Ensuring Financial Transparency with Centralised Data Management in Construction 

Financial transparency is a core part of a healthy business culture and means that there is clear, accurate and accessible financial information available for everyone who needs it. This can be both at a project and a business level. For projects, it helps construction project managers to control budgets and costs, spotting warning signs early. At the business level, it is essential for making strategic decisions that impact profitability and long-term viability.

However, despite the importance of financial transparency in construction projects and businesses, many companies don’t have the tools to fully enable it, even if they are open to and interested in making improvements in this area.

Why do many of today’s construction businesses lack financial transparency?

Poor financial transparency does not necessarily mean that construction businesses are intentionally obscuring their financial information. It’s more commonly down to a lack of technology and technology-based approaches. 

Many factors can contribute to a lack of financial transparency. These include working from fragmented and unconnected spreadsheets which data can’t flow between, error-prone manual data entry, insufficient document management and inconsistent reporting methods. 

While it can hold them back, construction businesses in this position can view the situation as a perfect opportunity for digital transformation that will bring genuine benefit to the business.

The Risks of a Lack of Financial Transparency in Construction

Without financial transparency, construction companies face a number of problems of varying levels of severity. Here are some of the most common issues these businesses are up against:

Misaligned financial forecasts

Without financial transparency, it is near-impossible to get an accurate understanding of the financial health of any given project. Whether it’s because financial information is scattered across different spreadsheets, or there is manual error that has distorted the accuracy of data, it’s difficult to make accurate financial forecasts if there isn’t a trustworthy single source of truth for financial information. 

Reduced Profitability

A likely knock-on effect of misaligned budget forecasts, especially if a company is making financial decisions based on inaccurate financial data, is reduced profit margins. Mistakes or missed costs can lead a construction company down a costly path. 

Delayed Decision Making

If a company doesn’t have an easily accessible, single source of truth for their financial information, they will find that making financial decisions takes longer than it needs to. This is because they will need to consult multiple sources of information and double-check accuracy, which means extra time spent on making decisions — time that could be spent on more proactive, strategic work.  

A centralised data management system is the solution

Centralised data management — where all data is stored in a common data environment — is a simple solution that may solve a company’s financial transparency issues. Consolidating all data, including financial data, in a single platform is a great way to bring more efficiency and accuracy into a company’s operations. It increases visibility into the information a company holds, which helps with making decisions based on data to guide you towards the best outcome.  

For construction businesses, centralised data management means that all project-related data is kept in one place. When it comes to financial transparency, this means that information such as project budgets, invoices, change orders and expense records are all stored in a single repository. It’s not only a more organised way of working, but also a system that brings many tangible benefits to construction companies.

The Benefits of Enabling Financial Transparency with Centralised Data Management

Implementing a unified source of information brings a broad range of positive changes to a construction business. These benefits have a far-reaching impact across the firm, from making daily working life easier for employees, to increasing profitability, to reducing the risk of costly errors. 

According to the Construction Financial Management Association, “The ability to seamlessly integrate data from multiple sources allows construction CFOs and controllers to gain instant financial visibility, eliminating surprises and enabling proactive management of costs, cash flow, and profitability.” It’s clear that there are big upsides to consolidating data into one system.

Here are some of the specific benefits that unlocking financial transparency with a data management system delivers:

Reduced Errors in Cost Reporting and Forecasting

With a centralised system for managing a construction company’s financial information, you can ensure that every part of each financial process is visible, accurate and automatically updated. There’s no need to reconcile different data from different sources — it’s all in the same place. This reduces the risk of duplicate errors or conflicting data and standardises the way you input and store knowledge. The traceability and comprehensive logs of transactional information make it easier to track down what you need, reducing the risk of operating from the wrong information. 

Increased Visibility of Financial Data

Consolidating all your financial data into one centralised, accessible system increases visibility into your data, helping you see and identify the metrics you need easily and quickly. It also makes it easy to grant access permissions to everyone that needs this line of sight, ensuring that key individuals are using the correct, up-to-date data. Real-time dashboards also offer quick snapshots of project spending, budget tracking and other key metrics, so you can identify budget overruns and cashflow risks at a much earlier stage. 

Increased Trust Among Project Stakeholders and Clients

With a consistent, single source of truth, every stakeholder can access the same information, bringing consistency and transparency across the board. This helps to minimise misunderstandings between different stakeholder groups. It creates a level of accountability because transparent financial records mean detailed audit trails for each transaction and decision, which helps people to see that all decisions are made responsibly. It also reduces ambiguity, which is a key cause of upset or mistrust in construction business dealings. 

David Kamel, Director of Creative Vision, attests to the benefits of financial transparency for building trust with clients in a recent case study:

“We can take a very personal approach to each project because of Procore. Clients see right through standard spreadsheets and reports. With Procore, we can condense and streamline our communications to deliver real-time data at any project stage, even providing pre-construction estimates during the design phase.” — David Kamel, Director, Creative Vision

Key Considerations for Centralised Information System Implementation

To achieve the best chance of success when you are implementing a centralised system that provides best-in-class financial transparency, there are a few things to consider. Any new implementation requires effective change management. By making sure you take care of  the ‘little things’, you reduce the risk of big problems. Some of these considerations include:

1. Conduct an initial data audit

Audit your current data systems, whether they are Excel spreadsheets or a disparate, disconnected selection of point solutions. This will help you to identify any pain points and work out what issues you need to address with a new solution. Asking your users for their opinions is vital: you need to know what it’s like to use a system every day, not just in theory.

2. Get leadership buy-in

Getting buy-in from the very top of the organisation is a big factor in enabling the successful roll-out of a new system. Showing leaders the benefits of a new system for financial data, such as increased profitability, time savings and efficiency, helps them link the implementation to strategic outcomes that will help the business. 

3. Provide training

Clear, accessible training is a must if you want to successfully implement a new way to manage your financial data transparency. You need to ensure consistent use of the platform and best-practice data entry and adoption. This is only possible if you adequately educate the users. Hold workshops and encourage questions at every stage of the implementation to avoid a situation where your staff are unable to get the best results from your platform.

4. Establish regular reviews

Introducing new technology can’t just be a ‘set it and forget it’ exercise. You need to stay on top of education programmes, training new users and creating an open forum for discussion about how best to use the platform. These should include both formal, regular reviews in addition to informal conversations. Periodic refreshers will help your staff to use the technology in the best way, reducing the risk of mistakes and overcoming reluctance to engage with the system.

Financial Transparency Futureproofs Construction

From a reduced risk of errors, to better visibility into data, to increased trust among stakeholders, there are many important benefits to gain from better financial transparency. Many construction businesses already enjoy this thanks to the technology that they use as a standard. 

Organisations that don’t have these capabilities are at risk of losing their competitive edge. But by implementing a centralised data management system, they can unlock the very same benefits for themselves. Why not evaluate your own business’ current data management practices, and see if it’s time to take your financial transparency to the next level?

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