The construction sector is one of the fastest growing industries, and with tight margins, project delivery delays and labor shortage, no industry has more complexity and risk. That’s why it’s important to always know exactly where your business stands.
With the current disruption in the landscape, significant pressure is put upon finance teams to manage the implications of this disruption and position your projects for continued success.
So, we sat down with RSM’s Senior Construction and Real Estate Analyst, Nick Grandy, and Henry Ferguson, Senior Manager of Construction Partners at Prophix, to discuss the importance of data analysis and the right technology in the construction industry.
Henry: To get us started, tell me a little bit about RSM’s construction practice and what you guys do for contractors.
Nick: Our motto is the power of being understood. We’re the fifth-largest accounting firm in the United States and a leader in tax, audit, and consulting. Not every contractor has the expertise they need to make consulting decisions, like evaluating new systems or making process improvement decisions. That is where RSM can be a first-choice advisor and show value to our customers.
Our consulting practice will look at your organization and help to evaluate your needs and potential gaps. We’ll then offer up solutions, such as Prophix, to solve organizational challenges. Often, much of the focus is on data analytics tools, but the true test of an organization is obtaining and analyzing data. Without the proper data, it’s the adage, “garbage in, garbage out.” Our expertise will ensure you’re capturing the right data from the various systems across your organization. This process is almost more important than the technology, as you need to ensure you get the data you need when you need it, and to who needs it.
Henry: By any standard, these are historic times for contractors. What examples are you seeing of how contractors are developing digital strategies to do a better job of capturing, mining, and reporting data? And perhaps more importantly, how are they acting on their data?
Nick: I have participated in several of RSM’s recent roundtable sessions with construction executives from large companies across the country. Many of them mentioned how they’re implementing digital solutions to be more successful in the future. To leverage data, you need access to it. Contractors are turning to tools like Prophix to access their data and use it to strategically manage their businesses. They need to be able to analyze historical performance – where they are going and where they want to expand in the marketplace.
Henry: I understand that the largest contractors are innovating and investing in these tools, but what about as you move down to smaller organizations. Are you seeing mid-market companies working to improve their technology, reduce risk, and increase profitability?
Nick: Yes, at RSM we serve the middle market. While our clients range from $2M in annual revenue, up to multi-billion-dollar organizations, our sweet spot is $100M to $1B construction companies. Middle market companies are seeing larger players leveraging data and technology to help their businesses and are subsequently following suit.
A large player in the industry can be a little less careful with labor costs and utilization, as they can absorb more fixed costs without a negative bottom line. However, in the middle market, resource management is critical to profitability. Many middle market companies are embracing alternatives to manual processes to better react to changes in their industry. Contractors are turning to solutions like Prophix to step up their ability to respond to market volatility.
As an example, lumber prices are at an all-time high with no reason to believe they’re going to go down anytime soon. So, how do contractors analyze price fluctuations and make sound business decisions? The first step is collecting data from the full supply chain, such as looking at lumber suppliers and where the lumber is coming from. In 2020, forest fires in the Pacific Northwest burned some of the lumber supply so companies are turning to other sources, such as Canada or Central Europe. However, companies must factor in additional costs with new suppliers such as tariffs and foreign currency exchange rates. Another major issue for contractors is increasingly expensive shipping rates from Asia. Contractors need to look at how these costs are being captured, analyzed, and optimized.
In speaking with clients, it doesn’t seem like there’s a shortage of supplies, as most companies can get supplies to their job sites, but at what cost? The challenge for construction companies is using data analytics to understand the true cost of an item and to model different scenarios that reflect changes in suppliers or routes that can reduce costs for the business.
Henry: Okay, so to wrap up, let’s mention what our organizations do and why we’d love to speak with any contractor looking to evolve their businesses. Prophix is a solution that provides integrated budgeting, planning, forecasting, and reporting. It ties together all the pieces of software that contractors use across the enterprise. This centralizes data, gives one version of the truth, and enables intuitive reporting and dashboards, delivered to any user on any device.
Nick: At RSM, we strive to be first-choice advisors to our clients. Our mission is to help our clients achieve the goals they’ve set for their respective organizations. There are so many solutions we can offer contractors and not every solution is right for every client. We strive to find the right solution and achieve the power of being understood.