There are different types of financial help that small and mid-size construction firms can bring in to help gain control over their money, including accountant, bookkeeper and fractional finance director (fractional FD). This article explains the difference between the approaches and details what you can expect.

Accountant

The first experience most small construction companies have with external financial support will be the accountant they employ to help them with their year-end tax returns.

What is accountancy?

Accountancy is a wide-ranging discipline that spans all the records, analyses, interpretations and reports on the financial activities of your business. To legally perform regulated work such as audits, insolvency and certain tax services in the UK, your accountant must be professionally qualified (as an ICAEW Associate Chartered Accountant, ACCA Chartered Certified Accountant or CIMA Chartered Management Accountant).

Why do construction firms need an accountant?

Small construction firms will almost immediately require the support of an accountant to post their year-end tax returns. The accountant is typically employed around year-end, when they review the business and financial transactions for the year before submitting the necessary tax reports.

At the same time, they will present the recording, summarising and reporting of the year’s financial results to the small business owner.

What are the limits of this approach?

Firms soon get into big trouble when their only interaction with an accountant is once a year.

When financial review and planning is limited to a once-a-year activity it is usually too late to take action on any problems that the annual review exposes.

We’ve seen this time and time again when onboarding a new customer. For example, the SDH Building Services team told us, “Instead of basing decisions on end-of-year accounts, we needed to be making more informed decisions month to month.”

And at RPMG Global, the founder Chris Cummins had a similar experience. For the first two years of the business, Chris used a big accountancy firm for RPMG’s company finances. When filing the first-year accounts, it became clear the firm was not providing the personal service needed to support RPMG’s ambitious growth plans.

“They were vague on our tax liabilities and it felt like we were being passed from pillar to post,” recalls Chris. “I knew that to grow the business the way I want to, I needed to be closer to the money.”

How can Prevail Accountancy help?

We help you move from once-a-year interactions to regular, monthly management meetings.

Prevail Accountancy focuses our approach on real-time management information. This means you have the information you need to profitably manage your business at all times – not just once a year.

For Chris Cummins at RPMG, this real-time approach means decision making is now much less stressful.

“It’s vital to know your liabilities. Your business will fail if you don’t,” emphasises Chris. “Our improved ability to manage cash flow means I can take on new opportunities. Because I have accurate, complete, real-time information, I can be certain of the liquidity in the business. That puts me in a better position to tender for work.”

Bookkeeping

When the day-to-day admin burden of keeping track of payments and reconciling the bank account becomes too much, small construction firms will often hire a bookkeeper to take the admin burden away from the founder or management team.

What is bookkeeping?

Bookkeeping focuses on the accurate, chronological recording of financial activity in the business.

Essential bookkeeping tasks include:

Recording transactions, i.e. sales, purchases, cash receipts, cash payments.
Reconciling bank accounts to ensure records match bank statements.
Managing invoices and bills, including accounts receivable and accounts payable.
Preparing basic financial reports, such as summaries of income and expenses, to show how the business is performing.

Bookkeepers may also support tax preparation and payroll processing, depending on the bookkeeper and the business.

Why do construction firms need bookkeeping?

It’s important to keep on top of day-to-day expenditure but this soon becomes a distraction for management. The admin burden, pulls attention from more urgent or operational tasks.

To lighten the load, construction firms will often hire a bookkeeper on a part-time basis so management can focus on the operational and strategic management of the business.

The bookkeeper might be employed part-time or on a contractor basis, especially initially when the burden is light enough not to require a full-time role. Often in owner-manager construction firms, it’s common for the bookkeeping to fall to a family member who steps in to support.

What are the limits of this approach?

A bookkeeper doesn’t not have the strategic financial management experience of a finance director or a chief finance officer. While they might help you keep on top of the day-to-day logging of financial transactions, they usually don’t have the skills, qualifications or experience to help you with financial planning or strategic financial management.

In other words, they can’t help you set the financial goals or direction to ensure continued profitable growth.

Our customer NTB Survey experiences the limits of this approach before hiring Prevail. The bookkeeper was trying to maintain the ledger, categorising transactions into assets, liabilities, equity, revenue, and expenses. However, their lack of experience meant direct costs were being recorded as indirect costs – giving a very misleading picture of the financial performance of the business.

As a result, the business founder was struggling to make the right decisions for the business. It took an overhaul of the existing accounting practices by the Prevail Accountancy team before he was able to make strategic decisions with confidence.

How can Prevail Accountancy support you with your bookkeeping?

As a Prevail Accountancy customer, we will support your bookkeeping efforts – because this information underlies all your financial reporting.

However, Prevail Accountancy offers more than day-to-day bookkeeping services. When you hire us, you’re really hiring us for the strategic guidance we can provide, rather than the administrative support.

We prefer to digitalise your day-to-day admin as far as possible. As part of our onboarding process, we will review the bookkeeping and admin processes underlying your financial data and financial management and help you to automate as much as possible.

This way, you save time, reduce the likelihood of data-entry errors and make your access to financial information as near real time as possible.

Fractional Finance Director

For fast-growing or ambitious construction firms, the strategic financial guidance and planning that a fractional finance director (fractional FD) can deliver is a much-needed step-change.

What is a Fractional Finance Director?

You can find out more about the role of a Fractional FD in our blog “What is a fractional CFO?”.

Essentially, a Fractional FD is a great way of getting senior, professionally qualified accountancy expertise into your business for a fraction of the cost of a direct hire.

A Fractional FD will work with your business on a part‑time, outsourced, or retained basis (hence the “fractional”). This enables you to bring in senior strategic financial leadership experience even when your business isn’t big enough to sustain the cost of a full‑time Finance Director.

It’s ideal for small but ambitious or small but fast-growing construction firms because it gives you a way to access the vital financial expertise and experience you need in an affordable way.

What are the risks of this approach?

There is very little risk in this approach. The beauty of hiring a Fractional FD is that you can scale up and down the hours they commit to your business in line with your business need.

This was really useful for our customer, Pas Safe Solutions, when it needed support on a large-scale digital transformation project. They scaled up the intensity and duration of the support they received from the Prevail Accountancy team so they could deliver the project successfully on time and on budget.

Pas Safe Solutions told us, “It was much lower risk than employing someone. If it didn’t work out, we could easily walk away. Hiring a full-time employee would have been a lot more expensive, and there’s no guarantee they have the right set of skills. Working with Prevail is a lot more ‘plug and play’.”

How can Prevail Accountancy help as a Fractional FD?

The great thing about hiring Prevail Accountancy as your Fractional FD is we can help however your business needs us to. We bring a high level of financial planning and strategic expertise to help you set out and achieve your business goals.

As our customer Pas Safe Solutions explains: “You have a choice… Do you want years of heartache and stress, or do you want to emerge from that high-growth phase actually having enjoyed the process? Dropping in Prevail to support your business and your team will help you to enjoy the journey. Every ambitious, growing business needs a Prevail. Well, more simply, they need Prevail.”