How Automation Streamlines The Workflows Of Construction Clients

The construction sector is critical to the health of the UK economy. Construction of new buildings, repairs, and alterations is estimated to be worth around $386 billion in 2023 and is set to grow 47% between 2020-2030.

However, the industry is not without its challenges. Late payments are more pervasive than other areas of the economy due to construction relying on subcontractors to complete jobs and contracts. Critically subcontractors can’t be paid for their work until the main engaging party has been paid, and this assumes they are paid on time.

Additionally, day-to-day compliance and finance processes are more time-consuming and costly than other industries due to entities and individuals needing to comply with the Construction Industry Scheme (CIS) when paying subcontractors.

Thankfully automation can do a lot of the heavy lifting to help fulfill compliance responsibilities and free up accountants’ time to win new clients and focus on value-adding activities.

Late Payments In The Construction Sector

Due to heavy reliance on subcontractors, late payments are more prevalent in the construction sector than in other areas of the economy.  The FSB’s recent Time Is Money report in 2022 revealed that 64% of construction businesses experienced late payments, with 34% surveyed reporting an increase year on year. 

This negatively impacts cash flow in circumstances when companies have VAT liabilities due, but funds are tied up in outstanding invoices. In these instances, construction firms will often have to turn to short-term financing to pay HMRC on time. 

While the UK Government has introduced a raft of measures to remedy late payments, these haven’t made a material difference. The Prompt Payment Code (PPC) is voluntary, and the Small Business Commissioner has only recovered around £8m of unpaid invoices.

CIS Adds To The Admin Burden Too

A further complication of servicing construction clients is having to comply with CIS. Construction companies engaging subcontractors are required to make tax deductions on their payments. These count towards their tax liabilities and are collected over time rather than being payable as a lump sum at the end of the tax year.

Engaging contractors need to file monthly returns and retain CIS records, and failure to do so can result in penalties.

While construction companies will often seek accountants to register and maintain their CIS scheme, practices must have slick processes, as keeping on top of the paperwork and filings is time-consuming and makes it challenging to generate a high margin on these services. 

How Automation Helps

Core Cloud Accounting Platforms

Core cloud accounting platforms such as Xero and QuickBooks, automate everyday processes, including bookkeeping, bank reconciliations, and data entry of invoices. This creates close to real-time data and critically gives accountants and their construction clients accurate visibility on cash balances. Additionally, this allows them to forecast cash flow and, where appropriate, give advice related to working capital or seek cost-effective financing facilities.

AP Automation Tools

AP automation tools, such as ApprovalMax, keep data flowing in a compliant manner, enabling accountants to keep on top of record keeping and free up construction clients to focus on their businesses rather than battling to keep on top of the admin.  

Owners of construction businesses tend to be out and about working on-site, so they are rarely in the office to keep on top of their paperwork. This creates several challenges for AP, including a delay in getting invoices entered into accounting software, alongside the risk of paying key suppliers late and/or twice from duplicate invoices.

ApprovalMax solves all these issues by enabling construction businesses to set up customised automated workflows for approving bills, purchase orders, and invoices. Construction clients can review and approve bills from anywhere, with a dedicated mobile app to keep data flowing with payment errors kept to a minimum.

Cloud Payroll Tools

Cloud payroll tools like IRIS CIS Payroll, Staffology, and Quicbooks’s CIS module, take the pain out of registering and maintaining CIS for clients who work with subcontractors.

These tools use powerful automation features to manage the entire CIS journey for paying subcontractors. This includes verification and submission of monthly statements, with the flexibility to apply auto-calculations on any payment frequency (daily, weekly and monthly), as well as considering whether they are VAT registered. 

Alongside significant time savings, accountants can rest easy as statements are emailed automatically to HMRC within the 14-day deadline at the end of the tax month. 

Join Our Webinar On 22nd of September To Learn More

Empowered by Cloud, an accounting firm that specialises in construction clients,
use a variety of apps to support their sector specialism.

Graeme Morrison, one of the practice’s directors says:

“Our main app stack includes Dext, Xero, ApprovalMax, Telleroo, Float, and Spotlight Reporting. For job and project costing we use SimPro, Livecosts, and WorkflowMax. Job costing apps are selected after discussion with the client to ensure the systems to suit their operations.”

He doesn’t think the importance of job costing apps should be underestimated as this helps to overcome the tricky issue of managing multiple projects and identifying issues that can impact client profitability.

To gain further practical insights from Graeme on best practice of using automation-powered technology to scale up your construction clients service offering, sign up to our webinar where Nick Levine will be interviewing him alongside Eriona Bajrakurtaj (Majors Accounts).

Register now
Nick Levine

Chartered Accountant and Fintech Consultant

Graeme Morrison

Director at Empowered

Alex Keselman

Product Expert & Solutions Engineer at ApprovalMax

Eriona Bajrakurtaj

CEO at Major’s Accounts