Construction businesses employ 7% of the global workforce and account for 10% of global GDP. These figures are set to rise as the global population increases and demand in the construction of housing and business premises.
All industries face their own challenges, and the construction industry is no different. Like all businesses, it requires the careful management of core business processes such as financials, inventory management, supply chain, purchase order processing (POP) and sales order processing (SOP).
In addition, the Construction Industry needs to be able to manage project costs and plans, contractor and subcontractor billing, multiple sites of operation and HMRC’s Construction Industry Scheme (CIS). With profit margins tighter than ever, it is essential that construction firms manage their operations efficiently.
With a robust Enterprise Resource Planning (ERP) system in place, tailored to industry-specific needs, organisations can operate profitably and remain competitive. Below, we will look at some of the ways Business ByDesign can benefit construction organisations.
Business ByDesign is a cloud solution built for the Cloud
Business ByDesign was built for the cloud almost 15 years ago, it brings all the benefits that cloud-based software must offer an entire solution on almost any browser and device. SAP maintains legal and fiscal compliance removing costs related to support and maintenance.
Being cloud-based, the software can be accessed from anywhere, at any time, on any device. This means construction sites and the back office can be connected in real-time. Construction firms often have multiple construction projects across multiple locations so the ability to access and process real-time business information on-site is invaluable. Global construction firms may be conducting operations across different time zones, so a cloud-based ERP allows construction to continue round the clock.
Inventory can be booked in or out on-site directly within the ERP which gives construction firms a real-time view of their materials across multiple construction sites and allows them to create new purchase orders if required. Other resources such as labour can be carefully monitored to ensure there is always enough resources to meet current demand. This real-time view of operations means projects are not delayed due to lack of resources.
Business ByDesign Automates CIS & CITB Deductions
The Construction Industry Scheme (CIS) was introduced by the UK Government in 1999 as a way of increasing tax contributions from the construction industry to HMRC. Prior to the scheme, sub-contractors received full payment from contractors and were responsible for paying their own taxes on those earnings. CIS now requires contractors to make the deductions prior to payment of subcontractors and submit the tax to HMRC.
In addition to CIS deductions, sub-contractors must also have Construction Industry Training Board (CITB) deductions made on their earnings. CITB deductions are levies on sub-contractors or other workers’ wages which are collected to fund training within the construction industry.
Calculating CIS & CITB deductions on subcontractor payments can be a substantial task, especially for bigger construction firms with large numbers of projects on the go at any one time, with an equally large number of contractors and subcontractors. With SAP Business ByDesign however, CIS & CITB deductions are completely automated.
When a payment is being made to a supplier flagged as a subcontractor, the associated tax rate for that supplier will automatically be deducted and a payment certificate generated. With Business ByDesign also fully Making Tax Digital compliant, the deduction can be submitted digitally to HMRC ensuring the construction firm is also compliant.
Business ByDesign Project Management
Accurate project costing and management is fundamental to the construction industry. Construction projects can be extremely large, with significant levels of materials, plant equipment, contractors and subcontractors involved over multiple locations. Initial project costs need to be accurate to ensure the result is profitable, and these costs need to be kept on track throughout the project to maintain profitability.
Within Business ByDesign there is both Project Accounting and Project Management functionality available streamlining procurement and supporting ledgers, including accounts payable accounts receivable, SOP, POP, Inventory, Time Recording and Expense Management Works Order Processing (WOP). and Revenue Recognition.
Projects can be created manually or automated based on sales orders. SOP and POP lines can be assigned to specific jobs, phases and tasks, as can materials and resources. Work Orders create accurate project demand.
Time reporting is particularly important to construction firms who often have large labour requirements, a cost that can easily get out of control. Time spent on tasks can be imported directly into Business ByDesign or can even be recorded on mobile devices including timesheets, holiday Management, purchase requisitions, expenses and more.
With all associated costs held in a central location and updated in real-time, construction firms are always aware of the current costs associated with a project and can identify when costs are going over budget. If all cost areas are controlled and are in line with the original project cost, the project should end up being delivered on time and to the original budget.
Business ByDesign Applications, Valuations & Retentions
In most businesses, paying suppliers is a relatively straightforward process. The supplier provides products or services, submits an invoice and a purchase order is raised for payment to be made. Construction projects can be highly complex, making this traditional method of payment unmanageable and open to error. There is also a greater risk within construction that the end-product delivered by the supplier does not meet the original specification or quality.
Within the construction industry, sub-contractors and suppliers have managed applications that are held on a dedicated applications register in Business ByDesign. The applications for payment are continually valued against the work provided as a cumulative process. This process ensures the payments made to subcontractors are reflective of the work that has been done based on the initial application.
Customers also pay on an application basis, with applications being raised directly from the sales order processing module. As with suppliers, the application is valued in a cumulative process to ensure customers pay the true value of the finished product versus the original application.
Another important feature in Business ByDesign for construction companies is managing retention. Within construction, payment retention is agreed upon in advance of a project. This means usually, customers will hold back some payment until the project is complete, and further retention is only paid at the end of a defect’s liability period. This process is also used for supplier payments, with construction companies holding retention against subcontractors work or supplier materials for a pre-specified satisfaction period.
The retention ledger in Business ByDesign keeps an accurate record of all customer and supplier retention, including payment release dates. This ensures construction companies don’t forget about payments owed to them. Equally, it ensures sub-contractors and suppliers receive what is rightly due to them.
Top 5 Benefits of Business ByDesign for Construction?
- Project costing and management modules keep projects on track & profitable.
- Automated CIS and CITB deductions for sub-contractors.
- Accurate and streamlined payment processing through applications & valuations.
- Retentions are accurately recorded with payment release dates.
- Links construction sites to back offices when hosted in the cloud.
Summary
It’s obvious that construction companies face a wide range of challenges that are highly specific to the construction industry. With multiple projects and large numbers of subcontractors and suppliers, it’s not difficult for construction projects to get off track. Business ByDesign provides construction companies with the tools they need to improve the way they manage their operations, using industry-specific modules to navigate challenges.
Orchard House has successfully delivered hundreds of solutions to businesses, with construction companies amongst our clients. From conception to deployment and beyond, we can help you transform your business with Business ByDesign. If you would like to speak with one of our Business ByDesign experts on or book a meeting directly in the Sales diary.