Thinc insights
Explore how ERPs can help you to navigate the challenges of the construction industry.
When it comes to enterprise resource planning (ERP) systems for construction, organisations have a variety of different options to choose from, serving a series of different needs. However, finding an ERP that can help with the full breadth of industry-specific challenges, such as planning and estimating, managing taxation and compliance, and tracking project progress, hasn’t always been easy.
While some ERP solutions may be too expensive, others may be too limited to meet all your needs. This often results in you having to switch between multiple systems, rely on multiple spreadsheets, or lose time waiting to receive data from other teams in the office or on site.
Imagine that you could have an ERP system for construction that can be accessed at any given time from any device, with that system built around some of the best financial features available to SMEs.
A construction ERP system that meets the criteria we’ve laid out is possible with Sage 200, at a cost that works for SMEs. It can help you to navigate the vast number of different needs in the construction industry.
Take project cost tracking, for instance. Many in the construction sector are currently operating on incredibly tight budgets due to the price hikes of raw materials, so it is vital that each project is correctly budgeted for. Sage 200 allows you to do that, with budget control allowing users to set detailed budgets for individual projects, including breakdowns by tasks, materials, labour and subcontractor costs, all visible and easy to understand in one place.
With a whole range of modules and integration options, it’s possible to have a system built to the needs of your business and its projects. Let’s take a deeper look at the common challenges that construction and related sectors face and how a bespoke solution built upon Sage can help to solve them.
From housebuilders to engineering companies, equipment hire firms to agencies, organisations of all types turn to ERP systems for construction to help with common challenges. However, not every system can solve every problem. Let’s dive into this deeper.
Accurately estimating the value of work in the construction sector can be particularly challenging due to fluctuating costs. Over the past few years, we’ve seen drastic price changes for raw materials, with labour costs following suit. Misestimating costs on a project can place strain on finance teams through financial shortfalls, and project teams through delays, with both leading to disputes with contractors and clients.
If costs aren’t tracked properly, it can complicate forecasting, and companies may struggle to balance projected vs. actual costs. Incomplete or inaccurate estimates can also lead to inefficient use of resources, impacting both the timeline and overall project ROI.
From our experience, we often find that most ERPs for construction businesses lack real customisation and integration; they’ll be very good in specific areas for planning and estimating, but tying the data together is often a weakness.
The construction industry is heavily regulated, with complex tax structures, such as the Construction Industry Scheme (CIS) in the UK and Relevant Contracts Tax (RCT) in Ireland. Compliance with these regulations is time-consuming and error-prone, with the risk of costly fines to businesses failing to comply.
Tax deductions and submissions need to be calculated and handled accurately, but many businesses lack the internal resources to manage these tasks efficiently. The ever-evolving tax regulations can lead to confusion and potential mistakes, especially when businesses struggle to keep up with frequent updates to legislation.
Balancing these responsibilities alongside tight project deadlines and budget constraints adds significant stress to project managers. From our experience working with businesses in construction, their previous ERP has seen delayed updates in reflecting those changes to compliance, along with region-specific gaps. An organisation may have tailored solutions for the UK market, but they may fall short of compliance for the Irish market, or vice-versa – a stumbling block for multi-national operations spanning the UK and Ireland.
Projects can be disrupted for any number of reasons – from material shortages to weather conditions. But even if everything goes to plan, without real-time visibility, it becomes difficult to track progress, especially if multiple projects are in motion. Project managers must work across multiple teams, suppliers, and subcontractors, which can lead to miscommunications or misaligned schedules.
What’s more, without real-time visibility into project costs and progress, it becomes easy to miss signs of potential budget overruns or delays. Inaccurate tracking of materials, labour, and costs against projects can lead to underreporting or overreporting of expenditures, impacting overall project profitability and financial forecasting.
Some ERPs in construction fail to track progress at a granular level or may fall short of providing the real-time data you need.
Construction companies often struggle with efficiently recording labour hours and expenses, especially when workers are spread across multiple sites or involved in various tasks. The reliance on paper-based or manual timesheets increases the likelihood of errors and inefficiencies. Delays in submitting or approving timesheets can cause discrepancies between the work performed and the amounts billed to clients.
You may also find that tracking expenses such as subcontractor fees, materials, and equipment usage can become cumbersome without a centralised system, leading to potential misallocation of funds or missed reimbursements. Disorganisation in labour and expense tracking can negatively impact cash flow, project margins, and timely invoicing.
Construction businesses often face difficulties in managing their assets, such as tracking equipment across multiple projects. Misplacing equipment, failing to track maintenance schedules, or overlooking asset utilisation can lead to unplanned expenses or equipment downtime.
The complexity increases if you rely on external plant hire, as you then need to ensure proper tracking and management of both owned and rented equipment.
Equipment failures can directly impact project timelines and costs. Without effective tracking systems, companies are also at risk of missing maintenance or replacement cycles, leading to more frequent breakdowns or costly repairs that disrupt the flow of work on-site.
Many ERPs on the market don’t offer proper support tracking for rented equipment, while generic ERPs may not differentiate between equipment tracking and general asset management.
Cash flow is a critical concern for construction businesses as payments from clients often come in stages, and the completion of work doesn’t always align with the receipt of payments. Late payments and slow invoicing cycles are common in the industry, leading to cash flow problems.
Often, you may need to balance the need to pay subcontractors, suppliers, and workers with delayed receipt of payments for completed work. Inadequate cash flow can result in an inability to cover operational costs, affecting project continuity and relationships within teams and across the wider business.
Additionally, unforeseen costs, project delays, and penalties can exacerbate cash flow concerns, leading to financial instability for businesses operating on tight margins.
Generic ERPs without a focus on construction specifically fall short on custom reporting, leading to fragmented reports and forecasts – something to consider when looking for a bespoke ERP for construction.
Retentions are a common practice in the construction industry, where a percentage of the contract value is withheld until the project is completed to satisfaction. However, managing retentions can be problematic.
Contractors may face difficulties in tracking the amounts retained and released, leading to confusion and disputes with clients or subcontractors. Delays in the release of retention payments can cause financial strain on subcontractors, especially those working on multiple projects at once.
Furthermore, discrepancies in retention management, such as incorrect withholding or failure to properly account for amounts, can result in lost revenue or cash flow issues.
The complexity of dealing with both sales and purchase retentions adds another layer of difficulty for businesses looking to maintain accurate financial records. While a lot of ERPs can help navigate retentions management, many don’t offer features like dual retention tracking, meaning you’re still left juggling spreadsheets or multiple systems.
The process of submitting applications for payments and valuations in construction can be complex and time-consuming. Construction companies often work with multiple subcontractors and clients, each with different payment terms, requirements, and project timelines. This can make tracking applications and ensuring that the correct amounts are requested at the right time a logistical challenge.
Additionally, disputes over valuations—such as disagreements about the value of work completed or the timing of payments—are common in construction projects. This can lead to delays in payment and strained relationships between contractors, subcontractors, and clients. Accurate and consistent valuations are necessary to avoid disputes and ensure that payments reflect the actual value of the completed work.
Some ERPs won’t allow for providing detailed summaries for monitoring applications and valuations across multiple projects. Make sure that you consider this when searching for the most suitable ERP for you.
Sage 200 and the construction modules available from Sicon have been built to make time-consuming and resource-intensive activities in your projects much simpler to navigate.
Let’s re-visit the more complex challenges in the construction industry and how Sage 200 can help you overcome them.
Sage 200 allows you to plan and estimate work with confidence, and that’s down to the Projects module. It provides comprehensive insights into material, labour and equipment costs. It also integrates with estimating features, so that users can also account for work that is yet to be won. You’ll be able to get a much clearer picture of future ROI than with other ERP options.
With Sage 200’s CIS and RCT modules, complex regulatory requirements are reflected in real-time, so users can automate tax calculations and deductions on the back of real-time updates to tax laws. Because of this, Sage 200 reduces the risk of errors and non-compliance.
Given the platform’s robust audit trails for tax submissions, audits and compliance for projects across multiple regions are made significantly easier.
With Sage 200’s Projects module, users have access to real-time tracking of costs and forecast profitability, all in line with the progress of the project in question. This is due to Sage 200’s seamless integration across a number of tools and business units, as live updates to data influence project summaries and data dashboards.
It’ll give you much more accuracy than many ERPs available, as it’s a module that’s purposely built for eliminating blind spots in project progress.
You can use the Cash Flow module to pull data directly from across Sage 200 and any construction modules that the ERP has been optimised to contain, giving you greater visibility and ability to confidently forecast.
By leveraging the Retentions module, you’ll have clearer visibility of retained amounts, all calculated and tracked automatically.
Dual retention tracking is also available with Sage 200. Sales and purchase retentions can be tracked much more easily than through some of the other ERP options available to construction businesses.
Sage 200 makes it simple for construction businesses to create and submit applications for payment. Both cumulative and non-cumulative methods are supported, where you can have access to clear summaries of work that has been completed and progressed over time.
The main reason for why Sage 200 is such a good basis for a bespoke ERP system for construction is down to two main things.
One is its flexibility and scalability, as it can be added to or stripped back accordingly. It’s a completely scalable solution, with Sage 200’s respected financial platform as its foundation.
Second is the variety of tailored construction modules to support navigating the many complex challenges that the sector presents. There are modules for project costing, compliance, retentions management, valuations and applications; all built with a comprehensive understanding of the many industry-specific challenges that we have explored.
Through working with Thinc, you can design a bespoke solution for your business needs. Through additional modules and the support of our relationship with Sicon, you can slash time-consuming and resource-heavy tasks. You’ll have the flexibility to build an ERP that will best serve whatever activity you need support with, whether that be budgeting, project management, abiding by legislation or managing applications.
Backed by our 30+ years of experience in financial and ERP platforms, our customers in the construction industry benefit from our expertise in Sage, the specific module designs of Sicon and the close customer focus that Thinc brings to every working relationship.
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