Trouble-Shooting and Problem-Solving: Consulting Construction Accountants to Overcome Barriers to Growth

Construction accounting is a complex field, with myriad moving parts and variables incorporated into almost every contract. This can mean that occasional issues, delays, higher-than-anticipated expenditures, and problems are simply a part of the business that contractors must be prepared to deal with.

Our construction accountants have years of experience working with developers, investors, building firms, and contractors. We always advise that accuracy and agility are the cornerstones of success, ensuring each firm can identify issues and respond accordingly well before niggles and snags become critical.

Working collaboratively with accomplished construction accountants isn’t solely about regulatory compliance and timely reporting but about giving businesses in the sector the know-how they need to maintain a real-time overview of their revenues and margins, and to respond strategically when required.

Why Construction Sector Firms Rely on Accurate, Agile Project Budgets and Forecasts

Accuracy and agility go hand in hand in the world of construction because even the most precise, well-researched forecast can come unstuck if something changes within the supply chain. That could be related to third parties, such as shortages of materials or delays in deliveries, increased tax obligations or the introduction of new regulations.

Hoping that everything will run smoothly isn’t a sound strategy because risks are an inherent part of construction planning. In short, contractors don’t just need to know if a problem is emerging; they also need to have room within their budgets, plans, and resources to adapt.

There are varied tools, approaches and methods we might suggest, which can include:

• Detailed contract risk appraisals, ensuring a new project is likely to deliver the expected margins, without ignoring existing risk factors that could impact quotations offered.
• Job costing to keep continual oversight of the resources, personnel, equipment and tooling allocated to each project.
• Ongoing monitoring of committed costs, residual budgets and reserves, identifying where outgoings have risen and the impacts on other resources.

If, for example, a house building company has identified a lag in a specific aspect of a development and the knock-on effect this will have, it might redirect tradespeople to another part of the project or another site or utilise back-up sourcing options to prevent delays while optimising the best use of its resources.

The key is to work with an accounting team that can deliver this level of precise oversight without allowing any possible issues to worsen and without committing to contracts that have limited financial viability.

Implementing Cost Controls in Construction as a Risk Mitigation Exercise

Financial controls are essential. They safeguard a construction firm’s stability by ensuring clients have planned for potential setbacks and aren’t operating with uncertainty about whether projects will deliver the margins they expect and, therefore, their prospects for growth.

The ideal approach is to develop a system that uses real-time job data to create work-in-progress reports. These reports offer clarity about the proportion of work completed, how that corresponds to the budget spent, and the points at which contract payments become due.

Regular reporting allows contractors and construction managers to stay ahead of potential problems, concentrate on improving profitability, track outgoings, and mitigate overruns before they occur.

However, the outcomes aren’t solely financial because contractors who introduce best-practice cost controls have a substantially better ability to complete projects on time, on budget, and within the scope and specifications agreed to, leading to improved credibility and greater win rates for future contracts.

Avoiding Non-Compliance and Tax Inefficiency Issues With Construction Accounting Expertise

Compliance is incredibly important for ambitious construction firms that want to scale and expand. This involves both adhering to sector-specific environmental, building, construction products, and health and safety legislation and staying up to date with reporting and tax disclosure obligations.

As construction accountants, we support each client by ensuring they are aware of the current regulations and tax laws that apply to their businesses and are prepared when new reforms emerge that may impact their reporting.

This works to improve tax efficiency, where our clients benefit from:

• Professional advice on reliefs and exemptions that apply to their corporation, income, and VAT liabilities, with the assurance that they are operating compliantly and according to Construction Industry Scheme rules.
• Support to ensure clients claim all the allowances available to them, including the Annual Investment Allowance, Writing Down Allowances and Full Expensing where applicable.
• Assistance with preparing accurate financial reports and audit statements, avoiding any potential to incur penalties or fines that will affect their bottom line.

Of course, on-time financial statements are important, but regular management accounting can also better enable construction company owners to make decisions about potential expansion opportunities or access project financing with the up-to-date data that investors and lenders need to commit to a funding arrangement.

Why a Seasoned Construction Accountant Is Essential to Business Growth

As we’ve touched on, the support and advisory assistance we offer isn’t limited to one specific area, nor will it look the same between two clients, given the diversity of businesses operating in the construction space and their priorities, risk factors, and objectives.

Instead, the right approach is to manage the financial stability and health of a construction firm holistically, taking into consideration the level of risk incorporated into their project or contract structures, the degree of control and influence they have over costs and profitability, and the proper use of tax-efficiency measures to ensure they remain compliant without paying unnecessarily high tax obligations.

For many, a blend of robust, proactive cash flow management, the introduction of responsive construction accounting software, and regular reporting systems is vital. This ensures nothing is left to chance and the business is well provisioned to manage challenges or problems and identify upcoming issues to address them promptly and decisively.

We’d encourage any construction company concerned about its growth prospects, without the financial controls it needs to operate with confidence, or experiencing ongoing issues that contradict its aims, to contact us and speak with the construction sector specialists at James Todd & Co about the next steps forward.