Five challenges facing construction SMEs (and how to overcome them)
That’s why we offer three different types of construction accounting software packed with the features that your business needs to thrive.
We’ve explained before on the Integrity Software blog that our software is designed to help you solve common business problems and speed up tedious administrative tasks. In today’s article, we explore some the main issues facing small businesses in particular – from cash flow crunches to pernicious late payments.
As a small company, it’s just not in your budget to offer extensive training programmes to staff. You can’t promise them that they’ll be working on a multi-million pound contract, either. With skills shortages worsening and average wages increasing, it’s little surprise that so many companies struggle to keep hold of staff. Employers should discuss their employees’ career plans and try to find ways to help them reach their goals. Rewarding service in a consistent and fair manner has a good impact on retention rates – study your accounts and forecasts to determine how much you can increase wages and, just as importantly, how much value each employee brings to your business.
Every small business struggles with cash flow problems. In the construction industry, where your work isn’t likely to take place in a steady, predictable manner, this problem is even more pronounced. Your main weapon against cash flow problems is information. Use the accounts data in your software to closely monitor every cost and look ahead to potential cash flow issues in the future. The sooner you detect that a problem may lie ahead, the quicker you can take steps to rein in spending and scale back plans.
Similarly, late payments can put even more pressure on your cash flow. As an SME, you have far fewer resources to chase up payments from clients than larger companies can boast. As such, you may find yourself with delayed payments and a daunting gap on your balance sheet. Tackling late payment is easier said than done, but the best approach is a consistent one. Ensure that contract terms are clear. When the payment is overdue, chase up with a polite email. Follow this up a week later with a phone call if payment still hasn’t been made. If you’re still awaiting payment several months after the due date, don’t be afraid to get a third party involved – a single call from another party is often enough for late payers to finally make the payment. By having a consistent system in place to deal with late payments, clients will learn that you take the issue seriously and behave accordingly.
Skills shortages and rising raw material costs are two pressures which companies are used to dealing with, but SMEs may struggle to absorb these extra costs with quite as much ease as larger companies. Many of these costs tend to be outside of your direct control, so offsetting them through savings and efficiencies elsewhere is usually the safest route to take. Having a good relationship with suppliers can also help you to secure the best deals.
Every construction company has had to deal with a troublesome job that runs massively over budget and drags out for far longer than you originally planned for. Avoiding bad jobs can be tricky – you have to use a combination of past experience, initiative and recommendations from your peers in order to learn as much as you can about a potential client and how troublesome the job might be. Look at the factors that the work involves – has your company struggled to deliver this type of job in budget in the past? Job costing software isn’t just useful in tracking the costs of current jobs, but also assessing areas of success and failure in completed jobs. For example, if you failed to turn a significant profit on a past job due to the cost of hiring a specific subcontractor, be cautious about taking on any more jobs that would require a subcontractor with the same skills – until you have identified the reasons for the higher than expected cost or accounted for this higher cost in your budget.
To find out more about how construction accounting and management software can help you overcome obstacles in your sector....