction industry, where financing remains tight and investment delays means projects are slowed or cancelled outright. Most of the companies that have survived through the financial panic of 2008 and the ensuing years of recession have emerged stronger, if battle-scarred. The trick to surviving the next few years, as the economy stabilizes and improves, is learning from the experiences of the past and applying that wisdom to the future. Here are some lessons that every Contractor should take to heart to help survive the ups and downs of the upcoming years:
1. Start Using Technology to Your Advantage
Compared with other industries, construction is notoriously slow in adopting new technologies. It took longer than it should for Contractors to implement integrated ERP solutions to manage financials and projects. BIM now rules design, but it was a long and winding road to get to this point. Luckily for the construction industry, technology marches at its own pace, offering up developments and advances. If Contractors want to have any hope of surviving the next few years, they need to re-assess their use of technology and grab hold of the recent technological changes and start using them to their advantage.
This doesn’t just mean getting the latest tool or gadget to make work in the field easier. Contractors need to look at how technology can help them work in the office, from accounting to communication. It’s understandable that some companies would be wary of investing heavily in technology solutions given the uncertainty about the economic future, but an option to consider is Software as a Service (SaaS). SaaS allows Contractors to get sophisticated software solutions, such as Construction Payment Management™ and Pre-Qualification Management™, without having to spend money on hardware, installation and maintenance.
2. Get Rid of All That Paper
One outdated aspect of the construction industry that needs to change is the reliance on paper. We live in a world of personal online banking, where people can access accounts through their tablets and make payments with cell phones, yet the checks are still the standard in the construction industry for paying Subcontractors and suppliers. Invoices are created on everything from the back of a napkin to a spreadsheet. Wet signatures and notarization are still the standard for many critical legal documents.
The smarter method is to replace paper checks and signed and notarized legal documents with electronic payments and electronically signed documents, something Textura has been helping Contractors with since 2004. Contractors that have gone paperless have sped up the flow of money on construction projects, reducing risk for all parties and eliminating hundreds of thousands of man-hours associated with pushing paper. The result has been more efficient projects, better use of employees and lower cost to project owners.
Textura-CPM™ and Textura-PQM™ have helped the construction industry’s back offices reduce their cost and focus their energy on high-value activities by eliminating much of the construction paper chase. At the same time, Contractors have gained a sense of comfort knowing that their costs will scale up and down with their revenue.
3. Manage Your Overhead
Eliminating paper will significantly reduce costs, as will using a SaaS solution to manage payment and pre-qualification. Another advantage of using a SaaS solution, such as Textura-CPM™ and Textura-PQM™, is that it can help Contractors lower overhead.
A SaaS model with volume-based pricing can turn costs that have historically been fixed (administrative, project accounting, accounts payable personnel) into variable costs, creating significant savings and increasing flexibility. This does not necessarily mean that a company needs to reduce headcount to realize savings. The main goal of any technology is to either eliminate or automate tasks to improve efficiency. In other words, technology should make us worker smarter, not harder. If project count is growing, Textura can allow a project accountant to handle 20 jobs at a time instead of just three. During a growth cycle, this allows an organization to take on more work without increasing staff. In a flat or decreasing revenue environment, staff can be redeployed to higher value functions, or used to replace open positions created by attrition. It all adds up to managing overhead better, which has a positive impact on the bottom line.