Four steps to enhance your AEC firm’s forecasting

Unanet recently released its 2024 AEC Inspire Report. In this blog series, we’ll explore the topics and themes it covers and how your AEC firm can use this information to gain a competitive advantage.

Forecasting is essential for all industries, but it is especially critical for architecture, engineering, and construction (AEC). It ensures business health, improves project outcomes, and aids strategic decision-making.

According to Unanet's 2024 AEC Inspire Report, forecasting in the AEC industry is an ever-evolving practice. We surveyed some of the greatest minds in AEC, and here’s what they have to say about how forecasting plays into their plans for long-term, sustainable success.

Charting business health with forecasting

Predicting trends is crucial for monitoring the overall health of a business. Teams must leverage accurate predictions to ensure smooth operations and project success. Yet, it's one of the biggest challenges for accounting and project management teams in the AEC sector. Fortunately, the 2024 AEC Inspire Report indicates that fewer professionals view forecasting as a significant challenge compared to 2023.

The AEC Inspire respondents had the following to say about how they use forecasting:

Importance, frequency, and accuracy

• Forecasts are evaluated based on their importance, frequency, and accuracy.
• The perceived importance, frequency, and accuracy do not always correlate.

Critical metrics

• The most vital metrics - cash flow and project cost - are frequently perceived as accurate and commonly performed forecasts.
• However, less than half of AEC businesses consider these forecasts as "very accurate," mirroring low confidence in overall data accuracy. If firms cannot trust their data, they will likely distrust their forecasts.

Labor resources

• Forecasting labor resources are deemed "very important" by 55% of respondents but are infrequently performed and rarely considered accurate.

• The manual nature of Excel, the primary tool for labor resource forecasting, introduces delays and risks to data accuracy, hindering real-time analysis.

Strategic hires and new business

• Inaccurate labor forecasts put firms at a disadvantage when pursuing strategic hires and new business opportunities.

• With one-third of firms citing resourcing and retention as top business concerns, the need for reliable labor forecasts is evident.

Priorities based on firm size

Smaller firms and larger firms prioritize different metrics, with small firms focusing on operational metrics such as cash flow and project cost. This emphasis indicates a close monitoring of day-to-day concerns, ensuring liquidity and the sustainability of business operations.

Mid-sized and larger firms should prioritize capital asset expenditures and IT spend forecasts while reflecting a more strategic mindset and longer planning horizons. Despite the differences, the AEC industry largely adopts the small-firm mindset, focusing on daily operations rather than long-term strategic planning. To ensure future growth, firms must emphasize rigorous, reliable metrics and enhance accuracy in key areas such as the pipeline, backlog, and strategic expenditures.

The importance of accurate forecasting

Accurate forecasts help firms make informed decisions about project timelines, resource allocation, and budgeting while enabling proactive management of potential risks and challenges. Additionally, they support better client communication and satisfaction by setting realistic expectations.

So how do you change the way you tap into the power of forecasting? Here’s a strategy to consider:

Steps to improve forecasting accuracy

Adopt advanced tools

• Move beyond manual tools like Excel to automated solutions that offer real-time data analysis and insights.

Leverage AI and machine learning

• Utilize AI-driven platforms to enhance data accuracy and predictive capabilities.

• AI can process vast amounts of data quickly, identifying patterns and trends that manual analysis might miss.

Invest in data quality

• Ensure the data used for forecasting is reliable and up-to-date.

• Implement data governance practices to maintain integrity and accuracy.

Regularly review and adjust forecasts

• Continuously monitor and refine forecasts based on actual performance and changes in the market or project scope.

While challenges with accurate forecasting remain, advancements in technology and data practices offer significant opportunities for improvement. Adopting advanced forecasting tools and prioritizing data quality can allow AEC firms to better predict project outcomes, manage resources effectively, and drive strategic growth.

In our next post, we’ll take a closer look at the role of forecasting in the AEC industry. Until then, download the entire 2024 AEC Inspire Report here. 

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