There is no doubt that Construction is challenging industry to operate in. Business owners face the daily challenges of dealing with difficult clients, large sums of money and ongoing compliance requirements. The good news is that there are practical solutions to these challenges which aren't difficult to implement. Below I have explored the most common challenges that I hear from Construction business owners as well as my suggested solutions to address them.
Challenge 1: Getting Rid of Manual Paperwork
The Construction industry has traditionally been slow in embracing cloud technology and paperless processes. There are many reasons for this, not least of which is that owners of Construction businesses are notoriously time-poor. The result of this is many businesses continuing to live with processes like filling out paper-based timesheets & manual purchase orders. There is a better way!!
The Fix: Get onto the cloud! At Upside we suggest starting first with your accounting software in order to provide a strong base on which to build on. Xero is our pick of the cloud accounting packages but most of the popular solutions today have similar core functionality. Doing this will not only make your accountants life easier but provide you with access to financial information wherever you are. What’s more, cloud accounting software opens up the opportunity for integrations with a number of external ‘add-on’ applications. For example, Deputy, an electronic time sheeting app that syncs directly with Xero payroll. Or Receipt Bank is a 'one-click' way to manage all supplier expenses. These add-ons are easy to implement and can save a heap of time.
Challenge 2: Understanding Job Profitability & Overspend
For a business in the Construction industry, profitably managing projects is pretty much the entire ball game. It is for this reason that it shocks me that majority of Construction businesses still don’t know the profitability of their projects at any point in time. These businesses essentially work on one KPI, “Do I have Cash in the Bank?”, which while is important provides limited insights for areas of potential opportunity or identification of future risks.
The Fix: Set up the business processes that allow for this information to be easily tracked. Cloud accounting software like Xero allows for this information to be linked to all customer invoices, supplier expenses and staff time. The benefit of doing this live job profitability reports can easily be generated from Xero or via automated more sophisticated reporting solution like Power BI.
Challenge 3: Managing Cash Flow
Construction projects by their very nature deal with significant sums of money. If payments and receipts get out of sync, even the most profitable businesses can experience cash flow challenges. While it isn't possible to forecast for everything, cash flow planning is critical discipline that all businesses should perform, especially in Construction!
The Fix: Get into the habit of periodically performing cash flow forecasts. To facilitate this your accounts must first be accurate and updated on a timely basis (at minimum monthly). With this in place, equip yourself with a cash flow tool which will allow you to generate an ongoing forecast. This could be a simple excel spreadsheet or a more sophisticated cloud solution like Float. Your accountant should be able to help you with selecting the appropriate tool for your business.
Challenge 4: Staying on Top of Compliance
Unfortunately compliance is a part of any business and the Construction industry has more to comply with than most. Whether it is lodging the quarterly BAS, paying employee super, understanding employment awards or calculating Workers Comp the list goes on. Deadlines can change based on the size of the business and time of the year so staying on top of this can be a real challenge.
The Fix: Get a good bookkeeper! A good bookkeeper should provide you with a summary of your compliance requirements as well as be give you ongoing updates of what is upcoming, with the aim is to avoid surprises! If they aren't doing this it may be worth shopping around for other options.
The world of cloud technology & accounting provides some amazing opportunities for businesses that are ready to adopt it. If it is implemented well it can significantly simplify processes, reduce costs and provide a major point of difference over the competition. At Upside, we believe a business' bookkeeper should be more than just a 'bean-counter' and focus on adding value instead of simply providing compliance services.
Find out more about our unique approach working with businesses in the Construction industry. If you're interested to explore things further then call us today on contact us on (08) 7129 4450 or email@example.com for an obligation free discussion.