How construction businesses can use PPP windfalls to future-proof with technology investments
Early in the COVID-19 pandemic, Paycheck Protection Program (PPP) loans offered construction businesses a lifeline, providing funds to cover payroll as jobs were shut down and payments slowed. Ultimately, though, the interruption wasn’t as large as expected, as the industry was designated as essential and contractors were able to bring people back to work. So now many companies are experiencing a windfall of sorts, between their PPP loans becoming fully eligible for forgiveness and being recognized as large, tax-free gains on their balance sheets, and the cash they have accumulated as their work kept going while PPP funds were being used for payroll.
This windfall offers a rare opportunity to invest funds in ways that can have profound impacts on the success of the business in years to come. It may be tempting to channel these funds into the usual investments: iron, new equipment, other upgrades to the fleet. But those investments alone are not enough to prepare for the future, especially a future that continues to be uncertain.
Instead, we encourage businesses to take this opportunity to make long-term investments in an area where the industry has long lagged behind: technology solutions and capabilities.
The need for contractors to make targeted technology investments has accelerated as a result of COVID-19 as stay-at-home mandates have forced contractors to improve the work experience through digital rather than paper-intensive initiatives. Technology solutions to manage a more mobile workforce have come to the forefront. Additionally, with the prospect of a federal infrastructure bill becoming law and offering more opportunities for new business – along with new requirements to be met – these investments could mean the difference between being selected to participate or not.
Every contractor needs a roadmap
The first step in making these investments should be a thorough assessment of the company’s current capabilities, to create a roadmap of where PPP funds can be infused for more efficient and effective operations. The journey will be different depending upon where the company sits along the digital continuum and the business lifecycle, but everyone has room for growth. A mom-and-pop shop that has always been paper-intensive may need to take first steps to bring in automated software systems and then engage and educate its workforce on their use; a large construction organization may already have multiple software systems in place but may need to concentrate on integrating disparate systems and better protecting against external risks and threats. In any case, a key aspect of building the best strategy is working with trusted advisors who know the business and can help keep close track of costs and, later, help engage the workforce in strategy and implementation.
A word of caution is to make sure that the money is spent on solutions that will actually be used, as part of a cohesive plan. Avoid well-sold but ill-suited software in favor of ones that the organization will be able to adopt, implement, and integrate with existing platforms. It is worth engaging consultants to assess which solutions are the best fit, and later, investments should be made into initial and ongoing employee training on the new systems and processes.
Software programs are essential – but don’t overlook broader capabilities
Contractors seeking to position themselves for the opportunities we expect to see over the next few years should consider investing in these six areas:
1. Digitizing and automating invoice processing, cash management, and more. This work has traditionally been conducted on paper in the construction industry. But shutdowns and subsequent remote work mandates showed the importance of putting more effective, efficient, remote-enabled systems in place, as standard in-print, in-person, paper-intensive approaches became impossible. Now is the time to implement software that can automate processes that help manage cash and overall liquidity: Invoice processing platforms that allow direct deposits and provide transparency into company spending, cash management systems that allow businesses to process checks electronically and automate banking, and more.
2. Project management software. Construction companies need to possess – in real time – important information on the status of projects to make better decisions about how to shift resources or even pause jobs. It’s critical to have project management software that can track labor, hard costs, and project milestones and requirements, and can help answer questions concerning the current status of jobs, what managers are working on, how much has been spent to date, and project forecasts and completion dates. And again, moving forward it’ll be increasingly important to be able to manage this all remotely.
3. Cybersecurity software, policies, and procedures. Contractors need to be concerned about the growing number of cybercrimes that are impacting the construction industry. Large institutional owners will require that contractors who are tied into their systems and who provide invoicing and billing have appropriate cybersecurity controls. Federal and other governmental contracts – including those tied to upcoming infrastructure opportunities – will have specific cybersecurity requirements for contracts over a certain size. Construction companies will need to make sure not only that they have the software, policies, and procedures in place to meet requirements and detect and mitigate risks, but also that their own third-party vendors and subcontractors do.
4. Diversity, equity, inclusion, and belonging (DEIB). As in other industries, construction industry stakeholders are paying increasing attention to DEIB, along with other environmental, social, and corporate governance (ESG) matters. As large public companies, investors, and the federal government set new goals and requirements around working with minority-, women-, and service-disabled veteran-owned businesses and other diversity initiatives, they will also require that their contractors embrace those efforts. This means two things from a tech standpoint: To help ensure that projects are meeting these benchmarks, it will be critical to employ compliance tracking for DEIB efforts. And, companies should look at ways they can use technology to empower these contractors along the way, from equipping them with tools and resources that help them to also be more efficient, effective, and profitable to providing cash flow to them on a timely basis.
5. Analytics will be key. While the various programs and capabilities discussed so far will involve and enable various types of data collection and reporting, it’ll also be important to have a holistic solution that brings your data together for a clear picture of where the business is at any point in time in terms of progress, compliance, and more. The analytics dashboard can help organizations rapidly gain insights into customer preferences, improve decision-making, create operational efficiencies, and streamline information management. These foundational processes, when integrated, can empower businesses to seize and sustain transformative competitive advantages.
6. Mobility. For a company that already has sophisticated accounting systems, reporting tools, etc., a final step might be making sure that there is mobility in where they can access them, especially as work locations continue to shift. Can business be conducted equally well from an office, an airplane, and a truck in the field? Can work be approved and managed from a phone or tablet, or are workers still reliant on heavy laptops or even clipboards?
The road ahead is paved by technology
COVID-19 allowed many businesses to gain a better understanding of where they were on their digital journey. But it also created a great divide – between those who have embraced technology and digital solutions and those who have lagged behind. There are opportunity costs to not innovating and digitizing. Many rapid changes that took place during the height of the pandemic will be permanent, with workforce mobility a prime example. More publicly funded projects involving public and private funding now mandate contractor compliance with requirements around DEIB, cybersecurity, and a swiftness that businesses may not have encountered in the past. A key to success will be constant movement toward a more developed, comprehensive technological ecosystem – and with the extra boost of PPP-related funds, there’s no better time to take the next steps on that journey.
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