Following the financial turmoil and industry turbulence that rippled through the construction sector during the Great Recession, firms have been steadily crawling up from this low to reach new heights of economic prosperity. As construction spending continues to improve each year, it's absolutely crucial that executives, general contractors, and project managers have the right tools for tracking and measuring capital inflows and outflows for each particular job across the entire enterprise.
According to Construction Data Company, the industry spent a seasonally adjusted annual rate at $1,140.8 billion, a 10.4 percent year-over-year surge from January 2015's tally, which was $1,033.3 billion
Construction Spending Increases
After 2015 set a high-water mark for construction spending not seen since 2008, many in the industry are wondering what 2016 has in store for this sector. Just months into the new year has shown that the current upward trajectory of construction spending continues unabated.
According to Construction Data Company, the industry spent a seasonally adjusted annual rate at $1,140.8 billion, a 10.4 percent year-over-year surge from January 2015's tally, which was $1,033.3 billion. Further, January 2016's spending total is 1.5 percent higher than that of December 2015, with both figures exceeding those from November 2015. As noted by The New York Times, this is the largest jump in construction spending in eight months and represents a high not seen in eight years.
While private construction spending wasn't as high, January 2016's spending of $831.4 billion was a slight bump over December 2015's $827.3 billion. Further, January 2016's spending was 9.5 percent higher than the January 2015 figure. As noted by the source, the private construction sectors with the biggest gains were Lodging, Religious, and Manufacturing, which increased 6.7 percent, 4.4 percent, and 4.2 percent, respectively.
Further, public spending for construction also improved from December 2015 to January 2016, with a 4.5 percent increase seen over this time period. Year over year, January 2016 saw public construction spending jump a whopping 13 percent. Highway & Street projects had the largest gain at 14.7 percent, with Conservation & Development experiencing a 10.3 increase and Healthcare rounding out the top three with a 6.5 percent boost.
Time for Software?
As construction firms continue to increase their spending, it can be all too easy to lose track of the different monetary variables that must be constantly reviewed and updated. With these components not being tracked, companies may notice too late that they ended up not making profit on a particular job, due to too many change orders, unrestricted scope creep, or poor estimating.
In addition, as both the number of projects increase at the same time as spending per project rises, managers lacking experience in dealing with such a high volume can easily become overwhelmed with keeping track of all the vital financial information needed to complete each job under budget. In addition, trying to piece together all the various data from a host of single-point software systems eats up a sizable amount of man hours and resources.
One of the most effective ways to overcome the problems associated with the increase in spending is by implementing a cloud-based construction management platform. There are several different ways construction software can improve financial monitoring, streamline accounting processes, and ultimately boost profit margins.
Having to make on-the-job financial decisions can be one of the biggest detriments to staying on budget and reducing cost overages. Firms that don't use a cloud-based construction management platform don't have access to the pertinent budgetary information necessary to make the most cost-effective choices.
As noted in Strategy&, a PricewaterhouseCoopers publication, the right technological tools can provide construction firms with the leverage they need to effectively and more efficiently manage their procurement and supply chain. Managers can enforce standardized, company-wide controls over the procurement process, while simultaneously accelerating this often time-consuming process and greatly reducing the man hours needed to complete this aspect of a job.