Why leaders of construction businesses need to stay on top of their firm’s finances
Staying on top of your firm’s finances is essential no matter what industry you’re in. However, for some industries, the requirement to stay in control of your finances is even more pronounced – and the construction industry is one of them. Firms in this sector face a number of unusual and even unique challenges: from the contractor-heavy payroll frequently seen in the sector to wider changes in the regulatory and industry landscapes, there are a lot of reasons to stay organised.
Contractor payments
It’s believed that there are almost two million contract workers in Britain – and for finance teams in construction businesses, this represents both a blessing and a curse. It means, of course, that there is a lot more flexibility in place, and contractors pay their own pension and tax contributions. However, it’s also a problem in that it can lead to erratic payments, ever-changing invoices, and more. By having a strong financial management system in place, the risk of this kind of problem arising can be cut down substantially.
Shifting industry landscape
The industry landscape in the construction business looks very different now from how it did 20 or even ten years ago. All sorts of changes have occurred, and the demand for construction is fluctuating: it’s going up on the whole, but there are still pockets of problems. This sort of development can spell a problem for a business’s cash flow – but by ensuring that everyone from the C-Suite to HR has a clear grip on the amount of cash available to the company, it’s possible for everyone to make clear decisions in response.
Regulatory changes
The construction sector is, of course, quite rightly subject to a large amount of regulation from a whole host of angles. However, from a financial point of view, there are some particular rule changes to note – and the most pressing of these is the Making Tax Digital reforms, which are set to come into place next year. These reforms mean that any VAT-paying construction firms will have to start using a certain type of HMRC-friendly digital software package by April of next year.
For construction firms whose income is under the VAT threshold, there’s no immediate need to worry.
However, most construction businesses are likely to be brought under the Making Tax Digital umbrella at some stage soon, and even contractors may be affected by it: HMRC has said that it aims to roll it out to income and corporate tax payers in the coming years. It is, therefore, well worth investing in HMRC-compliant software that allows you to keep on top of your finances in a way that is suitable for the digital age as soon as possible.
Just like any business, construction firms need to take the lead in making sure that their finances are kept in good order. From the changing landscape of construction demand to the new-fangled ways that contractors are now paid, there are lots of real and pressing reasons why your firm’s finances need to be accurately monitored.
Find out more about the regulatory changes on the horizon by visiting our resource hub.
