If there’s one lesson for enterprises to learn amid a cyclical economy, it’s that it’s critical to pivot quickly when strategies don’t deliver results. This responsive resiliency is particularly important for construction companies, as financial leaders face everything from high vendor costs, unpredictable pricing (months of record highs followed by sharp price drops), and material regulations to supply chain complications and labor shortages.
The fluctuating economic landscape continues to erode margins for large construction firms, driving the need for dynamic forecasting and hands-on financial planning and monitoring. Today’s construction CFOs no longer simply keep the numbers. They can enable remarkable financial outcomes when they take active fiduciary and strategic roles in business growth.
“Historically, CFOs in construction were largely tasked with oversight of financial health,” says Nelson Tepfer, CEO and co-founder of ProCFO Partners, which helps financial decision-makers at large construction firms keep up with transformation. “Today, their role has evolved. They are pivotal in risk management, digital transformation, and ensuring sustainable growth. Their insights are invaluable in making informed decisions, be it in expanding into new markets or pioneering innovative construction methods.”
Using Technology to Amplify Growth
When the going gets tough, the tough often turn to technology and data. The CFO’s technology roadmap could support decision-making with real-time data and address core construction challenges like speed, time, waste, and sustainability.
CFOs can consider drivinge this initiative by championing tools like:
- Project management software that optimizes resource allocation and ensures on-time, on-budget project completion.
- Virtual design and construction (VDC) platforms that leverage digital twins to support design optimization and planning, reduce errors, and promote collaboration.
- Building information modeling (BIM) software that allows users to create, edit, and review 3D models in remarkable detail and resolve design conflicts before they lead to material reorders or subcontractor rescheduling.
- Finance tools like AR/AP to manage cash flow and working capital, reduce costs, and increase efficiencies.
According to a 2024 report from the Associated General Contractors of America (AGC) and business management software company Sage, which surveyed 1,293 construction firms in November and December 2023, many construction leaders will use mobile software technology this year. The majority plan to:
- Collect and manage daily field reports (67%)
- Track employee time and approval (59%)
- Access customer and jobsite data (58%)
- Share drawings, photos, and documents (54%)
Technology not only improves efficiency, but also reduces shockwaves caused by disruptive events, such as supply chain issues and mergers and acquisitions. According to a 2023 KPMG survey of 276 people from engineering and construction companies, for 78% of construction leaders, technology adoption is critical to successfully overcoming these business disruptions.
Beyond software, construction CFOs can recommend other technologies to their internal teams to enable company growth.
- Drones can be used for site surveys, progress monitoring, safety inspections, and quantity verification to increase efficiency and reduce costs. They help companies gather information that used to require hours of time and several visits to the jobsite. For example, Skanska recently used drones to perfect the installation of a prefabricated roof on top of a Portland International Airport terminal. Photos, videos, and 3D models captured via drone flights provided data for detailed logistics plans and kept the client updated on progress in real time.
- Wearable tech devices, such as smart helmets and vests, can not only increase worker safety and reduce accidents, but also promote productivity and accuracy. For example, some smart helmets have built-in cameras and microphones so workers can easily take pictures, make calls, and communicate with other project team members while they continue working.
- GPS-guided equipment can help workers be efficient and complete more work in less time. Equipment operators use GPS positioning data to make decisions based on actual grade and design features. They can operate equipment much more precisely, moving only the earth or materials they need to move. This can result in productivity gains of at least 30% to 40%.
- Modular approaches to construction have quickly proven themselves as a way to deliver an excellent return on investment (ROI). Just a few years ago, most construction companies didn’t consider modular construction to generate a return at all. But, in 2023, nearly one-third of construction leaders named modular manufacturing as a technology with high potential to deliver the greatest overall ROI.
Build Momentum With Quick Wins
While technology and long-term strategies are crucial for success in a changing world, they might also be bolstered by “quick wins” that cut costs, drive business forward, and serve as stepping stones for progress.
Here are six opportunities for CFOs at large construction companies to help achieve impact:
1. Discuss deals with existing suppliers
Consider renegotiating supply costs to achieve lower pricing, especially among long-standing partners. Analyze where cost savings can be achieved. Are there processes or requirements that can be eliminated? Can credit terms be changed to improve pricing?
2. Stop paying for legacy software
Evaluate software platforms and consider sunsetting old systems. A 2023 Nexthink analysis of more than 6 million work environments across nine industries and 12 regions discovered that 50% of software licenses aren’t used, wasting nearly $45 million per month.
3. Review and reduce payments
Regularly review operating expenses to unveil hidden inefficiencies or areas that could be ripe for cost-cutting. Take a close look at rent, equipment and supplies, inventory, marketing, payroll, insurance, utilities, and fleet maintenance to see where costs may be inflated, or where simple reductions may be possible.
4. Weigh whether to lease vs. purchase
Historically, major contractors could rent heavy equipment and move it around within a region as needed. Today, because of the sheer number and geographic spread of projects, it’s not as easy. Some companies, such as Turner Construction Company, choose to rent equipment before they buy to make sure the investment is worthwhile. For example, it’s currently piloting electric and hybrid construction equipment by renting it for work on a Meta data center project in Iowa.
5. Consider transient or temporary workforces
According to the AGC, more than three-quarters of construction companies – or 77% – are struggling to fill some or all of their salaried and hourly craft positions. Construction companies with large regional footprints could consider hiring in areas where labor is more readily available and then moving workers from site to site.
6. Track where grants go
If a construction company works on infrastructure projects, then CFOs might consider spending time researching each category of work (bridges, roads, transit, etc.) and view the grants provided as part of the Bipartisan Infrastructure Law. This can reveal where to position resources to take advantage of money that might be flowing for these projects.
The Takeaway
While a turbulent economic climate may cause construction CFOs to remain conservative about growth opportunities, a sensible approach that balances agility and resilience is key. By regularly revisiting forecasts, being open to technological solutions, and fostering a culture of continuous learning, CFOs could prepare their construction companies to respond to the anticipated boost ahead.
Insights from construction CFOs are invaluable. These leaders play a key role in anticipating and navigating financial headwinds so their companies can come out strong on the other side.
