What's Next for Construction Finance?

Construction companies are digitizing rapidly, yet many lack the strategic intelligence to guide these investments. Many construction players are turning to cloud-based financial automation solutions to keep them afloat and growth-ready in the "new normal." 

As construction companies carefully approach the years ahead, the balancing act between heavy-duty tech investments, and operational and financial health is top-of-mind. The industry is digitizing at what feels like light speed — with good reason. Construction companies that embrace digital transformation can see baseline productivity gains of 15 percent and cost reductions between 4 and 6 percent, according to a McKinsey report. There are noticeable benefits to construction tech, and nearly every mid-market architecture, engineering, and construction company is looking to capitalize on digital investments.

Financial automation and digital transformation

Still, there's a small persistent issue. How do you align these investments against your core corporate strategy? Point solutions bring amazing value to your organization, but they must be weighed in the context of budgets and forecasts.

Cloud-based financial automation software supports the company with the budgeting, planning, and forecasting needed to ensure corporate strategy stays on track amidst digital transformation. Not only do such platforms eliminate the over-reliance on spreadsheets for financial forecasting and budgeting, but they bring smart automation into the equation, which can fuel investments, better execute projects, and define business requirements.

Where do cloud-based financial software and financial automation platforms belong in today's construction ecosystem? And what does the future hold for construction-focused solutions?

Bridging the gap between strategy and execution

Construction organizations embracing digital transformation need a solution that includes the methodologies, metrics, processes, and systems used to monitor and manage the business performance of an enterprise. In other words, cloud-based solutions like financial automation bridge the gaps between corporate strategy (think: financial health, project selection, forecasting) and execution. 

If ERP is the heart of your tech stack, financial automation is its brain.

While you can find ERP solutions with forecasting features, and plenty of ERPs offer a wealth of financial capabilities, they aren't built to inform corporate strategy. They're execution-layer tools.

Cloud-based financial automation, on the other hand, unifies data from across your organization and leverage it to produce financial forecasts, highlight project objectives, and alleviate bidding concerns. If ERP is the heart of your tech stack, financial automation is its brain. For example, Briq produces extremely accurate financial forecasts that let you execute against cash flow, labor, and accurate cost-to-completion estimates. Briq takes thousands of data streams and uses AI to automate WIPs, giving real-time insights into your current financial situation. Armed with such vital information, you can make better project decisions and ERP-driven supply chain executions.

The current state of financial automation platforms in construction

The construction industry today is in a challenging financial position. During Covid-19, plenty of companies shuttered temporarily, most lost significant capitalization, and many reduced CapEx by 25 to 30 percent — essentially dooming any ongoing projects or investments. Now, construction companies are cautiously minimizing the risk of financial overcommitment, while still striving to achieve growth. 

Construction exists in a complicated financial ecosystem: you want to secure as many projects as possible — especially when in financial pain — but can't risk project failures or financial overcommitment in the short term.

A financial automation platform alleviates these concerns. Again, while ERP can help you build resilient supply chains and tackle pesky back-office problems, it doesn't provide significant value to the business strategy. You need to understand your financial position perfectly.

Construction companies must understand four financial areas to ensure post-crisis growth:

1. Optimizing working capital
2. Minimizing operating expenses
3. Managing discretionary spending
4. Controlling CapEx

To do this, firms are turning to financial automation platforms solutions. Briq, for instance, generates industry-leading, real-time forecasts and insights by combining critical data from systems across the organization. These forecasts can then be used to inform corporate strategy around operations, spending, capital, and CapEx, leading to smarter downstream tech investments, proper project selection, and savvier M&A moves.

In today's construction landscape, a financial automation platform isn't just another tool in the tech toolbox. It's a gateway to a more solid financial strategy.

What’s in store: the future of financial automation platforms

Financial automation platforms and cloud-based financial software will continue to gain traction as the construction tech landscape consolidates and trends towards analytics and AI. 

And with good reason. Construction technology can be categorized into three areas:

• Execution-layer tools
• Back office
• Digital collaboration

Financial automation platforms carefully weave together all three of these technology areas. In fact, they are the glue that holds your entire stack together from a financial perspective. They inform execution decisions, provide back-office financial intelligence, and promote digital collaboration through accurate forecasting. 

The future of construction technology lies in "technologies that enable visibility into management of business or operations processes through native capabilities and seamless integration with other technologies to aggregate data and process control in a single place," according to McKinsey.

Only 20% of construction companies invest in platform technologies.

With McKinsey estimating just 20 percent of construction companies investing in platform technologies today, the landscape remains relatively fractured. Point solutions dominate, and many companies still rely on ad-hoc financial intelligence tools, such as a combination of ERP, spreadsheets, and third-party vendor integrations. But digital transformation doesn't lend itself to these ad-hoc practices. You need a single source of business information for your strategy layer. Every decision needs to be guided by highly accurate forecasts.

Construction firms are ready to digitize and embrace the future of analytics, AI, machine learning, and on-site technologies, but this requires a shift in how we look at technology. Cloud-based platforms are orchestrators of this shift to the next wave of digitization and beyond.

Schedule a demo with our construction financial experts to learn more about Briq and how our cloud-based financial automation platform can help you run a better business.