Five tips to grow your business
How to expand your construction business this year according to Sheards Accountants.
Following a difficult year for the sector, construction output in the UK is now growing month on month. With this in mind, we share our top tips for construction businesses looking to grow in 2021.
Business planning . All too often, the pressures of keeping the business going on a daily basis mean that strategic planning is not given the attention it needs. The result is often rushed judgments, over or under-capacity, or missed opportunities.
Every business owner needs support from an advisor who can help them make objective decisions based on its current performance and future plans. How often do you put a little time aside to ensure that your business remains on target to achieve your plans, or maybe your plans need revision? We recommend working with your accountant to clarify your vision for the business and discuss what you can do to monitor progress towards this end goal.
Monitor projections and results. To be fully in control of growth, you need information on what is happening to your business now, not what happened weeks or months ago. As a businessperson you will recognise the vital importance of financial control in sustaining and improving profitability. Good financial control involves deciding which areas you need to monitor and how frequently, generating the numbers quickly and accurately and sharing the results with everyone who needs to know them.
It’s also essential to be able to interpret the numbers correctly and take appropriate and timely action based on your interpretations. The starting point should be to set up a system that enables you to generate accurate reports as quickly as possible. Certainly no later than ten days after the month closes.
Register for VAT monthly. While most businesses file their VAT returns on a quarterly basis, due to the implementation earlier in 2021 of the VAT Reverse Charge, it may be appropriate for some construction businesses to switch to doing their VAT returns monthly.
Builders working for larger contractors, and who have therefore become subject to the Reverse Charge, may be able to improve their cash flow by filing monthly VAT returns rather than standard quarterly returns. Input VAT on materials and overheads can be reclaimed from HMRC every month rather than waiting a full three months and more.
HMRC frequently queries VAT repayment claims, so habitually lower reclaims are far more likely to be processed quickly and without detailed enquiries by HMRC, which can delay refunds by six weeks or more.
Monitor risks. Charles Brook, partner at insolvency practitioners Poppleton and Appleby says the most important thing for construction companies looking to grow is to continuously monitor risks facing their industry.
“It simply isn’t possible to provide an exhaustive list of risks currently facing the construction sector, but there are a few which stand out as having the potential to impact most businesses in a negative way,” he said.
“The first is being busy. Busy people may be inclined to cut corners and, while that may have a health and safety impact at its most basic level, it also follows that important matters such as proper costing, credit management or the supervision of sub-contractors doesn’t get the attention that it deserves. There are so many business opportunities out there in this sector that it could be easy to become over-stretched or over-committed, and these create vulnerabilities.
“The second is managing supplies. It isn’t just Brexit that has damaged the supply chain and introduced delays and increased costs associated with border controls and tariffs. Globally, the demand for building materials has produced shortages of raw materials, and everything from blocks and timber to technical components at every stage in the construction process are in increasingly short supply.
“The consequence is increased prices, delays, lost revenue, penalties and, ultimately, contract failures.”
Billing and collecting payment on time. As the economy recovers, monitoring your billing and ensuring prompt payment by your customers is more important than ever.
Cash is king is an old cliché but late payment or, worse, bad debts, can bring down even the most profitable business. Ensure that you set time aside to bill regularly, and not weeks and months in arrears. Where possible, bill stage payments to help cover material and subcontractor costs.
The past 12 months have been particularly difficult for the construction sector, not only with lockdowns and restrictions but with the introduction of Brexit and new regulations across the industry.
For many, seeing growth in the next year is essential, which is why we wanted to share our insight into key ways construction business owners can do just that.
From working closely with your accountant on projections to considering doing your VAT returns monthly, now is the time to really take control of your business as the industry opens up once again.