Construction budgets are complex and remain fluid throughout the lifecycle of a project. Therefore, managing them is both a science and an art. Utilizing industry-specific cloud-based financial software with a centralized dashboard that contains all the financial information for the project, such as vendor contracts, invoices, change orders, is the science of managing a budget. This software, paired with an experienced Owner’s Representative who can fine-tune this hard data with their knowledge of the variable costs such as labor and soft costs, has the ability to bring a project to completion on budget—ultimately eliminating gut-driven decision-making from your construction project.
One of the most significant benefits of using AI-driven financial software is proactively forecasting cash flow throughout the lifecycle. Other benefits include managing risk, the ease of funding and draw requests, and early detection of errors & omissions.
The only way to successfully manage risk is with a forward-thinking data set. Spreadsheets and legacy software are prone to human error and are data entry intensive. In 2012, an excel error played the feature role in JP Morgan’s “London Whale” $6 billion trading loss. JP Morgan hired an expert quantitative mathematician to create a new value at risk (VaR) model. The model that was created was manually operated through a series of excel spreadsheets copying data from one spreadsheet to another. You can quickly see how this could be a problem. Excel is software that is reliant on the humans inputting the data and has no way to alert you when the data is incorrect or a formula is broken. It simply gives you a number.
Today’s financial software removes the headache of data entry by using AI technology, intelligently placing data on the correct line item within the project budget once an invoice is accepted into the system. This allows for the construction spend to be updated in real-time, giving the Owner’s Representative the ability to see where an issue might be arising and take immediate action for course correction. The ability to capture all costs and potential costs (exposures) in real-time is the only way to accurately monitor a project’s health and truly forecast the total anticipated spend of each line item.
Another benefit to financial software that uses AI intelligence is its ability to comb through your project data predicting trends, and tracking KPIs, making it an excellent tool for budgeting future projects.
Cash flow is the driving force of a project. However, forecasting cash flow has historically been difficult and time-consuming due to the manual nature of reviewing, approving, and tracking invoices. Today, financial software simplifies the process. Once the Owner's Representative accepts the invoice, it is read, stored, and is matched with its respective contract and budget line with only the click of a button, allowing the user to see the total spend immediately for a particular line item and allowing you to strategically plan for the future.
An experienced Owner's Representative will be actively monitoring the Total Anticipated Cost of a project. That includes contracted spend and any potential costs (exposures) that may arise along the way. Software that ties exposures into the contracted spend rather than below the line gives the owner the most accurate total anticipated costs. It is important to note, not all software links potential costs (exposures) into the overall project budget the same way, making it easy to overspend on a line item causing the project to go over budget.
Purchasing goods and services on a construction process at times is a daily occurrence to keep a project moving and meet all the deadlines. The many invoices to pay for these goods and services come in randomly throughout a project. An owner’s representative streamlines the process of draw requests for owners by sending over a monthly invoice package containing all the approved requisitions for payment.
Creating these draw requests for owners was an arduous affair in the past. However, in today’s AI-driven financial software all that is required is a single click of a button to gather all the necessary documentation required for the draw request. This type of automation allows the Owner's Representative to focus on the future of the project and not on time-consuming administrative tasks.
Inevitably errors & omissions occur on construction projects. They can happen due to an omission on the architect's construction documents or a problem developed during construction. Financial software increases visibility as to the overall project's health and immediately showcases the areas where there might be an issue in the field. Most financial software tracks line items by cost and percentage complete. This is where the 'art' comes into play. An experienced Owner's Representative can quickly catch when a spend/percentage complete does not align with the actual completion in the field and address the issue before it becomes a real problem. Identifying problems early can significantly decrease the negative impact they have on a project.
At Dubrow Group, we partner with Northspyre - an AI-driven financial software. This software has a network of talented industry professionals behind it continuously improving the software. Having that measure of support available on every project gives us confidence that we are making the best data-driven decisions for our clients.
We utilize this software as our single source of financial truth on every construction project we manage. It holds all documents, information, and data for quick access for easy project monitoring. Our clients appreciate the executive summary reports, while the project team appreciates the insights that keep them moving forward on schedule and budget.
As we continue to add to our database of projects within the software, financial trends on projects become more clearly defined, giving us better data to use in planning all future projects.