Industry Insight Tips & Advice

Protecting Tight Margins in a COVID-Affected Construction Industry

COVID-19 has had a massive effect on the construction industry. From closing job sites to stretching materials thin, owners, general contractors, and project managers are seeing the consequences on their projects.



One of the most notable impacts of COVID was a drastic reduction in cash flow for almost all project participants. When the industry slows, everyone involved in a project tends to grab hold of what cash they have, holding onto it until we’re in the clear. Sometimes, it’s just the result of less available cash, as financing and projects begin to dry up.


Let’s take a look at the impact COVID has had on cash flow and what you may be able to do to shore up your bottom line.

COVID Cash Flow: Where’d it go?

The COVID pandemic has had a significant impact on construction projects across the globe. Owners, general contractors, Project Managers, and subcontractors have been scrambling to grab their share of the cash before it seemingly runs out altogether.


Jobs are becoming more expensive to complete. With the new rules on social distancing, personal protective equipment, increased regulations, rising material pricing, projects that used to be profitable now seem to be bleeding profits. Between purchasing masks, hand sanitizer, adding new safety regulations and paying for full-time cleaning crews, projects that were underway with profitable margins are now taking on water.  


Factor in that social distancing can double the amount of time it takes to complete a task, and it’s easy to see how timelines and schedules are suffering. While unloading a material delivery that used to take two hours with a full staff, it might now take four hours. You’ll have to budget time to unload the same amount of materials with half the manpower. After all, pinch points like entry doors and elevators could bring workers on your crew into close proximity to each other. 


Materials shortages are also stifling cash flow. If you’re lucky enough to find the materials you need, the prices are way up. Many plants and lumber yards had to shut down for some time during the height of the pandemic. As a result, materials are low, trucking costs are through the roof, and deliveries are becoming more difficult to schedule. 


All of these factors, and many more, are shrinking profit margins. They’re also leaving project managers, general contractors, and project owners wondering what they can do to survive. 

How project managers can handle tighter budgets

Most of the burden of these tighter margins falls on the project managers. They have to recognize the changes in these margins and adjust the project’s course to maintain some semblance of profitability. Holding project managers accountable to their variances and tracking the movement each month is vital to any construction company.


If you’re a project manager, all is not lost. There are some techniques you can focus on to ensure you maintain these tighter margins to the best of your ability.

Job forecasts and cash flow projections

To understand which direction the project might head in, you need to maintain detailed cash flow projections. This data is the baseline that helps you determine the health of your company or projects on a monthly basis. You’ll be able to recognize and budget for trends, allowing you to save for leaner times and make the most of your busiest season.


Effective cash flow projections need to account for income and operating expenses. They also need to track other incidentals like investments and equipment purchases. Thinking about taking out a loan? Your cash flow projection will take the payment and interest into account and show you how it will affect your monthly bottom line.


One thing cash flow projections do very well is point out trends. If you’re maintaining a proper forecast on a monthly basis, you’ll have years of data to look back at. You’ll see which months are the most profitable, which months are the leanest, and what might cause both of those scenarios.


For more information on how you can forecast with Premier Construction Software, you can schedule a personalized product demonstration here.

Estimate at Completion

With the right software, you can track your project’s progress with real-time updates on the Estimate at Completion. Your Estimate at Completion, or EAC, is an important tool for maintaining these tight COVID-related margins.


As the project moves along, and you’re updating your cash flow projections with actual costs, the EAC changes. For instance, say a one-time event occurs unexpectedly, like a change in materials, subcontracts or suppliers. You can input the change order and it will automatically impact the EAC. 


The effects of some other scenarios on the EAC can be a lot harder to track. An on-going change, like purchasing extra PPE for the duration of the project, can be a challenge. This is why it’s important to factor in pending commitments, pending change orders and anticipated costs in your EAC so you have a more accurate picture of where you will finish on the job and won’t be caught with any surprises. With the right software, the EAC should automatically calculate and should be easy to adjust. It should be easy to view the history, and raise budget transfers so you can more accurately determine the long-term effect on the margins and adjust on future jobs.

How owners can hold project managers accountable

For project managers to be effective, owners need to let them manage. But this doesn’t mean that owners shouldn’t hold them accountable throughout a project. Owners need to give PMs the room to make decisions but also maintain the ability to override the decisions when needed.


A smart way to allow your PM to operate is to use effective forecasting software. The PM can make adjustments, enter change orders, account properly for anticipated costs, or even transfer budgets through this software. With an all in one software that provides both accounting and job costing, it can auto calculate the EAC. This way you can trust the data providing the owners with a real-time update on the project’s progress and a more accurate picture of where they will finish on the job and account for all the variances. 


The owner can choose the information they want the PM to have access to and keep updated as the project progresses. The PM will then have all the data they need to make smart decisions to keep the project on track. They can compare line items on a project that are under budget and transfer those amounts to items that might come in above the targeted amount. This way, the PM can account for line items like sanitation costs or materials that have gone up in price.


To ensure that the PM is staying on budget and within these tighter margins, owners can track, approve, or deny these requests. Owners can also lock the previous months, giving them a baseline to judge the PM’s performance against.

Maintaining tight margins during COVID

Protecting what profitability you have left is the key to surviving the changes COVID has had on the construction industry. Some solutions are easy, like shifting budgets, creating change orders, or simply planning for the leaner months. But, you still need to track those items effectively to make smart decisions. You need whatever advantage you can get.


By equipping your project with the right software, you can shore up your bottom line against these profit-robbing changes. Be sure to keep an eye on your Estimate at Completion as well as your regular forecasting. These records will give you an up-to-date record of your project and where it’s heading.


What’s Next?


This new pandemic has influenced the construction industry to adopt technology and refine their business processes to help streamline operations. Traditionally the construction industry are ranked as late technology adopters as it is structured with in-person meetings, hard copy documents,manual signatures and more. In the wake of this pandemic, businesses are becoming more reliant on cloud technology, digitization, virtual meetings, real-time collaboration, and electronic sign-offs pushing the industry to a new world of collaboration and automation.


Cloud technology is now essential. Schedule a personalized product demonstration here and learn how Premier Construction Software can help empower your business. 


Author Biography:

Tom Scalisi has over 15 years of experience working in the trades. Since moving to full-time freelance writing, he has developed a passion for helping construction companies grow. He enjoys teaching contractors how technology can streamline their businesses and educating them about their rights during payment disputes. 

Industry Insight Trends & Technology

Top 10 Construction Trends in 2020

2020 has been a year of unprecedented change and challenges with the novel coronavirus causing global shutdowns and impacting all major industries. Fortunately, most U.S. businesses have now been permitted to reopen, albeit with new restrictions and requirements in place.

While the coronavirus has certainly caused some disruption and changes within the construction industry, there are still several industry trends that maintain constant and continue year-after-year. Staying attuned to industry trends will help you maintain a competitive edge by knowing what to expect and help you to prepare accordingly. 

Below we’ve compiled a list of the top 10 most noteworthy and must-watch construction industry trends of 2020.


1. Supply Chain Disruption 

For builders that rely on Chinese-made goods and materials, 2020 has been an especially challenging year with Chinese government containment efforts and quarantines stalling—or, in some cases, completely stalling—production in factories across the country. While the economic giant has begun to recover, the long-term impact to the U.S. construction industry is still yet to be fully recognized.

Fortunately, because materials sourced from China typically arrive in the U.S. by slow-moving ship, most projects underway likely already had their materials ordered and in transit months ago. However, given that China is the world’s largest supplier of construction materials—with U.S. companies sourcing everything from steel to plumbing fixtures—any production or supply chain disruption felt on its end will undoubtedly impact the U.S. as well. While we can assume there will be some impact to future projects, the extent to which is still to be determined.


2. Labor Shortages 

Prior to COVID-19, the construction industry was already facing a labor shortage due to a boom in projects and high demand for workers with the necessary skills to complete them. Now, the industry faces new labor challenges. Many U.S. businesses adapted to the coronavirus closures by shifting to a work-from-home model. However, for many construction companies, this model isn’t feasible and healthy workers are required to be on-site. 

School closures and public transportation disruptions have also created a myriad of new challenges for construction industry workers that impact their ability to show up to work on time, if at all. In anticipation and preparation for increased absenteeism—whether due to illness or other factors—supervisors should begin to cross-train employees to handle multiple functions, and utilize technology to streamline operations such as construction management solutions.


3. Improved Safety Equipment

Aside from the new health and safety protocols implemented as a result of coronavirus, the construction industry is witnessing a rise of machines that are capable of increasing jobsite safety and reducing risk. For example, some work boots can now automatically connect to Wi-Fi and alert others if a worker has fallen. Another example is environmental sensors that can detect workplace conditions (like heat, wind, noise) and assess risk.

These machines are changing the jobs humans do by augmenting the decision-making process and creating room for higher-level jobs to use the data to decipher and translate findings into actionable insights.


4. Augmented Reality

Although virtual reality (VR) has been an emerging trend over the past few years, experts say it’s quickly growing outdated as augmented reality (AR) becomes the new “it” trend. VR is strictly a digital experience, whereas AR combines digital and physical views to create an immersive experience in real-time. 

Benefits of AR for builders and developers include 360-degree video to enable fast and affordable simulations, 3D visualizations of future projects and automated measuring of buildings, just to name a few. For clients, AR can provide more efficient project staging and make pre-construction projects tangible for buyers and tenants.


5. Drones 

drones in constructionDrone usage continues to be one of the fastest-growing trends in the construction industry as the technology advances and becomes more affordable, and the capabilities of drones continue to expand. Drones are commonly used to produce heat maps and thermal imaging, but the advancing software now makes it possible for them to provide real-time and actionable data that can be used for rapid decision-making and to streamline the entire construction process. 

Drones can also be used to improve workplace safety and reduce injury. For example, drones can be used to survey job sites to ensure workers are kept from potentially dangerous situations. They can also reach heights unsafe for the human worker.


6. Cloud & Mobile Technology

Not that long ago, most people didn’t understand what “the cloud” was—let alone a cloud-based operating system. Today, most mobile devices can access information anywhere, any time, and from any device. Cloud-computing has become integral to the construction industry for a number of reasons, including powerful data processing, connected job sites, easy sharing, and data storage, just to name a few.

Given its ease of access, Software as a Service (SaaS) has become a leading way to get the most benefit from cloud computing with minimal investment. There are SaaS offerings for almost every construction task, and Premier Construction Software offers the most powerful, all-in-one cloud-based software solution on the market to help you streamline accounting, job costing, project management, document management, approvals, electronic signatures and more. 


7. Modular & Prefabricated Construction

Another growing trend is a shift toward modularization and prefabricated construction because of the time, energy and cost savings. Modular construction is a prefabricated approach to building repetitive structures like hotels, apartments, and office buildings. 

Because modular units are built off-site, companies do not have to deal with construction barriers like inclement weather or limited working hours. Prefabrication can save companies a lot of money because they can get bulk discounts on materials—which, in turn, also saves time (and time equals money). These processes are also considered more eco-friendly because any leftover materials can easily be recycled. 


8. Building Information Modeling (BIM)

Given the emergence of an open and highly collaborative data ecosystem, it should come as no surprise that BIM continues to be one of the hottest trends in the construction industry. BIM allows users to generate computer representations of buildings and utilities, and brings more accuracy to the building process by empowering the exchange of important project information between key stakeholders.

BIM’s further evolution—like 4D and 5D BIM—will be the catalyst for fundamental change within the industry. Improved technology is anticipated to make construction projects more productive, affordable, eco-friendly and safe.


9. Green Technology & Sustainability

Every year, green construction grows in popularity as more companies look for ways to incorporate sustainability into the construction process. Green construction entails building projects in an environmentally responsible and resource-efficient manner to reduce carbon footprint. Sustainability construction includes the preservation of the environment, with a focus on social responsibility.  

A few green trends gaining traction in the construction industry include bricks made of recycled cigarette butts, self-healing concrete and thermally driven air conditioners. 


10. Construction Management Software

Construction software plays an important role within the construction industry, but many companies are using multiple disjointed systems that don’t speak to each other in real-time. This creates disconnect between accounting and project management which, in turn, causes bottlenecks, errors, and inaccurate reports. 

Premier Construction Software empowers businesses to work smarter by providing modern, powerful and easy-to-use construction software. Our all-in-one software solution features accounting, job costing, in addition to project and document management to ensure the data syncs real-time, making it easy for businesses to trust the data to make more informed decisions.

To learn more about Premier Construction Software and to speak to a representative, click here.


Final thoughts

As the construction industry continues to evolve, it’s imperative to stay informed about trends that are shifting the business and global landscape. Adapting to these changes and leveraging technologies to maximize efficiency and reduce risk will help business owners stay competitive, offset additional costs and increase profitability.


Author Biography:

Kathryn Dressler is a content strategist with more than 10 years of experience across the spectrum of marketing services, including blogging, social media, public relations, copywriting and editorial services.