The construction industry is known for its high rate of insolvencies. According to the Bureau of Labor Statistics, 45% of construction businesses will close within the first three years, and less than 20% will survive for 20 years.
Fluctuating material costs, labor shortages, the complexity of managing multiple projects simultaneously and failure to invest in new technologies contribute to financial distress for many construction companies. As a result, these businesses must adopt effective strategies to ensure their survival and success.
One such strategy is time tracking, a seemingly simple yet profoundly impactful tool that can transform the way construction companies operate. By adopting advanced time-tracking systems, construction companies can improve project management, enhance productivity, ensure accurate financial tracking, and prevent costly delays. This comprehensive approach not only mitigates the risk of insolvencies but also positions companies for long-term success in a highly competitive industry.
This article explores the industry’s common problems and demonstrates how time tracking can help prevent financial instability.
This Article Covers:
- Challenges in the Construction Sector
- How Time Tracking Software Reduces Insolvencies
- Choosing the Right Time Tracking Construction Software
- Time Tracking Software Can Prevent Costly Delays
Challenges in the Construction Sector
The construction sector faces a number of challenges which companies must address if they are to be successful. Here are the key issues:
Cost overrun
One of the most pressing issues in the construction industry is cost overrun, which occurs when a project’s expenses exceed its initial budget due to unforeseen costs, inflation, delays, and unexpected challenges. According to a study by McKinsey, large construction projects typically take 20% longer to finish than scheduled and can be up to 80% over budget. Such financial discrepancies can erode profit margins and compromise the viability of future projects.
A key driver of cost overruns is the escalating price of construction materials. Market volatility makes it difficult for construction firms to accurately forecast costs, leading to budget excesses and reduced project profitability. However, there are signs that the rapid increase in building material costs is beginning to stabilize. According to the latest Producer Price Index (PPI) report, the growth rate in the average price of inputs to residential construction, excluding energy, has dropped sharply—from 15% in 2022 to just 1.3% in 2023. Throughout 2023, the average monthly price increase was only 0.2%, a significant decrease compared to 1.5% in 2021 and 0.7% in 2022. This trend suggests that material costs are stabilizing, offering some much-needed relief to the construction industry.
Another significant contributor to rising costs is lagging productivity within the industry. Despite technological advancements, productivity improvements have not kept pace, causing delays and additional costs. To combat this, construction companies need to adopt new technologies such as automated timesheets, drones, and artificial intelligence to enhance efficiency.
Inflation has also played a significant role in rising costs, reaching a 40-year peak in 2022 and affecting prices for building materials, equipment, and labor. In 2024, inflation pressures persist, with material costs expected to increase by 2-6% and labor costs by 3-5%. Despite some relief from declining inflation rates, overall prices remain high, necessitating careful cost management and strategic planning to minimize impacts on construction projects.
Delays to Building Projects
Delays pose a significant hurdle in the construction industry, impacting timelines and profitability. The intricate nature of construction projects, involving various subcontractors and suppliers, often results in unexpected delays.
A key cause of these delays is supply chain disruption. The industry depends on the timely arrival of materials and equipment, which can be hindered by natural disasters, transport issues, or regulatory changes. Moreover, modifications in project scope, design, or budget can cause delays if not managed efficiently.
According to data by machine learning company nplan, nearly 9 in 10 large-scale construction projects (85.5%) are delivered late. The research showed that the median delay for projects completed before the pandemic was approximately 100 days, while pandemic-era projects have a median delay of more than 200 days.
Effective project management is one way that construction companies can mitigate delays. Automated tools such as Jibble enable real-time tracking, identify bottlenecks, and facilitate prompt corrective actions. Weather conditions and unforeseen events also frequently disrupt construction timelines.
Slow Adaption To Emerging Technologies
One of the biggest challenges facing the construction industry is its resistance to new technology. Tools like Building Information Modeling (BIM), time-tracking tools, and 3D printing could revolutionize the way things are done, making construction professionals’ lives easier and construction sites safer for everyone involved. Despite recognizing these benefits, many construction companies struggle to finance these innovations.
A 2024 survey by the Associated General Contractors of America (AGC) found that only 56% of construction firms have a process for testing and implementing new technologies. The slow adoption rate is due to high initial costs and the industry’s fragmented nature, complicating large-scale implementation. Additionally, a McKinsey report highlighted that construction labor productivity has grown by only 1% annually over the past two decades, compared to 3.6% in manufacturing. The report suggests that adopting technologies like AI, drones, and advanced data analytics could boost productivity by up to 60%.
Time-tracking software, in particular, has shown substantial benefits. These tools provide real-time data on labor hours and project progress, helping to identify inefficiencies and optimize workforce management. A report by Software Advice indicated that companies using time-tracking software saw a 30% improvement in project completion times and significant labor cost reductions.
Labor Shortages
The global construction industry continues to grapple with significant labor shortages, a trend that shows no signs of abating in 2024. This persistent issue stems from a variety of factors, primarily an aging workforce and a widening skills gap. According to the Associated Builders and Contractors over half a million additional workers are needed on top of the typical hiring pace to meet project demands. Labor shortages have also resulted in delayed projects as there are not enough workers to take on all of the work that is needed.
The U.S. construction industry’s unemployment rate averaged 4.6% in 2023, with job openings historically high at an average of 377,000 per month. Structural factors, including more than 1 in 5 construction workers being 55 or older, contribute to this shortage. The lack of younger generations entering the field exacerbates the problem.
To mitigate labor shortages, companies are also leveraging time-tracking software like Jibble to optimize workforce management. These tools provide insights into labor allocation, helping managers deploy workers efficiently and monitor productivity, reducing overtime costs and improving project timelines.
Poor Forecasting/Planning
While labor shortages in the construction industry are a persistent challenge and significantly impact project timelines, costs, and overall efficiency, these shortages are exacerbated by poor planning. One of the most significant factors contributing to poor planning and forecasting in the construction industry is the lack of accurate, up-to-date data. Construction projects require precise information regarding timelines, material costs, and labor expenses to develop realistic budgets and schedules. Without this data, project managers often face difficulties in forecasting cash flows and allocating resources effectively, leading to delays and cost overruns.
To address this issue, construction companies can invest in advanced construction management software, time tracking, and project management tools. This can help companies identify inefficiencies, streamline productivity, and onboard new staff members quickly.
Unrealistic client expectations can also pose significant challenges. Clients may demand accelerated schedules or have limited budgets that are not feasible, leading to strained resources and reduced productivity. Project managers should manage these expectations from the outset by breaking down long-term forecasts into achievable short-term goals.
Another critical challenge in the construction industry is the lack of effective communication among project stakeholders. Misaligned expectations and conflicting priorities often arise when there is insufficient communication between the construction company, project managers, and other stakeholders. This can result in delays, cost overruns, and compromised project outcomes. A study by FMI Corporation found that 48% of rework in construction projects is due to miscommunication and poor project data.
Delayed Cash Flow
Many construction companies rely on outdated invoicing systems that disrupt cash flow and project funding. Invoicing delays can lead to late payments, causing significant cash flow issues. These disruptions can halt project progress, delay employee and subcontractor payments, and stall procurement of necessary materials. A recent report from the National Association of Home Builders (NAHB) indicated that 75% of builders face issues with delayed payments, which significantly impacts their ability to complete projects on time and within budget.
To mitigate these problems, the construction industry must adopt modern invoicing software that ensures timely and accurate financial transactions. By streamlining payment processes and improving cash flow management, construction companies can maintain steady project progress and better navigate the challenges posed by labor shortages.
Furthermore, implementing digital payment systems can reduce the time taken for payments to be processed and received, thereby improving overall cash flow. According to a report by Deloitte, construction companies that adopted digital payment solutions saw a 20% improvement in cash flow stability. These systems can help ensure that all financial transactions are handled promptly and accurately, reducing the risk of project delays and financial instability.
How Time Tracking Software Reduces Insolvencies
The good news is that time tracking construction software can help to reduce many of the common problems that construction companies face. Over time, this can help to save costs, improve efficiency and plan ahead. Here are some of the main ways time tracking software can help construction companies:
Enhanced Project Management
Using time tracking software plays a crucial role in preventing delays and reducing costs in the construction industry. By accurately monitoring employee hours and project timelines, it ensures that tasks are completed on schedule, according to deadlines. Real-time data enables project managers to identify and address bottlenecks promptly. If your project management software includes precise tracking of costs, this will help in maintaining budgetary control, preventing cost overruns. It is worth noting that time tracking software facilitates better project management and financial oversight.
Increased Productivity
Using construction software lets employers see at a glance how an employee is spending their time, providing valuable insights into productivity and efficiency. Managers can quickly identify which tasks are consuming the most time and assess whether employees are focused on high-priority activities. This visibility helps in reallocating resources and adjusting workloads to optimize performance. It also aids in recognizing patterns that may indicate inefficiencies or potential areas for improvement. Moreover, transparent tracking promotes accountability among employees, encouraging them to manage their time more effectively and stay on task. Furthermore, time tracking software generates detailed reports that highlight trends and discrepancies, enabling more accurate project forecasting and budgeting. By understanding exactly how time is being spent, companies can reduce wasted hours, ensure timely project completion, and avoid the costly delays that result from poor time management.
Accurate Financial Tracking
By measuring exactly how much time employees are spending on specific tasks, this makes it easier for companies to calculate exactly how much they should pay workers.
This helps companies measure exactly how much time employees are spending on specific tasks,making it easier to calculate precise payments for workers. Another benefit of time tracking software is that it can reduce disputes over work hours and costs, by increasing transparency. Moreover, it provides valuable insights into project profitability and cost management, ensuring efficient resource allocation and adherence to project budgets.
Choosing the Right Time Tracking Construction Software
The features you need will vary based on your business’s unique needs and challenges. However, certain key features are essential for any software to be effective. We discuss these below:
Cost-Effective
Construction companies already face significant challenges from cost overruns and insolvencies, so time tracking software shouldn’t exacerbate these problems. Choosing a cost-effective solution is crucial to streamline operations and maintain financial health. One of the most cost effective time tracking software on the market is Jibble, which is free for unlimited users.
Multi-Device Compatibility
For time-tracking software to be effective, it must work across multiple devices. With employees using iPads, mobiles, and laptops, seamless compatibility is essential to ensure timesheets are always accessible.
Overtime Settings
For accurate time tracking, choose software with multiple overtime settings tailored to your construction company’s unique needs. With workers doing overtime on different days and shifts, the right software will automate these calculations, ensuring accurate payments and satisfied staff.
Geofencing Features
Choosing time-tracking software with geofencing features simplifies assigning workers to specific construction sites and prevents them from clocking in before arriving. This ensures companies only pay for actual time worked.
Reliable Offline Functionality
Opt for time-tracking software that operates without a WiFi connection to maintain precise timesheets, especially on remote construction sites with poor signal.
Detailed Analytics
Another major problem for construction companies is accessing accurate data for forecasting, billing, and scheduling. Time-tracking software with comprehensive reporting and analytics helps identify patterns and calculate project durations, making planning easier.
User Friendly
The software should be intuitive and straightforward for daily use, which minimizes errors and miscalculations.
Industry Specific
Ideally, construction companies should invest in software that is uniquely adapted to the specific needs of their industry, ensuring streamlined operations and enhanced efficiency.
Syncs With Popular Apps
The best time tracking software should ideally integrate with popular apps such as Xero, Payroll Panda, Deel, Zapier, and more, facilitating seamless data transfer and synchronization across various platforms. This integration capability ensures efficient workflows and reduces the need for manual data entry, and thus optimises productivity and accuracy.
Time Tracking Software Can Prevent Costly Delays
Although time tracking software may not solve all of the problems that construction companies face, it can certainly go a long way to prevent costs and delays from spiralling out of control and leading to insovlencies.
Gathering accurate data on how long construction projects are taking, makes it much easier for construction companies to plan ahead, and make more accurate forecasts.
Over time, this can help to prevent unnecessarily delays, which lead to increased costs and forecasting problems.
Time tracking software automates many of the processes that are prone to human error, and calculates timesheets, overtime, and identifies patterns for you. This can help you avoid many of the pitfalls that many construction companies have fallen prey to. Jibbles time tracking software can contain all of the features you need to analyze construction projects accurately and easily.
