The Best Ways to Manage your Construction Firm's Finances
In this current climate, it’s vital that our construction clients ensure they have accurate, relevant financial data at their fingertips. So how do you do this?
Firstly, you need to use specialised software that is tailored to the unique needs of the construction industry, able to handle things such as job cost accounting and project management.
You need to ensure that you have an effective system in place to track and manage project costs, including accurate budgeting and forecasting. Your accounting system needs to keep detailed records of all financial transactions, including invoices, receipts and payments, which can be maintained in digital format.
You also need to utilise a proper contract management process so you can manage and track contract costs, change orders, and claims. Construction projects can often undergo changes from the original quote provided to your client. These adjustments can cut into your project profits if the original quote isn’t adjusted for these additional costs. The use of change orders to document these changes can avoid disputes with your clients. Linked to this is the need to include a standard change order process in your contracts, which is not always possible but, when done, will ensure you maintain your profit levels on your projects.
Your finance team should be regularly reviewing financial reports and monitoring key performance indicators to identify areas for improvement so that you can make informed business decisions. They also need to maintain a timely and accurate billing and collections process, which includes monitoring and managing your accounts receivable and accounts payable.
With a diverse workforce, which can include a combination of salaried employees and CIS subcontractors, tracking the labour hours and costs on multiple projects can become challenging, so to automate the process and reduce human error, it’s important to take advantage of web-based tools and mobile apps as well as time-tracking software. If assistance is required with this, please contact our Digital Solutions department which specialises in assisting our clients with identifying and implementing these tools.
You obviously need to also ensure that you comply with relevant laws and regulations (e.g. tax and labour laws), and I would also recommend that you regularly review and update your internal controls to prevent fraud and errors.
If you would like to discuss how you can implement these improvements for your business, email me at andrew.coney@raffingers.co.uk or click here to get in touch.