Last year brought about rapid changes to just about every business segment on the planet, and all industries, including construction, are still finding their footing in a post-pandemic world. Part of this ongoing recalibration includes adapting how work gets done. Top of mind is cost management.
When Procore launched its Project Financials, it put collaboration and real-time data at the heart of projects and businesses to provide practical solutions to companies’ most pressing challenges. This led to defining a completely new approach to cost management, one that encourages transparency and openness, and builds a bridge between where costs are incurred and where they’re reconciled.
With growing project complexity and a demand for faster completion, the construction industry is facing new expectations around quality, cost, and schedules. Increased competition and pressure on margins, along with rising materials and insurance costs, have led construction teams to demand better visibility and control over their financials.
Cost Management Belongs to Everyone
Cost management was once the sole domain of accounting departments, but today’s business climate calls for a radical new approach. Procore’s recent global survey covering the economy, technology, workplace culture, and more, revealed great interest in financials, profits, controlling costs, and margins, with those topics always ranking at or near the top.
“What’s clear to us is this: cost management is not just the realm of accountants and office staff. To achieve truly effective cost management, everyone needs to own it. It needs to be collaborative,” said Tooey Courtemanche, Procore Founder and CEO.
Key Cost Management Themes
Effective cost management doesn’t happen by accident. Today, especially, it requires buy-in and participation from every stakeholder. There are several key themes to look for when it comes to leveling up a company’s cost management efforts.
1. Connected Data. Contractors want to connect their ERP platform, whether they’re running Sage, CMiC, Quickbooks, MRI, or any other ERP.
2. Connecting Workflows. This involves integrating cost management with the processes critical to managing project schedules and labor resources.
3. Connecting People. Companies need to connect all of the people on their projects through invoices and approval workflows across owners, GCs, and specialty contractors.
4. Insights and Analytics. Contractors need advanced forecasting that empowers them to predict and adjust to inevitable project changes.
Collaborative Cost Management That Works For Everyone
The throughline found in these themes is connectivity, bringing together formerly disparate parts of a business under the unified goal of keeping costs in line. Thousands of Procore customers make use of the cost management solution, and more than a million invoices and pay apps are submitted through the platform every year. Procore has enabled customers to connect estimating, schedule, quality programs and labor with financials, providing a robust and complete picture of their project costs.
“If we’re going to make collaborative cost management work for everyone, it can’t be a rigid app experience. It needs to have the flexibility of spreadsheets combined with the ease of a modern mobile app,” said Danielle Sandoval, Group Product Manager for financials, Procore.
Take Control Of Your Costs
The construction industry’s reliance on outdated manual processes makes cost management more of a challenge than it needs to be. The current wave of digitization gives companies an unprecedented level of control over their costs, and the ongoing push for greater accountability and transparency around costs shares the burden equally across an organization.
“Especially after the year we just had, construction was really put under pressure. Taking control of your costs in 2021 is a must do. A must. If you don’t know where you’re making or losing money on your jobs, you’re not in control. If you are still using manual processes, spreadsheets, or disconnected solutions, you’re not in control,” said Steve Means, Principal at Deloitte.
“If you’re not prioritizing accountability for all personnel that are involved in job costing, from PMs to executives, you’re not in control.”
Save Hundreds of Hours of Data Entry
Two key areas in controlling costs are contracts and invoicing. Procore’s all-new contracts experience makes it easy to find the information contractors need with a single click. Our new collaborator experience for submitting invoices makes it easy for a specialty contractor to submit their invoice and ensure they get paid on time, saving hundreds of hours of data entry each month. This frees the contractor up to tackle the rest of their to-do list, without getting bogged down with the back-and-forth of the traditional invoicing process.
Change management and cost management go hand in hand, and both are essential components to a successful project completion. Tracking changes offers better transparency into and control over the financial impact of those changes, improving communication with clients, increasing efficiency across field and office teams, and ensuring completed work is paid for on time.
Predict Cash Flows Ahead of a Project’s Start
Forecasting a project’s monthly cash flow is also critical, but the process traditionally lives in a spreadsheet or an ERP system which project teams are unable to access. Advanced forecasting methods now allow contractors to predict cash flows ahead of a project’s start, and update them throughout the course of the project. Past months get replaced with actual spend, and future months can be re-forecasted, giving all project stakeholders access to the actuals to-date.
Technology has given contractors the ability to keep costs in line, but doing so successfully requires connecting everyone involved in the project on a global platform, creating new partnerships between departments, and driving real-time collaboration between field and office, including across project stakeholders. Transparency, collaboration, and control are the stool legs for better cost management, and taken together, represent the next frontier in controlling costs while maximizing profitability.