Coronavirus wreaked havoc on the global economy. Almost two years down the line, the world is only starting to recover from the aftermath. During the height of the pandemic, the construction industry suffered from the lockdown, with large numbers of construction sites shut down. Those still operating were plagued by multiple restrictions and supply issues.
In 2021, the Federal Reserve expected the economy to improve by 7%. The industry is currently doing well, with a booming housing market. There is an infrastructure plan in the Senate worth $1.2 trillion, and businesses overseas are expanding into the U.S, giving the construction industry a strong nudge upwards. Unfortunately, the small and medium-sized (SMB) construction companies do not get it easy as these opportunities pass on to more prominent construction companies.
SMBs miss these opportunities to make it big for several reasons:
Hyperinflation: The quick reopening of businesses after Covid and the stimulus will hike prices abnormally fast. Standard inflation at 2% annually drives material costs upwards.
Labor and Material Shortage: Prices of building materials have gone up due to the shortages during the pandemic. Labor costs also go up during hyperinflation. These factors might force SMB construction companies to shut down.
Public Projects: Public projects do not favor SMB construction companies as they do not help them to absorb any unprecedented hikes in material prices. The company has to look for substitutes when the prices go too high, delaying the project timelines and depleting cash flows. Since government agencies know this about SMBs, they rarely allow them to bid on these projects.
SMBs can change the narrative by:
Digitization: The only way out for SMBs is to digitize their systems and implement a CPM that can centralize and read their data. They need to automate their systems and do away with manual and time-consuming processes. Digitalization and automation mean getting payments on time and avoiding cash flow issues. Having some cash at hand allows them to bid on projects, pay wages on time and negotiate better contracts with their suppliers.
Capital: SMB construction companies need to get fast access to capital. Banks are ready to expand construction portfolios. At the same time, construction companies between $10 and $12 million are underbanked. If these two can get together, it will give SMBs better opportunities. However, this means that SMBs have to digitize and organize their books to allow banks easier access.
The facts speak for themselves, the construction industry has convoluted payment systems. Payments go through a lot of bureaucracy before they get to the payee. It is no wonder SMBs struggle with cash flow. This may be seen as the natural state of the construction industry, but it doesn’t have to be. Implementing CPM software allows for more collaborative work between teams, having visibility on the status of projects allows for more timely payments and improved project management and project forecasting.
Combine this with better access to banking and capital, and SMBs will have jumped the hurdles of finance. Machine-powered forecasting will make smaller teams better risk managers and position themselves to maximize the economic boom. For maximum benefit, SMBs need to invest in upskilling their workers and training them on new technologies, tools, and procedures. Most of these activities will benefit the workforce via a collaborative and timely environment.
Briq is a corporate performance management platform built specifically for construction financial professionals.
We join modern technology with hundreds of years of combined construction experience to give you deep insights into your business.
Briq unifies your financial workflows, making them more efficient, accurate, and timely.
By automating workflows, consolidating financial data, and enabling real-time reporting, we allow contractors to make efficient and effective financial decisions.
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