With greater competition among construction companies, good financial management is increasingly important. Keeping control of cash flows, debtors and creditors is vital. Modern bookkeeping systems tend to centralise data at head office with little or no information being available to the construction site management team.
The site management team must be encouraged to take a more active role in financial management. This is critical because profits are made or lost on site. Timing and understanding of costs is vital to increasing profitability on jobs. Decisions on site should be based on what is most cost effective.
Firstly it is necessary to decentralise financial management information. Secondly, to train construction site personnel, who are generally not from financial backgrounds, to be more financially motivated.
Financial managers, be they external accountants, financial directors or bookkeepers, tend to favour centralized financial management systems. This focuses the directors’ attention on how much money the business is making and ignores the importance of good site financial management.
To successfully implement decentralised financial management understanding the skills of the construction site team is vital. Any bespoke job costing systems, site management systems or financial management training will need to be designed around these skills. If existing site management processes are understood they can be reused, which will limit the amount of change management required later.
In conclusion, if more emphasis is placed on construction site financial management, costs will be reduced leading to more competitive pricing which in turn will increase turnover without sacrificing profit margins.
Article by Duncan Stainer