Construction companies face challenging environments and problems on a daily basis, including issues affecting their economic operations. So how can these businesses find success on and off the job site?
Automated bookkeeping ensures accurate data collection in real time, improving financial operations for construction companies. Business owners in this industry can have more visibility over their cash flows to control current and future costs, plan better project quotes and gain insight into their business performance.
Want to learn how your construction company can benefit from accurate bookkeeping? Let’s look at common challenges for business owners and the advantages of financial automation.
Common Construction Bookkeeping Challenges
Extreme weather conditions, broken equipment and delays aren’t the only roadblocks business owners must combat. Outdated bookkeeping practices also introduce a whole slew of problems that may have lasting effects.
Lost Paperwork
Picture this: A team member purchases materials for a project and sticks the receipts in their back pocket, or throws it somewhere inside the van. Receipts are important to document, but they often end up wadded into a ball and forgotten about — and the business expenses listed on those receipts are now unaccounted for. Another issue for construction workers is having to keep track of paper invoices or other vital accounting information without it getting damaged or even lost.
These instances — on top of every worst-case scenario imaginable — can result from manual bookkeeping. Without digital copies, important paperwork can be lost forever, causing construction companies to either foot the cost, chase partners or suppliers for additional reprints (when possible) or even worse: facing fines for inaccurate books.
Inconsistent Record-Keeping
The construction industry is growing, resulting in larger teams, more expensive projects and increased records. As projects get more complex, record-keeping becomes even more vital for success. The problem is, without a set system for data capture and storage, projects can be delayed and go over budget.
Inconsistent record-keeping is a result of updating financial records without ensuring they match the rest of the associated documents or, on the other end of the scale, avoiding duplicates. It can also occur when business owners collect some of the necessary documentation without receiving all relevant details, causing errors.
Additionally, some organisations may attempt to ease their accounting work by using different financial tools. However, spreading information across several channels can result in siloed data and conflicting accounts.
Manual Data Entry Errors
The main issue with manual data entry is the risk of human error. When busy construction companies rely on manual operations, mistakes are bound to occur. These issues can be caused by employee exhaustion, hard-to-read information and inattentiveness — factors that result in inaccurate records and possible financial discrepancies, which can lead to fines.
Additionally, manual data entry is expensive and time-consuming. While accounting software may seem like a big investment, the hours and energy spent inputting and correcting information manually can end up costing more. This is especially true because construction companies rely on this data to move projects forward. Without fast data entry, timelines can come to a standstill, forcing workers to push project deadlines back and potentially go over budget.
Lack of Real-Time Financial Data
Performing monthly expense reporting and invoicing is a common business practice. While this keeps businesses running fairly smoothly, it doesn’t provide them with updated, real-time financial information. Without these insights, organisations have no way of knowing how much they’re making on any given day after all expenses are accounted for, which makes future planning very difficult.
Besides the effects on the decision-making side of things, a lack of real-time data also makes risk management more difficult. Waiting for monthly or quarterly reports on performance leaves businesses in the dark about the state of their operations. Is there potential for financial hardship? Is cash flow healthy enough to take on a certain project? Are there any causes for concern with project delays due to a lack of resourcing? How much flexibility can the team count on for any surprises or last-minute expenses in a project? These questions and more can’t be answered without real-time financial data.
The Impact of Accurate Data on Construction Cash Flow Management
In construction accounting, cash flow ensures businesses have the necessary funds to procure materials and labour without interrupting project timelines. Rather than forcing them to be bombarded by unexpected change orders, slow-paying customers, delayed invoices and project delays, real-time data allows business owners to plan ahead and prepare for possible problems. This keeps projects moving forward and financial paperwork in order.
Here are a few ways accurate data refines construction cash flow management:
Improving Cost Control and Budget Management
Accurate data on cash flow can help workers better balance financial resources, preventing them from overestimating or underestimating project costs and ensuring funds are aligned with the specific project needs. When construction companies have real-time financial details, they can better prioritise spending and facilitate fund allocation.
Also, projects are less likely to go over budget when workers have accurate, updated information regarding money already spent versus how much is left to utilise. For example, if a construction business is aware it’s already used up 30% of the project budget up until that point, the firm will be able to plan out how to most effectively use the last 70% without needing to gain further funding.
Enhancing Quote Accuracy for Projects
Without a clear picture of potential costs and past expenses, business owners can only use guesswork to quote out projects. This leaves a lot of room for ineffective resource allocation and underestimated project costs. Also, manual quotes can include human errors like typos, miscalculations or outdated information, all of which can derail a project from the start.
By ridding the quoting process of guesswork and using data to back up estimations, teams can generate professional and consistent assessments, no matter the type of project. Using financial data for more accurate quotes also ensures team members don’t have to spend time stressing about the economic side of projects. This enables everyone to focus on what really matters: building valuable projects that meet client expectations and are on time and budget.
Gaining Insights for Better Business Decision-Making
Similar to quotes, without accurate data, business owners making decisions must rely on assumptions that may or may not actually be correct. This can leave construction companies scrambling to get projects done within the originally allocated budget.
Business owners who have visibility into their cash flows, however, can make more informed decisions about equipment purchases, loans and project deadlines. For example, proper bookkeeping helps managers track project costs in real time, evaluate profitability and use that information to make cost estimates for future projects.
Cash flow management is tricky — especially for the construction industry. To be successful, business owners must be able to navigate client payment delays, purchase necessary equipment and meet their payroll obligations, all of which can’t be done without up-to-date data to back up their decisions.
Ultimately, real-time information can keep business leaders light on their feet, ready to make fast decisions for the betterment of their teams. This keeps companies competitive and able to adapt as client demands change and projects become more complex.
Building a Stronger Foundation With Dext
In the construction sector, the connection between operational efficiency and financial stability is crucial. Given the industry’s variable profit margins, intricate projects, and ever-changing market conditions, the line between making a profit and incurring a loss frequently hinges on streamlining operations. Fortunately, advancements in technology offer businesses of any size various tools and strategies to make construction financial management a lot easier.
Dext provides automated accounting solutions for the construction industry, simplifying bookkeeping for more accurate, efficient and productive financial reporting and performance. Rather than expecting employees to spend hours manually entering expenses data into spreadsheets, professionals can use Dext Prepare to capture documents quickly and accurately. This not only makes records more accurate and consistent but it also frees up time for teams to focus on other valuable tasks.
This solution enables business owners to snap paper receipts and financial documents with one click using the mobile app, forwarding paperwork via email or uploading it directly into the software. Dext does the hard work of capturing, extracting and categorising the relevant data, so it’s ready to be published into their accounting software of choice. This makes it easier for builders, plumbers, electricians and any industry workers to ensure their accounts are organised, keep track of expenses, accurately quote projects and make informed decisions to boost revenue and productivity.
With Dext Prepare, construction business owners can enjoy:
- Paperwork extraction with 99% accuracy;
- Smooth accounting processes;
- Records kept in a standardised, digital format;
- More time to focus on value-adding work.
Find out why businesses owners of all industries choose Dext Prepare.
Ready to experience accurate bookkeeping for improved decision-making and data accuracy within your construction company? Start a free trial of Dext today to see the benefits for yourself.