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The Future of Automation in Construction Finance
It’s every business’ goal to do things quicker, easier, cheaper. Construction finance is no different, especially as developers face increased materials costs, a labor shortage and now a pandemic. Fortunately, today’s advances in technology and machine learning have created significant opportunities for construction finance partners to make these goals an even bigger reality.
What is Automation?
Automation allows computer systems to perform duties, including data input, analysis and recommendations, that would normally be relegated to a human worker. When machine learning runs efficiently, it frees up human capital to focus on more strategic processes, rather than mundane, repetitive tasks like data entry or transaction processing.
Automation in Construction Finance Today
Automation can be seen throughout the construction finance process as artificial intelligence and machine learning tackles processes and transactions associated with construction planning, budgeting, accounting, project adjustments, payment allocations, financial reporting and even industry forecasting.
Automation presents three major values for construction finance professionals today.
- Save Time
Data entry and transaction processing can be painstakingly repetitive, not to mention time-consuming. Humans being, well, humans, we’re also prone to errors, which can add not only time, but more money to a project.
Construction finance professionals also spend unnecessary time searching for the desired spreadsheet, invoice and other documents if their data sits in individual silos versus one streamlined location.
- Preserve Money
Let’s go back to those human errors for a moment. They’re costly. And we’re not just talking time-wise. Manual workflow errors can result in delayed funding, unpaid invoices, liens, audits, project delays, incorrect orders, compliance issues, skewed risk assessments and more.
The 1-10-100 rule states that it costs $1 in human output to confirm the data at the first point of entry, $10 to correct the error (if it’s even found) and $100 in losses if the error remains unchecked. Translated to a multi-million-dollar project, and that means your costs multiply at a rate of 10 if you catch that error…and a rate of 100 if you don’t.
- Maximize Human Capital
When processes are streamlined and automated, construction finance employees are freed up to focus on more important tasks. This can include relationship building, operational efficiencies, strategic data interpretation, revenue enhancers and growth opportunities, many of which are based on data-driven recommendations.
Automation’s Potential in Construction Finance
It may seem like the benefits of automation, machine learning and artificial intelligence are already here. After all, we’re saving time, money and energy…what more could we want? Experts believe there’s a lot more automation can do for construction finance.
McKinsey Global Institute believes automation will free up 34 percent of a financial manager’s workload, resulting in more time for strategic activities. EY (Ernst & Young) takes this a step further, noting that the automation of low-value, high-volume transactional processes can result in a three-pronged organizational overhaul for all this free time.
EY’s study, The DNA of the CFO, sees automation leading to:
- Senior finance executives focusing on external relations, talent leadership, partnerships, megatrend response, and ethical decision-making, among other tasks
- Strategic business partners reallocated to data-driven scenario and performance modeling, innovation and digital propositions, and liaising with business units and functional leaders
- Next-generation centers of excellence that emphasize finance analytics, forecasting, strategic risk and resilience, connected reporting, smart compliance, and financial management
EY isn’t the only company that believes automation will inspire companies to create centers of excellence. Workday, a finance and HR cloud applications provider, also envisions a future where corporations use the investment dollars they’ve saved through automation to establish hubs that shift away from number crunching in favor of financial analytics and forecasting. This includes strategic risk and resilience, compliance and control and more efficient data-driven financial management.
The implications for construction finance are tangible. These automation systems are moving past error identification and flagged concerns and into a realm where they can make independent assessments and recommendations that can drive efficiency and ROI. This also improves financial, regulatory and statutory reporting, as well as tax accounting, analysis, data management, compliance, and preparation and review.
Through automation, developers can devote more time to the project at-hand, sourcing new opportunities and making informed investment decisions based on data-driven forecasting. Lenders can push some of their menial, administrative-heavy tasks to the side in favor of acquiring new business, optimizing credit decisions, enhancing financial risk management, improving partnerships with developers and refining skills in predictive analytics.
The Skills of the Future
One of the biggest criticisms of automation is that many believe this technology will replace millions of jobs. This isn’t entirely correct. Automation will always require a human element. In addition to that, the entire purpose of machine learning is to make one’s job easier; not to take it away.
Automation, when executed properly, frees up key members of the development and lending teams to focus on what they do best. However, that doesn’t mean everything stays the same. This extra time should go toward relationship-building, yes, but in an ideal world, a significant portion would also go to data analysis in an effort to manage risk, forecast performance and predict the future (as best as anyone can, anyway).
Automation can input the data, run the data and tell you what the data says. It’s then the human’s job to act upon that analysis. To do that, these employees must know what to do with this information. This may require additional training, education or hiring as the future of construction finance embraces the concepts of predictive (potential future outcomes) and prescriptive (specific recommendations) analytics.
The construction finance industry has spent decades dealing with manual inputs and legacy management systems. Today’s technologies offer us the ability to take this industry – and the businesses that embrace it – to new heights through automation. Rabbet can help get you there. Our streamlined software takes the guesswork and manual entry out of the finance management equation. We’re happy to show you what Rabbet can do for your projects and, most of all, for your bottom line. Contact us today.