How ERP Boosts Project Cost Intelligence in Construction Industry

Today, let’s start by being honest. Construction industry has never been for the faint hearted when it comes to project cost. So, lets understand why and how about the project cost intelligence.

Each and every project always looks great on the hard copy until you get to see things like – spikes in material costs, bills piling up for sub contractors and late updates from the sites. And you got me right the result? Well, by the time your finance team tries to stitch each piece in their spreadsheets, your profit margins have already vanished in the thin air.

I think that you might find this something familiar? and if it is so then you are in line with most of the construction firms that are trying to battle the same. They have a lot of moving parts and too little visibility into each.

When after the fact thing becomes too late

last year i spoke with one CFO who is from an EPC firm. What he said was that” by the time my monthly MIS reports come in the project is already gone over budget”.

What you get from this line sums up why do the construction companies always struggle with the profitability part.

They have tools at hand like – excel sheets, accounting software, and stand alone project trackers but none of them talks to each other.

So, when every department is doing their job no one actually sees the whole picture which includes slipping margins, failing forecasts, and reports arriving late to the top management. Well, most of the time this causes the management to end up reacting instead of steering the complete project.

Poor Visibilities Hidden Cost

We are already aware from the data provided by research organizations world wide gives us the understanding that construction industry contributes nearly 13% of the global GDP. But unfortunately they are still line up in the least digitized industries. According to McKinsey, they have seen that a big construction project will take around 20% longer time to finish and will run up to 80% over budget.

So, why is it so? What the crux is, it’s all about missing real time financial control.

Most of the times we have seen on ground that things like untracked material wastage, idle equipment, and delayed vendor billings are the main culprits and the actual silent profit killers. Also, if we add fluctuating prices and manual data entry, even a 2-3% deviation per project can for sure wipe out your profits for the year.

Stepping up From Spreadsheets to Smart Systems – Project Cost Intelligence

Kindly understand that project cost intelligence is not a buzzword but it’s kind of a practical way that helps you to make financial predictability possible.

You can think of it as like just moving from the rear view monitoring to an actual live dashboard. Instead of knowing what went wrong you can actually see that what is going wrong right away and you can easily fix it before it escalates.

Well, all of the magic like in the integration of all departments. When estimation, procurement, HR, accounting, and project tracking come together in one ERP platform, let’s say Odoo, you get something rare in construction a is single source of truth.

So, you get to have a system that helps in syncing every transaction, timesheet, and vendor bills automatically. Your budget gets updated in real time and the cash flow forecasts are no longer a part and parcel of your guesswork. Hence, you start to manage the out comes and not the numbers.

Example in Action – Project Cost Intelligence

Here is an example for you, where before integration –

• Spreadsheets being used to log expenses by the site engineers
• At month end the finance department is reconciling the bills
• After the damage the reports are pouring in

And after the integration with Odoo ERP we have –

• As soon as the materials arrive and labour hours are logged expenses are synced automatically
• Dashboards with real time live updates show you the budget variances and the burn rate
• Whenever costs are crossing the threshold auto alerts are triggered

What used to take weeks now will happen in mere minutes.

Our Clint’s Real Story from the Ground

We had this industrial construction contractor client. He was handling a 18 million dollars projects. he too had a similar and familiar problem. They were into manual cost tracking along with late vendor reconciliation, and month end chaos.

We implemented Odoo ERP integrating project, purchase, HR, and accounting modules. After that within six months they realized that their:

• Project cost overruns had dropped by 28%.
• Profit margin visibility improved from weekly to real time.
• Cost reporting cycles became almost 40% faster.

This is what their CFO had to say – “It’s for the first time I can see where each and every dollar is being spent and foremost thing is why actually”. And that’s the power of project cost intelligence.

So, how It works behind the scenes

So, there are three pillars to it and and let me break them down for you –

Though Integration you get a unified financial view. All your key functions whether it’s about estimation, procurement, HR, project management, accounting every thing lives inside one connected ERP. This helps a lot, so when a site level change is made by any person your financials automatically change and there is no need to wait for manual updates.

Automation give you live cost tracking. All of your expenses, invoices, and timesheets are logged automatically. Any approvals requires move through the system’s digital workflows thereby reducing leakages and human errors. Apart from that, you get timely automatic alerts whenever there is a cost threshold breach.

You have intelligence that helps to get predicative and preventive analytics. Odoo dashboards show you exact cost variances, trends in profits, health of your cashflow. Algorithms for forecasting can help you predict end of project costs based on your current burn rate. It gives CFOs and COOs the real power so they can act early.

Reality – Before and after Odoo ERP implementation

Processes	Before ERP Implementation	After Odoo ERP Implementation
Cost Tracking	Manual spreadsheets, post-facto	Real-time, automated
Budget Control	Static and periodic	Dynamic and continuous
Cash Flow Forecasting	Reactive	Predictive
Reporting	Fragmented and delayed	Unified and instant

So, this just not only about automation but visibility that will help you in driving profitability.

What Leaders Will Gain

After implementing ERP and project cost intelligence we have seen what the firms are able to achieve in months –

• Real-time margin control that allows them to see the actual profit leaks before then turn into losses.
• Predictive forecasting helps them with data allowing them to plan ahead without any assumptions.
• Reduced manual errors as the teams can collaborate better and decisions move faster.
• Cross-functional clarity between finance, procurement is achieved and the operations work in sync.
• Sustained profitability as your projects stay predictable, and helps in growing your confidence.

Well, construction is all about having grip and control over time, materials, money, and people. But understand that the control will never come from spreadsheets but through visibility itself.

Project Cost Intelligence when powered by a unified/integrated ERP system like Odoo provides you with complete clarity to act early, spend wisely, and build profitably.

We can help you to map your current challenges, identify your cost leaks and showcase how Odoo can turn your data into profitability.

To know more, drop us a line at sales@apagen.com or call us on – +91 9971800665.