SMBs and project managers in the U.S. construction market must keep tabs on budgets and how funds are being spent if they want to meet the current projections for industry growth. The following Deep Dive explores how cost management solutions could help these firms quickly issue wages, assisting low-income workers by preventing them from having to incur out-of-pocket expenses.
The $1.8 trillion construction industry has not yet had its moment of digital reckoning.
Recent data indicates that construction firms typically rank in the bottom percentage of U.S. industries investing in digitization, falling just above agriculture and hunting.
Construction firms looking to remain profitable must ensure proper cash flows and complete projects on time, but old school practices can get in the way. Project managers and construction workers often have to manage their funds, operating budgets and other related expenses themselves, and losing track of any of these components can increase the time to project completion and final costs.
A lack of access to spend management tools can add further delays and expenses.
The Bureau of Labor Statistics found that the average annual salary for construction workers is $34,810. It is common for these workers to pay for materials and supplies while on the job, but such out-of-pocket purchases can have profound effects on their financial health.
This is especially true considering reimbursements can still take days or weeks to reach workers’ bank accounts. Today’s world of instant payments and transactions is making this practice increasingly less acceptable, especially among those living paycheck-to-paycheck.
Balancing these needs at a pace appropriate for the digital economy is why many construction firms, managers and individual employees are turning to spend management tools. Adoption can decrease strain on construction companies juggling funds for various projects, help construction workers by enabling employers to quickly issue reimbursements and prevent workers from having to incur out-of-pocket expenses.
Digital Tools and Construction Spending
Digital cost management solutions enable construction companies to automate key aspects of spending, such as developing estimates and calculating projects’ overall budgets. Project managers can use these tools throughout a project’s lifecycle to gain more tailored insights into performance metrics, funds available for subcontractors or parts of the job that may be lagging behind. They can also use such offerings to gain a deeper understanding of labor and supply costs, taxes and overall profit margins.
These mobile-friendly tools can also have a marked effect on individual workers’ performances by expediting the payment and reimbursement processes, which are especially beneficial to workers living paycheck-to-paycheck. It is perhaps not surprising that such solutions are fast gaining popularity, with 58 percent of construction companies now using cloud-connected mobile apps.
Greater insights into spending and more efficient payment management are not enough for many construction companies to turn to digital spend management software, though. The tools must be both easy to use and easy to teach.
Ease of use was the No. 1 factor construction companies considered when making software purchasing decisions, according to a recent study. Firms that adopt such solutions must train managers and other workers on how to use them, a process that requires recalling workers from job sites and making them sit in offices for training. Taking staff away from active construction sites can increase the time and money spent on projects.
Digitalization and New Technology in the Construction World
The construction market is still far from meeting any kind of digitization threshold, but the attitude toward technology within the industry appears to be changing. A recent survey of construction SMBs found 81 percent planned to spend more on digital software last year than the previous year.
Adoption of digital construction management solutions is also growing, with the market reporting a CAGR of 9.19 percent from 2018 to 2022.
The survey also found that construction firms are increasingly looking to experiment with cloud technologies and software that can help automate larger parts of their businesses, with spending and cost estimate tools one of the most intriguing areas.
These new technologies are especially important if construction companies want to keep both workers and clients satisfied in a world in which steady financial management is harder to tackle without access to digital tools.
Clients expect more nuanced reports of where money is heading, project managers need more complex views on where funds need to go, and workers need access to solutions that can help them handle on-field expenses.
Construction companies will need to become more familiar with digital spend management solutions to keep cash flows moving and construction projects on time and on budget.
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