October 2023
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Trends and Hot Topics
Rightsizing Your Construction Company’s Financial Management Software consider a cloud-based solution. Know Your Needs
By Bill Constantopoulos As your construction business grows, your needs change. This holds particularly true for financial management systems. As operations expand, basic financial software is no longer adequate to meet growing needs. Here’s how to “rightsize” your financial management software. Recognize the Signs
• Inefficiencies: If you spend significant time on manual data entry and reconciliations, or resort to multiple software programs and spreadsheets to fill gaps, you need a more robust system. • Lack of Advanced Features: If you could use features like advanced reporting, multi-entity management, or integration with other business systems that your current software doesn’t offer, it is time for an upgrade. • Limited Accessibility: If you need access from multiple job sites or on mobile devices, you may want to
Analyze your workflows and identify bottlenecks and pain points for current and future needs. • Project Accounting and Management: Gain access to project costing to track costs and revenue for specific projects, and progressive billing to keep the cash flowing. • Time and Expense Management: Employees should be able to log their time and expenses, a critical measure for construction projects that are timesensitive and require detailed expense tracking. • Financial Visibility: React to problems and take advantage of opportunities with real-time dashboards that can include KPIs important to construction management. Customizable reporting options make it easier to view financial metrics by project, location, or other dimensions critical to operations. • Compliance and Auditing: Someone is always going to be looking over your shoulder. Make sure your software will keep you compliant with GAAP standards and create a trackable audit trail for both internal checks and external audits.
• Integration: Your accounting software should integrate with the software tools commonly used in the construction industry like project management software, HR systems, and inventory management solutions. • Scalability: If your construction company has more than one project going on at the same time, advanced financial software allows you to track across projects and scale up (or down) as needed. Part of this scalability is having a cloud-based system for access any time, from anywhere. • Collaboration: Give various team members different levels of access, based on their roles, making it easier to collaborate on financial matters without compromising security. Explore Available Alternatives
There are many accounting software packages available in the market tailored for mid-sized and growth-oriented construction companies, including Sage Intacct, Procore, or Fieldwire. Here’s what to look for while exploring these alternatives: • Scalability: Your new system should grow with your business, be flexible and scalable, offering additional modules or features as your business needs expand.
• Integration: The software should seamlessly integrate with your other business systems, such as CRM, inventory management, and HR software. • Customization: The software should be customizable to suit your unique business requirements. • Cloud-based solution: A cloud-based solution allows you to access your data anywhere, anytime. • Support and Training: Vendors should provide robust support and training, ensuring a smooth transition from QuickBooks or another basic program. Engage a Consultant
Outgrowing your financial software is a sign that your construction business is flourishing. Embrace the change and equip your business with the tools it needs to continue to thrive. Engaging an integration consultant who is familiar with the construction industry and its requirements can guide you through the process, ensure data integrity, provide training, and help customize the software to your needs. Bill Constantopoulos is a partner leading the Sage Intacct & Advisory Practice Group at Gray, Gray & Gray. He can be reached at (781) 407-0300 or po erofmore gggllp.com.
The Impact of Inflation on the Construction Industry:
5 Strategies for Navigating Uncertain Times by Carmine Cimetti
Rising Costs Leaving Some Projects Underinsured
Despite the prospect of growth thanks to the Infrastructure Investment and Jobs Act, the U.S. construction sector is still grappling with numerous challenges. Persistent inflation, along with escalating labor, fuel and material costs, has led to significant budget increases, with some projects experiencing cost hikes of up to 20% overall. The rapid rise in interest rates further dampened the industry’s growth during the first half of 2023. Acquiring the necessary construction materials and equipment results in limited inventories and, now with a significant shortage of expertise, potential project delays, contingencies, extended schedules and ultimately, added project costs. Even as the materials markets have appeared to stabilize, the cost of construction materials remains considerably elevated, upwards of 5% compared to 2022.
The construction industry’s ongoing challenges have led to tighter profit margins and an upswing in insurance costs. These challenges have been exacerbated by the record number of extreme weather events in recent years, resulting in catastrophic property losses. Builder’s risk insurance rates have surged by 30% over the past two years, with no clear indication of returning to pre-pandemic levels. Similarly, liability insurance costs for construction projects have nearly quadrupled during the same period. For large-scale projects, particularly those in catastrophe-prone areas such as condominium construction, and construction conversion projects, insurance costs that previously accounted for approximately 2% of the total project cost recently surged to 8% or more. It has also been noted that high inflation and increased construction costs are also leaving some projects
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underinsured mid-build. Supply chain disruptions and potential project delays have made some construction underwriters cautious, and some insurance carriers are now more reluctant to assume the entire risk for a project. Unlike the past, when a single insurer would underwrite a large-scale project, it now often requires multiple carriers to provide the same level of coverage. Project managers and owners grappling with rising costs based on conceptual estimates schedules are now faced with significant delays and face an increased risk of being underinsured. While some seek to mitigate these exposures through insurance, carriers are increasingly hesitant to extend buffers for claims. Five Strategies for Success
Economic forces have made it increasingly difficult to predict costs and timelines for building projects. In light of these uncertainties, contractors can no
longer rely solely on traditional project management approaches. To ensure the survival and success of your business in this dynamic environment, contractors should consider the following strategies: 1. Prioritize risk management. Given the prevailing market conditions, construction firms must prioritize risk management to position themselves as a bestin-class risk. Developing comprehensive risk management plans for jobsites and investing in mitigation technology can be instrumental. This includes the use of products designed to prevent common issues, such as treated wood to mitigate fire risk or environmental monitoring and alert systems to address water leakage, temperature fluctuations in addition to changes in relative humidity/moisture levels. The implementation of these measures has been viewed favorably by most carriers and can potentially lead to insurance rate discounts. continued to page 43
