The Missing Link Pt. 2 – Minimizing Risk

by | Aug 18, 2023 | Minimizing Risk

Risk assessment and management background
In this second installment of a 3-part series, we’ll look at the key elements that can drive profit margins in the construction industry: increasing revenue, reducing costs, and minimizing risk.

A proven way for construction companies to reduce margin erosion is to integrate project management and ERP systems, as well as other systems you may be using to run your business such as CRM and HCM. By doing so, the left hand will always know what the right hand is doing, which can significantly reduce or eliminate “surprises” about project costs and provide other insights that are critical to your company’s productivity and profitability.

For over 20 years, we have enabled the most prominent construction companies to operate more efficiently. For instance, we helped Charles Perry Partners, Inc. (CPPI), a Gainesville, FL-based general contracting, design-build and construction management firm manage change orders more effectively. Change orders that project managers issue in the project management solution are automatically integrated to the accounting system. As a result, there is zero probability of data entry errors occurring beyond the initial change order because people are touching the data only one time instead of multiple times.

This example is one of many that shows what companies can reap from an integrated technology environment. Here are 7 other high-level benefits driven by connecting project management and finance systems.

Table of Contents:

1. Real-Time Risk Visibility

2. Improved Risk Assessment and Mitigation

3. Accurate Cost Estimation and Budgeting

4. Enhanced Contract and Change Order Management

5. Efficient Insurance and Bonding Management

6. Compliance with Regulatory and Financial Standards

7. Data-Driven Decision-Making

8. Conclusion

1. Real-Time Risk Visibility

Integration allows for real-time visibility into project costs, budgets, and financial performance.
Business meeting, businesswoman and presentation on screen of tv in modern boardroom with colleagues. Workshop, speech and black woman or speaker speaking with coworkers in conference room.
Project managers and finance teams can monitor key risk indicators, such as cost overruns, budget deviations, or potential financial risks, in real-time. This visibility enables early detection and proactive management of risks, reducing the likelihood and impact of adverse events.

2. Improved Risk Assessment and Mitigation

Companies can conduct more robust risk assessments.
Engineer builder calculate construction bill cost surprised shock expression for building project cost excessive expenditure
Project managers can monitor and analyze costs against budgets, identify potential cost overruns or variances, and take proactive measures to address them promptly. By gaining better control over project finances, construction companies can minimize cost leakage, optimize resource allocation, and improve project profitability.

3. Accurate Cost Estimation and Budgeting

Working as a team is key in the construction industry and integration enables better coordination and collaboration between finance and project teams.
Engineers two woman working on plan building construction with laptop in city
This collaboration facilitates effective communication, reduces delays in financial processes, and ensures that project milestones are met on time. Timely and accurate financial information empowers project managers to make informed decisions, allocate resources efficiently, and mitigate financial risks, ultimately leading to more efficient project delivery.

4. Enhanced Contract and Change Order Management

Ensuring accurate revenue recognition based on project milestones, percentage of completion, or other relevant criteria is essential for profitable projects.
Builder choosing heavy machinery for construction with a sales consultant standing with some documents on the open ground of a shop with special vehicles
Integration enables construction companies to align revenue recognition with project progress, adhere to accounting standards such as the Percentage of Completion method, and avoid revenue leakage or deferral. Accurate revenue recognition provides a more reliable financial picture, helps with forecasting, and supports better decision-making.

5. Efficient Insurance and Bonding Management

Integration allows for comprehensive data capture and analysis across finance and project management processes that might not occur with a disconnected system.
Data Science
Construction companies can leverage advanced analytics and reporting capabilities to gain valuable insights into project performance, financial trends, and profitability drivers. These insights enable data-driven decision-making, identify areas for improvement, optimize resource allocation, and identify high-margin projects or areas of the business that contribute most to revenue growth.

6. Compliance with Regulatory and Financial Standards

Integration allows for comprehensive data capture and analysis across finance and project management processes that might not occur with a disconnected system.
Data Science
Construction companies can leverage advanced analytics and reporting capabilities to gain valuable insights into project performance, financial trends, and profitability drivers. These insights enable data-driven decision-making, identify areas for improvement, optimize resource allocation, and identify high-margin projects or areas of the business that contribute most to revenue growth.

7. Data-Driven Decision-Making

Integration allows for comprehensive data capture and analysis across finance and project management processes that might not occur with a disconnected system.
Data Science
Construction companies can leverage advanced analytics and reporting capabilities to gain valuable insights into project performance, financial trends, and profitability drivers. These insights enable data-driven decision-making, identify areas for improvement, optimize resource allocation, and identify high-margin projects or areas of the business that contribute most to revenue growth.

Conclusion

Given the sophistication, user-friendliness, and affordability of project management, ERP, CRM, and HCM software these days, it is easier than ever to unlock and integrate data in disparate systems. By connecting data rather than keeping it siloed, you can put manual data entry, higher costs, lower productivity, litigation exposure, and other undesirable processes and conditions, in a dark closet that never needs to be opened again.

 

To benefit from more than 20 years of construction industry  integration experience that helps you access better data, make better decisions, and increase your margins, request a demo of our platform.