Managing the books for any commercial constriction outfit is not the easiest of tasks, even in a perfect world. But in today’s era of high inflation, extremely tight profit margins, and soaring energy costs, completing a construction project on time and under budget is getting harder and harder. This is where utilizing new efficient software tech comes into play.
While you can purchase state-of-the-art construction accounting software and hire the best construction accounting services, your project managers must keep a sharp eye on material supplier delivery dates, subcontractor performance, invoices, executed change orders, architectural mishaps, OSHA compliance, and so much more.
With that in mind, how much should commercial construction businesses be allocating to high technology in the 2020s? According to a new comprehensive report by Construction Drive, there has been a significant economic slowdown over the past couple of years, as the GDP indicates. This slowdown, taken along with what is generally seen as gloom for U.S. economic growth, is having a definite impact on construction businesses’ budgeting practices.
However, new trends in construction budgeting and technology planning might come as a surprise to commercial construction outfits striving to meet their annual goals.
Fewer Construction Starts
The CMFS, or the Construction Market Forecasting Service, is said to have predicted a 2 percent rise in construction starts for the second quarter of 2023. But this level of growth is tiny compared even with one year ago when construction starts came in at around 15 percent.
One of the risks the CFMS points to is the tenuous issue of once more raising the country’s debt ceiling. Dodge Reports and the Dodge Construction Network Economics Group cited the impact of not one but two debt ceiling “breach scenarios” that were predicted by Moody’s Analytics.
A short breach situation would cause starts to drop by as much as 3 percent in 2023, with perhaps a slight increase come 2024. However, a lengthy breach would cause a fall in starts of 14 percent in 2023, along with almost 10 percent in 2024. In the end, the debt ceiling crisis was averted, but it proved how sensitive, if not vulnerable, the overall commercial construction industry remains under the current presidential administration and in a country that is already leveraged beyond hope.
Why Construction Companies are Increasing Their High Technology Budgets
Says Construction Drive, U.S. construction companies are expanding their spending on construction tech in 2023 for a variety of reasons. According to one Chief Operating Officer of a design/build engineering firm, they look at the investment in high tech to become more efficient during hard times.
Since many companies are facing staff problems, an increase in tech efficiency is of particular importance. Companies that are increasing their tech can realize up to a 20 percent increase in engineering designs, including 3D renderings, as opposed to 2D blueprint drawings.
Some construction and engineering professionals are said not to be slowing down one bit in their digitization investment, which virtually came to a halt when the government purposely shut down the economy in 2020.
One excavation contractor claims that new software technology has been a very good way to address all the uncertainty and volatility the industry has been facing since 2020 after having realized four very strong, very profitable years between 2016 and 2020.
Simply put, technology is allowing construction companies to do more with less staff. This means taking on more lucrative projects at a time when inflation and the cost of fuel are eating away at profits. But if companies are slowing down on their purchasing power, high tech allows them to become as efficient as possible both in the field and in the construction management office.
How Construction Companies are Paying for New Technology
High inflation has tightened budgets to the breaking point and had a detrimental effect on almost every aspect of the U.S. economy. Paying for new software tech can be tricky. That said, how can you go about paying for new and enhanced tech?
One flexible solution is the subscription-based model. Not too long ago, construction companies were forced to expend significant upfront costs for new software. But using resources like subscriptions, construction companies can use a product without being married to it. Basically, you are renting the product instead of having to come up with big bucks to pay for it all at once. This way, you pay only for what you need.
Despite what you might hear on the mainstream news about a strong economy, the reality is markedly different. Inflation and soaring energy prices continue to be real problems, along with outrageous government regulation. But by employing new software tech, construction companies can do more with less in 2023 and beyond.