As a construction company, how do you manage business finances? Do you use in-house systems or outsource this function to an external resource? The reality is that most businesses use a variety of resources to manage their financial accounting. The challenge of getting what is needed from these varied systems is even greater for the smaller construction companies forced to make do with sub-optimal resources. Research reveals that nearly 45% of small businesses (or SMBs) neither employ an accountant nor any bookkeeper. Companies with an accounting department have the largest percentage of outsourced accountants (at 22%).
While outsourcing can help companies with limited budgets, the real concern is whether your existing financial accounting system is good enough for your particular growing business. Especially businesses in the construction sector face a host of accounting-related challenges that their existing tool can no longer overcome.
Let’s look at the five leading challenges of accounting for small and mid-sized construction companies.
5 Accounting Challenges for SMB construction companies
Many businesses use popular, and hence generic, financial accounting systems to track their financial numbers. However, a competitive business environment demands that accounting systems deliver more than just base information.
Here are the top 5 business challenges that most entry-level accounting tools cannot overcome:
Lack of scalability in the financial accounting system can impede the growth of any business. This is because such accounting tools are built using legacy architecture that cannot scale up for more customers and more complex projects with multiple sites and schedules.
As any business scales up, data-centric financial processes must also scale up simultaneously. However, with these tools, SMBs are unable to generate their financial reports quickly, which impacts their business operations across multiple areas. It makes planning harder and less data-driven. It also makes compliance and reporting more effort-intensive and error-prone.
Inefficient accounting systems can limit new business opportunities, thus, adversely impacting business growth.
2. Limited Integration
Traditional accounting tools offer limited integration with third-party tools like payroll and HR systems. Growing businesses need the flexibility to integrate their accounting with a host of other systems. In construction projects spread across sites, jobs, contractors, and functions, this presents an even bigger problem as silos get created. Silos present the challenge of fragmentation in the data, creating the possibility of different versions of truth existing within the same system. Integrated systems address this problem and give businesses a single source of truth.
Integrated accounting systems can also lead to faster payroll processing and customer billing. Both results are beneficial for any small business.
3. Timesheet Management
Small businesses continue to rely on manual time tracking for their employees, which is inefficient as the number of employees increases and jobs become more complex or distributed. Existing accounting systems also rely on “manual” work time entry from Excel spreadsheets into their timekeeping modules.
Human or manual errors in timesheets can cause issues in payroll processing. As a result, small businesses incur high payroll costs when correcting manual errors.
Similarly, project costs escalate when records do not display the accurate hours worked by project teams or employees. Revisions in timesheet rates may not automatically reflect in the project billing system. Further, companies with union payrolls can be fined by the unions if the payroll is inaccurate.
4. Remote Work Management
Can your employees use mobile apps to clock in (or out) their project work time? In the wake of the ongoing skill shortage, small companies are adopting different working models like remote working to improve their reach or dividing work between on-site and in-office teams. To boost productivity, distributed teams use online collaboration tools for project management and online meetings.
In this regard, remote-working accounting and financial teams also need robust collaboration capabilities in their accounting systems for better communication as well as to ensure the same versions of data exist everywhere in the financial system. Functionalities like financial planning and budgeting deliver improved collaboration (than manual spreadsheets).
5. Customer Support
Customer support or service is another point of contention with traditional accounting tools. Instead of 24/7 customer support, accounting users often must rely on online knowledge resources to find answers to their common queries. Vendors offering accounting solutions focus on developing online discussion forums where users can post their queries and receive answers from other users.
Effectively, customer support in these companies is driven by peer knowledge instead of a trained team of customer service professionals.
While most financial accounting tools are easy and user-friendly, they can become liable once the business grows to the next level. Here is why small and mid-sized construction companies need a complete financial solution like Microsoft Dynamics 365.
How MS Dynamics 365 Overcomes Accounting Limitations
For growing companies, traditional accounting tools pose multiple challenges, including the following:
- Completing consolidated financials
- Reconciling intercompany accounts
- Consolidating intercompany accounts
- Adding a new business unit or revenue stream
MS Dynamics 365 overcomes these challenges with accurate financial reports that users can generate with a single click. Here are some of the major improvements of MS Dynamics 365 over other popular accounting systems:
Dynamics 365 is a complete CRM and ERP solution that manages many business needs, including accounts, customer relationships, sales, and more. Dynamics 365 has improved functionalities for companies planning to expand their operations across many countries.
Ease of Use
Business executives prefer to work with a user-friendly accounting tool. While other accounting tools are user-friendly, MS Dynamics 365 is more intuitive and packed with useful features like in-line editable grids, visual designers, and much more.
Traditionally, small companies prefer using Microsoft products like Excel, Outlook, and Word. Developed by the same company, Microsoft Dynamics 365 seamlessly integrates with most Microsoft tools. The powerful solution can. Easily scale to a full-fledged ERP with purpose-built tools for everything from payroll and time sheets to asset tracking and management.
Most accounting tools allow organizations to generate and send their sales invoices to customers through multiple modes. On its part, MS Dynamics 365 generates accurate invoices based on correct timecards.
Overall, MS Dynamics 365 offers a range of financial benefits to SMBs, including:
- Accurate timekeeping and generation of paychecks
- Cash flow optimization using predictive analytics
- AI-powered decision-making
- Real-time reporting and embedded analytics
During their initial startup years, small businesses are more likely to invest in simple accounting tools and solutions. As their business grows, the shortcomings or limitations of these tools are exposed, making it challenging for organizations to scale to the next level.
With MS Dynamics 365 solution, small businesses get the same (and even more) ease of use and basic functionality as the other tools while relishing a robust and scalable system to handle rapid business growth and complex challenges.
At CEM Business Solutions, we have developed the best Microsoft solutions for various use cases, including HR, accounting, and payroll. Let us help you out on your search for a better accounting system. Book a demo today!