According to the U.S. Chamber of Commerce, 70% of contractors believe advanced technologies can increase their productivity. 56% of businesses plan to increase their technology spend in 2021 (SpiceWorks). Among these, 38% attribute the increase to changes in their business operations due to the COVID-19 pandemic, while 36% say the increase will be needed to support their remote workforce during the ongoing crisis.
Automation through technology is expected to have the biggest overall impact on organizations related to other technology impact. This certainly includes contractors, and within 10 years full scale digitization across the construction industry is expected to yield savings of 13% – 21% (World Economic Forum). Artificial Intelligence (AI) is a good example, and adoption of AI powered technologies is expected to nearly triple, enabling companies to process large amounts of information quickly and more accurately. For the construction industry alone, AI has the potential to increase profits 71% by 2035 (Accenture).
Historically, the construction industry’s adoption of technology has lagged compared to other industries. For example, in 2012 only 16% of contractors were using cloud-based technology, but today nearly 85% have adopted cloud-based technology or plan to in the near future.
As a result of the COVID-19 crisis, an area of increased focus for automation is the importance of identifying ways to change and improve internal accounting/finance and technology systems that make businesses work.
The New Normal
Following the emergence of COVID-19 in the United States, contractors were forced to quickly move their finance and accounting departments to a virtual environment. This increased the importance of accurate data input in their systems from daily transactions. As many companies were forced to rapidly decrease overhead, finding ways to function more efficiently became paramount and the adoption of technology shifted from optional to essential. Studies have shown that almost 75% of accounting and related business tasks can be automated with the use of technology. Software developers have risen to the challenge and new applications have rapidly emerged, many of which are specifically designed for contractors.
Software Considerations: More is Not Always the Answer
Purchasing a new Enterprise Resource Planning (ERP) application may not be in your budget right now, and it may or may not be the best solution for your company. First, make sure you are fully utilizing the technology you are already paying for. Reach out to your ERP software expert for an assessment of your use of the current system vs. what the system has to offer. There are increasing numbers of high-quality third- party applications that can be integrated with your current ERP to provide extended features and functions you may need. For example, more in- depth and flexible job/project costing applications allow for real time changes to the calculation of job profitability, better time management for projects, and flexibility in communication between your team and customers. Third party applications typically tend to have a minimal or no upfront license fee but rather a monthly subscription fee.
Replacing, updating, or restructuring systems is no small task and requires an investment of time and capital from the company. Calculating the ROI on this investment is important, but it may not always be a monetary ROI. Examples of non-monetary ROI can be improved accuracy, the ability to quickly scale changes, real-time access to information for important business decisions, and improved business analytics. These investments can range from larger amounts for complete ERP implementations to a more manageable ongoing monthly fee for third party applications.
Benefits to Technology Adoption or Upgrading Your Current Systems
Now more than ever it is important to assess what you have in place and gaps that may exist related to technology. Identifying gaps in systems and processes has allowed companies to focus on ways to improve for the future. Long-term efficiencies gained will pay dividends for many years to come. Listed below are key areas of benefit:
- Improved business efficiencies
- Increased profitability
- Cost reductions
- New business insights
- Product and/or service differentiation
- Business process automation
- Increased market share
That said, not all improvements need to be overly expensive. Rather, sometimes it can simply be a change in processes or additional training to better use the systems you already have in place. Talk to your team members and primary users of your systems to find out where their pain points are, and then create your company’s action plan. Many times, the solution to a problem is closer than you think and may not always be a technology change. Some common, non-monetary, changes accounting departments can make are:
- Realigning assignment of responsibilities from a variety of tasks across the company to specific functions by person
- Standardizing month-end closing procedures
- Redesign of your profit center structure or maybe put one in place (if you could break your company into different profit centers what would they be?)
- Clean up your customer/job listing and/or take advantage of additional tracking allowed in your current system for better management reporting
- Change the way you route documents (especially paper documents) at your company to improve efficiencies and decrease duplicative entries
Challenges of Technology Adoption
As with any change you make in your company, there will be challenges to consider and barriers you may face to the success of the project. Carefully considering available resources for each of the challenges below as you build your plan will be important:
- Unproven business case
- Technology complexity
- Regulatory compliance
- Legacy technologies
- Lack of capital to fund investment
- Limited experience to interpret data into valuable insights
Key Areas for Consideration
Questions to ask yourself and seek out answers for as you navigate these opportunities are:
- How do we secure our systems, become more efficient and utilize available technology to adapt to new ways of working?
- Are we fully utilizing technology we have already purchased?
- Are current workflows causing duplication of efforts by our team?
- Do we need to revisit now that we have modified our work methods?
- Have we outlined workflows and processes to better utilize team members?
- Before we hire additional team members to process transactions/information etc. can we automate the process?
- How can our company utilize the power of AI and ML (machine learning)?
- Do we have systems that are not integrated but collect similar data?
- Will our systems delay the ability to respond quickly to a shift in material procurement processes, customized estimating to meet customer requirements or additional financial reporting?
Taking a phased approach to your next system (people, processes and technology) implementation will allow you to navigate through this process and develop a plan that will be successful:
1- Assess: Evaluate current state of IT and business processes. Define target state solution requirements.
2- Select: Assess and demo select ERP solutions/3rd party applications, perform fit gap analysis, and select platform to deploy.
3- Deploy: Design, build, and test selected ERP solution. Train users and roll-out solution.
4- Support: Provide both heightened post go-live support as well as transition to business-as-usual maintenance.
We Can Help
If you don’t have a project manager to implement new or improved processes and technology, engage with advisors who can do this for you. By taking action, companies are not only recognizing the need for change, they are embracing the challenge and keeping up with the fast pace of today’s world. If you need assistance, reach out to Marshall Stein or Denise Bailey.
Originally published as Driving Productivity Through Systems as part of the Catalyst Risk Partners Construction Journal 2020.
The information provided in this communication is of a general nature and should not be considered professional advice. You should not act upon the information provided without obtaining specific professional advice. The information above is subject to change.