28 Apr Financial technology in the construction business
By guest writer Rachael Everly
Today, there are only a few industries that remain relatively unaffected by technology, unlike most of the world. The construction industry is one of these. Many enterprise operations are now automated, or are expected to become automated in the near future. Even if they may not be capable of automating core processes, industries have incorporated information systems to efficiently manage support functions such as finance and administration. Most companies rely on information systems for financial management, receivable management, tracking, and payment management. These automated services are received through on-site or cloud-based software platforms.
The construction industry has been one of the slowest to adopt new technologies. Construction industry investments in technology amount to only 25% of what companies in other industries spend on technology; much of which is limited to the use of CAD software and other types of technology utilised in the designing phase of a construction project. This may indicate resistance by construction companies in the adoption of technology. Or, it could suggest that current software platforms are not catering to the industry’s needs, and that there is an opportunity for tech companies to develop industry-specific solutions.
Recent years have also seen a shift toward software for the management of finances. Specific software platforms have been created that allow contractors to better manage projects, secure extensions of credit, follow deadlines, maintain partner and customer relationships, and to better monitor receivables and payments.
Need to Adopt Technology
Traditionally, the construction industry has relied on hand-written ledgers and Excel spreadsheets, and although technological change is now being welcomed, industry use of technology is still far behind that of other industries. In the construction industry, the potential for financial technology applications extends beyond just construction financial management. Financial technology offers specific and beneficial assistance in managing receivables and developing and implementing an efficient payment funnel.
Construction companies that disregard adopting technology and implementing software platforms may appear out-dated and risk falling behind competitors that have been quicker to adapt, and are now reaping the benefits of greater efficiency and smoother financial transactions. In general, the construction industry has very narrow margins and improved efficiency could result in sufficient financial gains. Poor efficiency, on the other hand, will likely have a negative impact on a company’s market position.
Over-reliance on Excel spreadsheets
A survey conducted by JB Knowledge found that, although the majority of construction companies have implemented accounting software, these software platforms are not capable of interacting with other programmes. Shockingly, 85% of what had been defined as ’accounting software’ was actually just Microsoft Excel spread sheets. The use of CRM technology was also limited – only 21% of the surveyed construction companies reported implementation of CRM technology, out of which one third of the implemented systems were actually just Microsoft Excel spreadsheets.
There was once a time where Excel was thought of as the most efficient way to manage financial data, but most of the world moved past that idea decades ago. Excel has proven to be useful software, but it is not designed to manage advanced financial systems. Excel is general and lacks collaborative tools. Using Excel to manage large amounts and different types of data generally results in multiple spreadsheets with limited ability to be linked together.
Receivables Monitoring Technology
A Receivables Monitoring Solution offers a much more effective alternative to Excel. An advanced software platform is able to provide easy access to information and should be able to display data in a manner that is easily understandable. Likewise, it should be able to collaborate with other software applications and efficiently track security rights and the steps needed to remain in a secured position. The purpose of receivables monitoring is to better ensure timely payments from clients and partners. Being secured in all extensions of credit is key to enabling prompt payments.
This post was written by guest blogger Rachael Everly – an undergraduate student who loves to write on the topics related to business, finance, and education. You can check out Rachael’s previous contributions to our Fintech Blog via the following links:
• | Read the post – Mobile wallets and their impact in 2017 – here
• | Read the post – Top three effective strategies to increase digital audience – here
For further updates, follow Rachael on Twitter @RachaelEverly