The construction industry requires specific solutions for distinctive challenges. These include variable costs, longer project timelines, and needing to have precise control over resources.
Construction projects have lengthy timelines, and unlike many other industries, financial commitments often need to be made months or even years in advance. Market fluctuations, labor shortages, and material costs all affect profitability.
Project completion delays add even more pressure, requiring contingency plans that account for unexpected changes.
Without a financial strategy and FP&A software, companies face cost overruns, delayed receivables, and subcontractor payment issues.
Strong financial planning processes help businesses stabilize and prepare for uncertainties—but the right FP&A software for construction is key.
Improving FP&A for Construction
In the following guide, we’ll discuss best practices and the top software for construction FP&A to navigate financial obstacles, improve project forecasting, and acquire more profound insights into cost management.
Challenges in Construction FP&A
Before proceeding to best practices and solutions, we’ll examine the top financial challenges construction firms face.
These challenges influence everything from cash flow stability to project profitability, and this means effective financial planning is critical.
1. Project-Based Revenue Cycles and Cash Flow Inconsistencies
Often faced with unpredictable cash flow, construction firms must carefully manage liquidity. Delayed client payments only add to the financial pressure.
2. Unpredictable Costs and Labor
Fluctuating costs and unpredictable labor needs make construction budgeting difficult. Inaccurate expense tracking increases the chance of overspending and financial strain.
Construction companies run the risk of eroding profit margins and endangering project success without aggressive financial monitoring and cost control strategies—we’ll get to those later in this article.
3. Balancing Financial Commitments vs. Cash Flow
Handling subcontractor payments requires meticulous financial planning. Companies need to make timely payments without sacrificing cash flow to prevent delays and cost increases.
4. Extended Project Timelines
Long project timelines mean construction companies must invest in materials, permits, and labor far in advance. Accurate forecasting is crucial for managing budgets and avoiding financial strain. Keeping the project running on time can also be a challenge in the long term, and areas such as Schedule Performance Index need to be tracked carefully.
5. Compliance and Regulatory Challenges
Financial regulations, tax requirements, and labor laws vary by area and project type. Construction firms must follow these rules or face fines, legal issues, and operational issues.
Best Practices for FP&A in Construction
With the challenges covered, let’s move on to best practices for addressing and overcoming them with strategic financial planning, strong cash flow management, and the right FP&A tools.
1. Accurate and Dynamic Forecasting Models
Finance teams can use rolling forecasts to anticipate cash flow needs, allocate resources efficiently, and plan for unexpected challenges.
Construction companies can create responsive forecasting models that adjust to project progress and external market conditions by integrating immediate financial data with historical trends.
2. Proactive Cash Flow Management
Proactive cash flow management preserves financial stability.
For example, construction businesses are urged to:
- Build structured invoicing schedules corresponding to project milestones
- Encourage early payments from clients whenever possible
- Set clear payment terms with subcontractors
Some businesses continue to rely on static spreadsheets that require manual updates. Often, this leads to delays in spotting financial red flags.
If they switch to FP&A software with real-time insights, finance teams can detect budget discrepancies early and take action.
3. Collaboration Between Finance and Project Management Teams
Effective communication between finance teams and project managers leads to better financial decision-making. Project managers need certain financial insights to make cost-effective decisions on-site.
Implementing a centralized FP&A platform helps finance and operations teams collaborate. This way, their financial objectives can coincide with project execution plans.
4. Using Construction FP&A Software
The right FP&A software helps construction companies overcome financial hurdles by streamlining reporting, automating budgeting processes, and improving data accuracy.
Modern FP&A tools integrate with existing accounting and project management systems, providing finance teams with a unified platform for monitoring financial performance.
Let’s talk more about this role in construction next.
The Role of FP&A Software in Construction Finance
Realizing manual efforts no longer cut it, construction companies increasingly rely on FP&A software to manage financial planning and reporting.
FP&A software converges financial and operational data, generating real-time reports and better visibility into cash flow trends.
Curious about web-based vs. Excel FP&A software? Learn about the key differences in this article.
Below, we’ll look at two case studies to demonstrate the real-life role of Datarails FP&A software for construction companies.
Case Study #1: AA Projects
AA Projects, a UK-based midsize construction consultancy, needed a more reliable financial planning and reporting system to support its growth.
Previously, the company relied on an extensive Excel workbook and separate accounting software, leading to inconsistencies and inefficiencies in financial reporting.
With a fast-growing business, this method simply wasn’t up to par.
Finance Director Neil Grindrod noted, “We had two versions of the truth, both using the same numbers but interpreting them in different ways.”
He adds, “The structure got out of control. We were using it for management accounts, forecasts, sector targets, divisional targets. Just one small change could then throw loads of other items out.”
After implementing Datarails, AA Projects streamlined financial reporting, budgeting, and forecasting, eliminating the errors and inefficiencies of its previous system.
“The reporting is more accurate, it’s easier to understand.” Grindrod explained, “We’ve taken a huge spreadsheet and narrowed it right down because Datarails is doing the major part of the work. Datarails is doing the grunt work in the background.”
Datarails also enhanced headcount forecasting, helping the company track recruitment and subcontractor costs more accurately.
The finance team can now easily project the impact of potential acquisitions, allowing the business to plan strategically for future growth.
“We spend less hours now doing reports, and they are much more accurate.”
Case Study #2: Bedrock Quartz
Bedrock Quartz, a Utah-based supplier and installer of high-end granite countertops, needed to improve financial visibility and streamline reporting.
CFO Rob Anderson initially sought a reporting tool to supplement the company’s ERP system, which lacked strong reporting capabilities.
However, his first choice proved too bulky and required excessive manual effort.
When Anderson discovered Datarails, he saw an opportunity to create automated dashboards that provided key metrics to the executive, sales, and operations teams—without the inefficiencies of manual reporting.
“When I saw the demo, I could see that my vision of what I wanted to do could actually be done with Datarails. So I dropped the other place I had looked into and came over to Datarails.”
Anderson adds, “It’s so easy just to upload data into the system. Once it’s in, it really is quite simple to create my own charts and graphs. I’ve enjoyed that.”
With Datarails, the Bedrock Quartz sales team can track daily performance, including:
- Budget vs. actual sales
- Site visits
- Quotes
This live visibility allows sales reps to monitor progress against targets and adjust their approach as needed.
Datarails has also simplified sales compensation calculations, saving Anderson three to four full days per month.
“Before [Datarails], I didn’t look at the daily sales because it was cumbersome to get to and see. Our sales management team now looks at it on a daily basis,” Anderson explains.
Beyond sales tracking, Anderson uses Datarails to monitor revenue trends and forecast business growth.
“I look at the insights in Datarails every single day. That’s how I know how we’re doing on sales, on revenue, how I can look at trends and forecast what’s going to happen in the future.”
How Datarails Supports Construction FP&A
FP&A software is becoming a fundamental differentiator for success in the construction industry.
Here are some of the most pronounced benefits of using Datarails for construction FP&A software.
Consolidated Data Management
Datarails consolidates all financial and operational data into a single platform. The result? Accurate and consistent reporting and planning.
Accurate Forecasting
Datarails builds precise forecasts using historical financial data and industry trends. This helps construction businesses anticipate cash flow needs, budget accurately, and reduce the risk of cost overruns.
Seamless Integration with Excel
Many construction companies rely on Excel for financial modeling, and Datarails integrates directly with existing spreadsheets. Finance teams can keep using the tools they’re comfortable with while enhancing reporting and planning capabilities.
AI-Powered Insights
Datarails’ FP&A Genius, an AI-powered financial large language model, provides instant answers to budgeting, forecasting, and financial performance questions in a chatbot format.
Automated Reporting and Workflow Optimization
Construction companies save time with automated financial reporting, lessening the need for manual data entry. Rather than losing time on repetitive administrative work, finance teams shift their focus to high-value tasks that demand a human touch.
Customizable Dashboards and Reports
Datarails provides flexible reporting options, so it’s easy for construction companies to track project expenses, subcontractor payments, or cash flow, with reports generated in mere moments.
Enhanced Collaboration
Stronger coordination between finance and project managers is possible with Datarails, making financial planning smoother for construction firms.
Your whole team can access up-to-date financial data, enhancing coordination and decision-making.
Security and Compliance
Datarails includes advanced security features, privacy, and compliance tracking to protect sensitive financial information.
Try Datarails in the Construction Industry Now
Datarails provides FP&A software designed to address the complexities of the construction industry. Join the dozens of Construction companies already using Datarails and the 1000+ companies overall using our 4.7 G2 rated FP&A software.
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