Ever wish you could peer into the future and see which projects are likely to go over budget, so you can address issues before they happen? Innovative construction companies are using artificial intelligence, automation and predictive analytics in construction accounting to do just that.
New applications can parse and present data to aid decision-making and make important information readily available. This level of automation and artificial intelligence (AI) is especially valuable in sectors like construction, where cash flow is crucial, leverage must be closely monitored and spending and profitability must be tracked on a project-by-project basis.
Accounting software has evolved from providing a historical financial picture to offering a nearly real-time snapshot of everything from project progress to cash flow. Intuit’s recently introduced QuickBooks Assistant uses AI to answer questions, offer relevant financial data and even provide feedback. Other applications use AI and machine learning for multiple tasks, from automating expense reports to reconciling bank statements.
The growing sophistication with which AI can parse data, connect it with existing data and present it in an easily readable fashion opens up a range of promising possibilities in the construction industry. It’s a data-intensive, complex business to track. Companies manage multiple projects simultaneously, with inputs ranging from materials and labor to time constraints and leverage and each project’s profitability needs to be tracked separately. AI can provide real-time access to key information to improve decision-making.
AI’s rapid advances in automation, data analysis, security and more have the potential to change how construction companies do business, but the real transformations begin not with technology, but with a change in mindset and behavior. Business owners, executives and project managers must integrate these technologies into their everyday workflow. Most of these tools are cloud-based and can be accessed easily on a job site.
Spending, budget and cost information is no longer buried in filing cabinets or accessible only to bookkeepers and accountants. Advanced accounting software can link and display information — from immediate labor needs and costs to incoming materials and financial records. It’s presented in a way that doesn’t require an accounting or finance degree to understand. This information can and should be used to make decisions in real time.
Of course, any application is only as good as the data it receives. To get an accurate real-time snapshot of a job or a company’s financial picture, the system needs accurate data, properly formatted. Technology can already automate much of this process, integrating bank and credit card accounts with accounting systems so that every transaction shows up in your books within a day.
Databases can recognize a cell phone photo as a restaurant receipt and send that information to meals and entertainment expense categories. Using GPS, apps can automatically check workers in and out of a job site, creating instant time cards that feed directly to the accounting system. It’s a big change from the time when a lengthy bank statement arrived at month’s end, and some poor accountant had to code all of those charges.
The most exciting advancement in AI for accounting may be the promise of using data to more accurately predict future conditions. Programs can already take historical information and use it for predictive analytics. For example, given a job’s current budget, timeline and spending status, AI can begin to predict what the job will look like upon completion. Expect this to become easier, more common and far more sophisticated, when AI combines historical data, current accounting information and non-financial indicators to extrapolate into the future.
Construction companies, with their complicated variables and dependent timelines, can really benefit. Think of a job where concrete and drywall workers are followed by cabinetmakers, electricians and plumbers, all paid different rates, with changing material needs. With the right information, delays and cost overruns can be predicted before they happen, and immediate adjustments can be made.
The challenge most companies face is setting up front-end systems that record and classify project information accurately and rapidly, to connect those systems together with accounting software, and to incorporate accounting information and status into project managers’ daily workflows.
It’s a learning curve. Most construction companies are still not taking advantage of what real-time accounting can offer. Many are just beginning to convert from older systems to newer ones that allow them to receive and pay bills electronically. Construction companies that are quick to adopt new accounting and other technologies have an advantage when it comes to bidding jobs and to profitability.