Construction accounting software can certainly help to improve visibility of business finances, but often visibility alone isn’t sufficient to eliminate cash flow problems. Instead, you may have to investigate changing business processes.
Efficient purchase order processing is integral to maintaining a healthy cash flow. From creating and storing purchase orders, to managing your credit, there are plenty of opportunities to streamline this key area of your business.
#1 Switch fully from paper-based to electronic systems
No doubt you’ve at least dabbled in using electronic purchase orders, but if you’re still using paper purchase orders for transactions with some suppliers, it’s time to make the full transition to digital. You’ll reduce the chance of duplication, reduce the number of human errors and make it easier to edit and find specific purchases orders later on.
#2 Centralise systems
Use a construction accounting software that will ensure that your purchase orders are accessible and consistent across all your sites, whether they need to be accessed by a contractor or one of the admin team in the office. Again, this reduces duplication and increases productivity, as staff can always access the information they need, regardless of their location.
#3 Set up authorisation
To avoid any nasty surprises, set a rule that every purchase order must be authorised before it can be placed. If you use accounting software, it’s easy to set this up. You can choose the level of access a user must have before purchase order authorisation can take place. This simple change will prevent confusion further down the line, and you’ll have to spend far less time investigating why certain purchase orders were placed.
#4 Checking due payments
Gaining a bad reputation for late payments is likely to annoy suppliers and make them less sympathetic to negotiating on factors such as price and minimum order quantities. Improving purchase order visibility through your construction accounting system is a good start, but you must also set up a methodical way to check due payments on a regular basis. How you go about this will depend on the volume of payments you have, and the size of your finance team. Regardless of these variables, set up a procedure and stick to it, so that no payments fall through the gaps.
#5 Link purchase orders (and other documents) to budgets
Using your construction accounting software, link each purchase order to the relevant job’s budget. This will allow to you to quickly see where budgets are in danger of being exceeded. You might even be able to set up alerts to warn you when you go over budget, enabling you to look more closely at the job and determine how to offset the extra costs elsewhere. Later on in the purchasing process, you can also match goods received notes and invoices in the same manner.
In conclusion, by adding safeguards and taking extra time to properly organise your purchase orders, you can save hours in the future. By taking a methodical approach to purchase orders, you’ll gain a good reputation with suppliers and a boost to bargaining power. If your current accounting software package can’t manage all the tasks we’ve discussed above, consider switching to a construction-specific software package – built for your sector.
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