Monitoring Your Financial Position to Succeed in the Construction Industry
6 Minute Read
While many businesspeople swear by hard work and technical proficiency as the key ingredients of success, within the construction industry, there is a broader understanding that success is built on more than just structural expertise and hard work. In fact, there are numerous examples which show that irrespective of the hard work and precision which is put into place for each and every project, failure to pair this with an effective construction accounting and expense control strategy which drives back-end decision making, can be the difference between success and failure.
It is a given that within the industry, project managers can feel overloaded by numerous simultaneous projects requiring immediate attention. And what often happens is that the lack of time to analyse the best way to make decisions or procure the right components means that project managers react as opposed to making rational decisions. The result is they often spend more money than they may otherwise need to. Over the course of a project, cost increases that may seem marginal at the time, end up having flow on effects, or adding up with other overheads resulting in total project expenditure which is far from the amount originally estimated. Sometimes this erodes profit, but in some scenarios, it can mean losses or even worse.
When is the Right Time to Implement Construction Accounting Software?
The truth is, the question should not be when do you need construction accounting software, but rather, can you truly afford to not have solutions in place? When correctly implemented, a software solution can pay for itself over the life of just one project because it allows decision makers within your organisation to combine exceptional on-site performance with proactive expense control and financial management.
Try the below checklist we’ve compiled. If you agree with two or more of the below statements, we’d recommend that it is time to put a financial management program or an online construction accounting software solution in place:
- Your expense reports and other financial monitoring data are often laced with holes or errors making accurate analysis a difficult task;
- You spend more hours calculating job cost data rather than using your time analysing cost-reduction measures for your projects;
- It is more common than not to find your cost estimates are not reflected in the actual costs;
- You find it hard to allocate contract revenue and costs to the correct reporting periods confusing the profitability review of any one project;
- Your schedule is filled with too many tasks and you feel like you no longer have any time left to account for and manage your individual project’s finances;
- You are struggling to translate your large building projects into revenue;
- Your project teams run your projects in Microsoft Excel making it difficult for you to see how those projects are really faring;
- By the time you get accurate project financial data, its obsolete and so not useful for decision making;
- Variation revenue is sometimes “left on the table” due to a disconnect between the variation financials and the variation deliverables;
- Retention revenue is occasionally forfeited due to poor tracking and management from a financial perspective; or
- You know how much profit a project is making at the COMPLETION of the project. But you do not know how much profit a project is making on a month by month basis during the course of the project.
But Doesn’t Generic Accounting Software Do the Job?
In all likelihood, you probably have an off-the-shelf program in place to do your general accounting. While the off-the-shelf program has a low upfront cost, it is worthwhile remembering that generic accounting software is not built for the rigours of the construction industry — think progress claims, retentions and other nuances of the industry. What they save you in the beginning may be eroded over time with the labour of making it work for you or the errors which it generates.
Why Invest in a Specialised Construction Accounting Program?
At Viewpoint, we have invested years of experience, spoken to countless industry professionals and fine-tuned our offerings to make sure they are the best they can be for you. We know the industry and know what you want and have designed a built-for-purpose system that minimises human error and improves outcomes.
We work exclusively with the construction industry and work tirelessly with our 8,000+ clients to make sure our solutions are designed to make running your construction business administration as simple and profitable as possible. Whether it is logging your project scope and deliverables to identifying labour needs; determining your expense centres or putting in individual cost data; or generating financial reports and forecasting your revenue and losses, we know that a well-integrated, industry designed system is the best solution.
A few other benefits of a best-of-breed online construction accounting platform include:
- Seamless integration. If you’re using multiple platforms to collate the information you need you are inadvertently exposing yourself to a myriad of risks and increasing the time it should take to get the answers you need. A well-integrated software solution that ties together financial and project management functions should make entering and then accessing data a breeze. A system such as Jobpac (our integrated financial and project management solution) will allow you to manage the costs associated with projects, commitments, revenue, forecasts, cash and labour all in one interface.
- Improved productivity. Say goodbye to tedious data entry and time-consuming report creation. With the right productivity suite in place, errors on data entry can be minimised and reports set up to be automatically generated. This allows project managers as well as financial officers to easily analyse a projects’ progress, find bottlenecks and opportunities where the budget has gone awry. Businesses that want to get ahead need a system that has one source of truth and one that allows great reports to be generated at the click of a button. With access to up-to-date information and deep, analytical insights, managers can make better decisions even in the field.
- Security. With JobPac, all financial and project information is stored in a secure environment. Only those individuals with the correct credentials can gain access to your construction company’s sensitive and highly-confidential data. At Viewpoint, we pride ourselves on providing the highest standard of encryption and data recovery services available as we understand this is an area of concern for many companies within the sector.
- Business sustainability and accuracy. When you consider that previous project data is easy to access, you can utilise previous projects to identify potential issues and build these into future projects making your estimation and job running processes more accurate.
Take the Leap: Improve Your Construction Business’ Financial Position
Over the years there have been countless takeovers and bankruptcy’s (Walton’s for example) in our industry. We do not want you to become one of those statistics. We want you to be in a position where you have the information you need at your fingertips so that you can make the right business decisions. If you are aware you could be running your projects more efficiently and need the insight to know how, contact a Viewpoint team-member and let us explain to you what your options are.