Keep on top of complex construction projects
Construction is a uniquely project-oriented sector that requires businesses to make significant investment upfront and carefully manage cash flow through uncertainty to unlock returns over the long term. This brings with it a range of specific challenges in terms of budgeting, forecasting, scenario planning and asset utilisation – challenges that don’t affect any other sector.
To meet these challenges head on, construction companies must utilise Financial Planning & Analysis (FP&A) software that can enable better decision-making through nuanced analysis, dynamic forecasting and maximise Return on Investment (ROI) on a risk-adjusted basis.
Common challenges
Cash flow planning
The cash flow curve in construction can be extreme, requiring careful management to avoid liquidity concerns.
Large upfront investment
For most construction projects, a large upfront investment is required to get the project off the ground. This upfront cost can typically only be recouped over the long term, resulting in a cash crunch that, if not managed effectively, can cripple your business’s operational capabilities. Managing treasury and dealing with financing options requires good foresight.
Cash flow crunch
Without requisite planning and risk mitigation processes, a single departure from the stated plan can place a company in a cash crunch that means they can’t pay suppliers or workers on time. This liquidity crunch can force costly borrowings, or even place the company’s existence in jeopardy.
Nuanced cash flow planning
Cubewise and IBM Planning Analytics / TM1 offer a powerful suite of tools for advanced cash flow planning that can help construction companies manage their risk and avoid liquidity problems entirely. By utilising sophisticated scenario planning, driver-based forecasting and real-time data analysis, construction companies can stay on top of their numbers and access the information they need to make smart, proactive decisions.
Feasibility studies
Understanding whether a particular project will deliver expected ROI is half the battle won.
Managing risk and reward
Construction projects are long term, they come with plenty of fixed costs and they’re very difficult to get out of if things go wrong. As such, management must do their diligence and calculate whether the ROI is worth the effort, considering all factors including internal constraints, macro-economic factors, client relationships and more.
Negative returns
It’s not unheard of for a construction project to lose money due to unexpected delays, problems in the construction process, exchange rate fluctuations or any number of other factors. Feasibility studies are crucial to identify these factors upfront and understand risks in detail before embarking on any new project. Without this your margins and returns remain fragile.
Sophisticated forecasting
Cubewise and IBM Planning Analytics / TM1 offer highly sophisticated forecasting capabilities that enable dynamic and precise feasibility studies to be performed. By running these tests in advance and evaluating them according to the company’s strategic vision, projects can be triaged and entered into with a full understanding of what’s at stake. Data transparency and powerful forecasting combine to help your business mitigate risk.
Asset utilisation
A construction company’s ability to sweat their scarce resources (both people and material) effectively can be the difference between a successful project and an unsuccessful one.
Resource optimisation
Construction projects require careful optimisation of resources across machinery, contractors, labour and technology. Within various constraints, companies must plan how they use these assets in parallel so as to eliminate idle time and bottlenecks that can slow down building progress.
Wasted time and resources
When assets aren’t utilised effectively, they create dead space and time. In extreme cases, over-reliance on specific assets can cause breakdowns and ongoing maintenance concerns. All of this places further pressure on margins, hurts relationships with clients and eats away at project ROI.
Integrated asset utilisation
Cubewise and IBM Planning Analytics / TM1 offer a truly integrated financial system that brings together key financial information and operational data for optimal asset utilisation. Managers can then evaluate the needs of the project, plan their asset usage precisely and run scenario testing to arrive at a fully optimised plan. This process is dynamic, based on real data and is connected intimately to the financials. Automate the complexity of scheduling in time and space, and focus on choosing the best alternative.
A sophisticated planning system for all your construction needs
Cubewise and IBM Planning Analytics / TM1 provide a highly advanced and holistic suite of solutions for construction companies that want to take their planning and forecasting to the next level. Whether it’s protecting project profitability, performing feasibility studies, measuring ROI, running scenario tests, managing cash flow or optimising asset usage, we can assist you.
If you’re ready to take the next step and supercharge your construction planning and analysis, get in touch today.
Talk to us today and let’s overcome the challenge together.
When a system is unable to adapt to changing business circumstances, it can be tremendously frustrating for all who work with it. Things must go on, of course, and so users will resort to building tedious workarounds, simplifications and shortcuts that only serve to kick the can down the road.
Don’t accept that your business processes are incapable of adapting to fast-moving market changes. Contact us to find out how easy it can be to implement efficient and practical planning, reporting and forecasting workflows.
