Barry explains how software enables subcontractors to replace gut-feel decisions with informed data-driven decisions.
I WAS recently chatting with a business contact, discussing what keeps us both awake at night. He told me his subcontracting business was the 4am worry, as his biggest project had been hugely affected by the Covid-19 pandemic.
The project had been hit with delays, he’d had to buy materials at a higher price from a new supplier due to limited availability and he’d been forced to restructure his labour force onsite to comply with social distancing. With all these unforeseen changes, he could no longer tell whether the project was profitable.
Given 73% of construction contractors cannot ‘push one button’ to obtain fully integrated, real-time project data (according to McKinsey), he’s like many other construction business owners who are unable to easily tell how projects are performing.
With the large number of systems and spreadsheets on which projects are typically run, it’s difficult to see complete, accurate and up-to-date commercial data. And the consequence? Critical project and business decisions are often made based on a combination of incomplete data and ‘gut feel’. Sound familiar?
But just think how different it could be if better systems and processes were adopted. Business owners could make sound operational and strategic decisions confidently, knowing the data upon which the decision is based, is accurate – i.e. they could make data-driven decisions.
This isn’t a pipe dream; those subcontractors who are ahead of the curve are already running projects using software that provides a structured cost management framework and business intelligence, enabling them to analyse key business and project metrics and, importantly, take the appropriate actions in a timely manner.
Introducing ‘Business Intelligence’
In 1865, Richard Millar Devens coined the phrase ‘Business Intelligence’ (BI) when describing how Sir Henry Furnese, a banker, profited from information by gathering and acting on it before his competition. In modern day construction, the principles are the same, only subcontractors use software platforms to run their projects and the software presents real-time insights on which to make both strategic and tactical decisions.
‘Real-time data enables you to make important decisions without delay.’
BI in a subcontractor’s world
BI is at its best when the subcontractor’s project team uses one cloud-based software platform for managing project financials at every stage of a construction contract, from tender to final account. The software platform provides a structured framework for creating, sharing & managing cost information consistently; every time someone does anything with a cost implication – for example, creating a purchase order or adding a variation – all project financials update in real-time.
Actual and projected revenue and margin figures are all available instantly because the entire project team uses one, integrated system.
This eliminates the wasted time required to pull financial data from multiple sources and, because all activities that affect costs and revenues are held within one system, subcontractors have a 360deg view of live project commercials enabling them to:
- Evaluate how projects are performing, individually or collectively
- Identify early warnings so they can take corrective action if needed
- Understand accrued costs they’re liable for in real-time
- Achieve the best prices & economies of scale when placing orders
- Ensure supplier invoices & rebates are correct
- Check labour subcontractors aren’t over charging
‘Integrated business intelligence is crucial at both a strategic & operational level.’
From a strategic standpoint, BI provides subcontractors with a range of business-wide analytics, to help with decision making. For example, historical project information can identify the more profitable clients or project types, or tender/win rates by client, and even those suppliers or subcontractors who habitually overcharge. And because the business owner is armed with real-time costs & revenues relating to each project, it’s easier to make more accurate cashflow projections.
They say knowledge is power – and it’s true. Subcontractors who have harnessed software platforms for cost management are far more agile and better able to seize opportunities. Business intelligence gives them true insight, enabling them to identify strengths and weaknesses across their projects and business, and to protect themselves from challenges.
If you can’t easily see how your projects are performing, your liabilities or project revenues, I’d urge you to investigate an integrated software platform for managing your project costs.
Over the years, I’ve seen many subcontractors harness technology to grow their businesses, simply because they put intelligent systems in place to replace gut-feel ‘finger-in-the-air’ decisions with true data-driven, informed decisions.