In this changing economic environment, a growing industry like the construction industry may face various accounting challenges when it comes to staying updated with finances and regular tax payments. While the old methods of keeping track of finances might be easy, they are not always scalable to the new needs of a business. With increasing numbers of bids, jobs or budgets, moving forward with the old systems may require you to add more administrative staff. This can affect the profitability of your construction business as well as the quality of services. Thus, hiring professionals who are adept in accounting for the construction industry is extremely beneficial to avoid delayed tax payments and subsequent penalties.
Ultimate Accounting & Tax Solutions is the one-stop destination for all your accounting needs. Based in the UK, Ultimate Accounting & Tax Solutions can provide you with experienced construction accounting professionals in the UK who can manage all your accounts to ensure the smooth operation of your construction business.
Here are some common accounting challenges faced by the construction industry:
Rising costs of materials and labour:
The pandemic has undoubtedly disrupted construction supply chains and labour pools. Prices for materials, equipment and labour are expected to increase following the market trend. In such conditions, it is crucial for construction companies to ask for a deposit to purchase and store raw materials prior to starting the project. However, many construction businesses still face losses if their clients are unwilling to pay the additional amount when the market prices for materials or labour goes up with respect to the previously estimated prices. Therefore, apart from maintaining a cordial relationship with the client, they must set a percentage threshold which allows them to send an invoice to the client regarding the extra cost.
Delayed payments from clients:
Most of the time contractors only get paid on the completion of the project. In the meantime, the construction company has to bear the expenses of payroll, interest and rental fees. In addition, as constructed facilities require a large short-term cost with long-term benefits, a situation may arise where the client fails to have the funds to make full payment for a project. Delayed payment from clients might leave you with a negative cash balance while permanent delays from clients can cause you financial burden and cash-flow problems. To deal with such cash-flow problems your construction company must include a payment schedule in your project proposal based on agreed-upon milestones or dates. Also, consider asking for a deposit before starting the project.
Difficulties in securing funding:
Macroeconomics, economic cycles and material costs along with a whole range of other factors highly influence the construction industry. As a result, mainstream institutions such as banks find lending money to construction firms relatively risky. Also, we cannot deny the fact that funding a construction business is never cheap. Materials, labour, dispute resolution, insurance as well as the fact that projects that start now will be subjected to economic changes in the next two to three years (as the commercial environment may change) indicates that for any significant construction product, there is a need for liquidity and capital from firms from the beginning of the project
The cost of complying with regulations:
Following environmental regulations have become a constant challenge for all UK-based construction companies. As the government constantly imposes new rules and revises the old ones, keeping up with the changes becomes difficult and failure can result in significant penalties. While such regulations are necessary for the protection of the environment, they also raise the project cost significantly. Of course, it is crucial for construction companies to carefully maintain a balance between the need to protect the environment and the need to stay afloat financially. For those companies that can strike this balance the probability of future success increases significantly.
Managing risks of the construction industry:
As we all know, the construction industry involves high-risk – workers working from a height, usage of dangerous machinery & tools and carrying out work under hazardous sites. Therefore, effective risk management is a must to keep employees, contractors and site visitors away from harm.
However, risk management includes much more than just health and safety. Financial risk management is something every construction company should consider as soon as they can escape the financial risks. Anything that affects the finance of a business is considered a financial risk. The common financial issues faced by construction companies are – shortages in cash flow, delayed payments from clients, increased material costs, etc.
Financial risk management involves accessing how the company’s finances might be affected in different scenarios and planning for all such possibilities. Partnering with a specialised firm that has experience in accounting for the construction industry might help you get a better understanding of financial risks and can help your company make a well-informed decision.
How Ultimate Accounting & Tax Solutions Can Help Your Construction Industry?
Here at Ultimate Accounting & Tax Solutions, we have accounting experts for your construction business who can provide advice on VAT options regarding tax, land tax, environmental taxes and stamp duty. We will apply for your tax refunds, submit your tax returns in compliance with the HMRC ‘Construction Industry Scheme’, help claim R&D tax credits as well as chase HMRC for tax repayment.
Our experience and expert accountants will represent your construction company when it comes to HMRC requirements and carry out required investigations to ensure that your project complies with all current regulations. We will also ensure that you get maximum tax efficiency without costing you your valuable time!
Hiring the ideal construction industry accounting professional is going to help you implement new methods of accounting for your construction business without having to spend your time, allowing you to focus on other aspects of your business! Here at Ultimate Accounting & Tax Solutions, we can also optimise the financial processes of any business in the construction industry to ensure the best returns and help you with strategies to help your construction business achieve your desired goal.
Contact us today for a chat with the best construction industry accounting professionals in the UK.