Construction is big business, employing 7% of the global work force and accounting for 10% of global GDP. These figures are set to rise as an increasing population requires an increase in the construction of housing, and a tsunami of emerging businesses requires the construction of new business premises.
All industries face their own unique challenges and the construction industry is no different. Like all businesses, it requires careful management of all core business processes such as financials, inventory management, supply chain, purchase order processing (POP) and sales order processing (SOP).
In addition to these, it faces challenges such as project costing and project management, contractor and subcontractor management, multiple sites of operation and HMRC’s Construction Industry Scheme (CIS) to name a few. With profit margins tighter than ever in the construction industry, it’s essential that construction firms manage their operations efficiently.
They need a robust Enterprise Resource Planning (ERP) system in place that is tailored to industry specific needs, so they can operate profitably and remain competitive in this highly competitive industry. Below, we will take a look at some of the ways Sage 200 can benefit construction.
Sage 200 can be hosted in the cloud
Sage 200 (also known as Sage 200cloud) can be hosted in the cloud, bringing with it all the benefits that cloud-based software has to offer. Although some hardware and software is required on-site, the software can be accessed remotely by users. Some businesses choose not to have the hardware and software on their own site, which can increase costs in terms of maintenance and IT infrastructure. Instead, many businesses choose to have software and hardware with 3rd parties such as Eventura, who provide this service for a wide number of businesses.
Being cloud-based, the software can be accessed from anywhere, at any time and 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 even 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.
Sage 200 Automates CIS & CITB Deductions
The Construction Industry Scheme (CIS) was introduced by the UK Government in 1999 as a way of increasing tax contribution 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 Sage 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 Sage 200 also fully Making Tax Digital compliant, the deduction can be submitted digitally to HMRC ensuring the construction firm is also compliant.
Sage 200 Project Costing & Management
Accurate project costing and management is fundamental to the construction industry. Construction projects can be on an extremely large scale, with vast amounts of materials, plant equipment, contractors and subcontractors involved over multiple locations. Initial project costs need to be accurate to ensure the end result is profitable, and these costs need to be kept on track throughout the project to maintain profitability.
Within Sage there are a number of Projects modules available. These modules integrate directly with Purchase Ledger, SOP, POP, Inventory, Time Recording and Works Order Processing (WOP). Projects can be created manually or automated based on sales orders. SOP and POP lines can be assigned to specific jobs, as can materials and resources. WOP creates accurate works orders based on total current demand with a project.
Time reporting is particularly important to construction firms who often have large labour requirements, a cost which can easily get out of control. Time spent on tasks can be imported directly into Sage, or can even be recorded on web connected portable devices using Sicon’s Web Authorisation Portal (WAP) module including timesheets, holidays, 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 costing, the project should end up being delivered on time and to the original budget.
Sage 200 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 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 which are held on a dedicated applications register in Sage. 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 Sage 200 for construction companies is the retention ledger. Within construction, a payment retention is agreed in advance of a project. This means usually, customers will hold back some payment until the project is complete, and a further retention which is only paid at the end of a defects liability period. This process is also used for supplier payments, with construction companies holding a retention against subcontractors work or supplier materials for a pre-specified satisfaction period.
The retention ledger in Sage 200 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 Sage 200 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.
- Retention ledger accurately records all payment retentions & release dates.
- Links construction sites to back offices when hosted in the cloud.
It’s obvious that construction companies face a wide range of challenges which are highly specific to the construction industry. WIth multiple projects and large numbers of sub-contractors and suppliers, it’s not difficult for construction projects to go off track. Sage 200 provides construction companies with the tools they need to better manage their operations, using industry specific modules which have been created to navigate the challenges faced in the construction industry.
Eventura has 20 years of experience successfully delivering Sage 200 solutions to businesses, with construction companies amongst our clients. From conception to deployment and beyond, we can help you transform your business with Sage 200. If you would like to speak with one of our Sage 200 experts, you can request a free call back here.