Automating financial processes is the best way for construction firms to meet the challenges of cash control and fluctuating project costs. Overall, the rise of automation is a boon for businesses, whether it’s increased productivity or more accurate forecasting.
In this post, we’ll explore the main benefits of financial automation for your construction business, from reducing errors to ensuring timely payments.
Benefits of automating financial processes across your construction business
Automating financial processes brings a ton of benefits for construction firms. Automation speeds up laborious financial management tasks and ensures you have a real-time overview of your financial situation to inform decisions–from budgeting to payment processing.
Reduction of financial discrepancies and inaccuracies
Automation reduces the need for manual tasks like data entry, which are prone to error. Even simple typos and duplications cause payment discrepancies and project delays, affecting your financial stability and reputation.
Automation allows businesses to avoid these mistakes and strengthen customer relationships. Increased efficiency makes work more enjoyable for your finance team and frees them up to handle high-value tasks.
Creating and maintaining standard processes is also simplified. Standardization leads to improved consistency and reduces the risk of silos and information gaps.
Improved financial visibility and reporting
The increased visibility across all your financial operations that automation brings allows you to easily manage cash flow and see how each project affects your overall budget. Spotting errors and inconsistencies early is also a welcome benefit that makes taking action easier–before mistakes cause more significant problems.
For example, approving and tracking purchase orders is streamlined, guarding against overspending and ensuring essential materials arrive on time. Easy monitoring of prices and payment terms from suppliers helps identify opportunities for renegotiation easily.
Unlike manual systems, automated solutions can centralize data and make it accessible to everyone who needs it in your business. You’ll eliminate key person dependencies and the associated delays, as others can pick up relevant data when a colleague is on vacation or out sick.
Automated financial software generates regular, accurate, shareable reports for your accountant and stakeholders. Historical and real-time data is presented in an easily understandable format, including visual elements such as charts and graphs.
Timely access to financial data and insights
Construction managers need fast access to financial information and metrics at all project stages to stay within budget and manage the job efficiently. You can make more informed decisions with a better awareness of your finances at any given moment.
Automated systems give you this access. They also deliver insights on business performance. For example, specialist construction ERP software by Sage brings all your critical data together. It provides a real-time view of what’s happening across projects and the business. Another example is LetsBuild planning, a project management tool that gives you data from the site to check whether the project is on schedule and, therefore, on budget.
These platforms help everyone understand the data, even those outside the finance team. You can use the data to make accurate forecasts, such as the amount of labor and equipment required for a job, and you can easily see how your decisions impact the financial situation.
Decreased labor and administrative costs
Automation brings the major benefit of reduced labor and admin costs for your business. It streamlines workflows and increases productivity for the finance team, who can do more in less time—and with fewer people. They can also focus on high-level, strategic work instead of tedious manual tasks.
For instance, you might implement robotic process automation (RPA), where bots learn to mimic human actions and carry out tasks, or digital process automation (DPA) for repetitive and rule-based work. Machine learning algorithms can analyze data, find patterns, and make choices much faster than humans can.
With finance leaders saying that 53% of a typical week is spent on manual accounts payable processes alone, financial automation can represent significant savings. Data forecasting will also predict how many workers are needed for each job, so you’re not paying people unnecessarily.
Enhanced budget planning and cash control
Construction companies face a set of unique financial challenges, including low margins and a lack of regular income. Add to that the rising cost of materials, supply chain issues, and the problem of labor shortages, and you understand the need for maximizing resources at all times.
With so many variables that could affect project costs and financial stability, it can be difficult to set an accurate budget. Financial automation gives you the necessary data, from tracking your incomings and outgoings to comparing previous budget plans with actual expenditures.
That way, it’s less likely that you’ll underestimate project costs and go over budget. And you can build in leeway for reacting to sudden changes, with automation enabling you to process change orders quickly. You can make predictions based on historical and real-time data, which is also useful when creating proposals and customer quotes.
In construction, it’s crucial to have a handle on your cash flow. You need to maintain cash reserves and view the available funds in real-time to cover expenses as and when they’re needed—especially as there may be unavoidable delays to the project schedule due to weather or contractor availability.
Another aspect of financial control is expense management, and automated systems include approval workflows for purchasing and staff expenses. For example, automated receipt collection and processing makes life easier when your workforce is spread across different sites.
Increased compliance and risk management
By keeping all your data in a centralized hub in the cloud rather than in siloed systems (or filing cabinets!), automated software offers better protection for critical information. You’re less likely to experience a breach, and you can comply with privacy regulations for customer records.
Full visibility into financial processes lets you spot potential fraud and cross-check and validate data automatically. It also assists with risk management by helping you predict potential issues and their impact and create contingency and response plans.
For example, you can predict what will happen in the event of cost overruns, delays, scope creep, and lower revenues than expected. You can also examine risks related to human resources, materials, and equipment and ensure that mitigation strategies are in place.
Meanwhile, financial automation makes it easier to comply with tax regulations in the countries or states where you do business—such as California’s regulations for construction and building contractors and the UK’s Construction Industry Scheme (CIS), which affects how subcontractors get paid. You can often get CIS software free with construction accounting solutions that enable you to create payment and deduction statements quickly.
Automated invoicing and payment processing
Invoicing and payment processing are essential but time-consuming tasks best handled by automated systems. Construction is a notoriously slow-paying industry due to long build and lead times, but you don’t want to miss out on revenue in the bank or get your suppliers offside.
Document automation is ideal for creating invoices, sending them out, and getting approval, all of which help you to get paid faster. Software solutions reconcile invoices against sales and delivery records and send auto-reminders to customers.
It’s easy to track payments and spot discrepancies between invoices and what you’re owed according to accounts payable. Along with automated invoicing, financial automation tools will streamline the approval of outgoing supplier payments so that you’re never overdue.
Plus, you can ensure all employees and contractors are paid on time and in full. With finance automation, payroll becomes a simpler task—you can pull in data from attendance tracking tools, automatically calculate deductions and benefits, and let workers view their paychecks.
Scalability to support growth and expansion initiatives
As your construction firm grows, you’ll take on more staff, and there’ll be a higher volume of data to handle. Financial automation is even more critical, providing the efficiency and insight you need to expand the business smoothly.
With the data at your fingertips, you can ensure your finances are in a good position to support sustainable growth, and you’ll have enough visibility to make big decisions at the right times. You can commit to larger projects with more variables, knowing that you have the flexibility to react to changes.
Automated systems are also highly scalable, based in the cloud, and operated on a subscription model. You can add or remove features or users or switch to a different pricing band when you need to, and you only pay for what you use.
Future-proof your construction business with automated financial processes
Automating financial processes is essential for your construction business to remain successful and to scale for the future. It saves you time and money by increasing productivity and reducing errors and helps you calculate budgets and predict project costs.
You can also avoid risk, secure regulatory compliance, and keep employees and suppliers happy with timely payments—while using automated invoicing to receive your payments faster. With complete visibility into financial status and operations, you can spot problems and make any necessary improvements.
This is a guest post from Sage.