The collapse of Carillion, a major British multinational facilities management and construction services company, has highlighted some major downfalls within the UK construction industry and has even led to a report being published by Constructing Excellence, revealing that 43% of construction firms prioritise immediate financial goals over organisational resilience.

So, what else have these reports revealed about the financial situation of construction firms and what steps can be taken to improve it in terms of building better financial models?

The findings

The reports revealed that senior business managers and executives within the construction industry highlighted a number of financial issues as being detrimental to their business goals, including inadequate budgets, insufficient senior management focus on resilience and a lack of skills or knowledge related to ensuring business continuity could be achieved.

At present, the construction industry is a major player within the UK economy, contributing £138bn in value added to the UK economy and employing 3.1 million people, which equates to 9% of the total UK workforce.

With the uncertainty of the UK economy still a present issue, what can leaders within the construction industry do to remain on top?

Embrace the benefits of new technology

Providing staff with new technology will ensure that the industry remains dynamic and will also help with boosting productivity and efficiency. For example, 3D BIM modelling can help with project planning and also material acquisition.

Listen to your staff’s needs when it comes to training

If you want to improve your company’s credentials, it’s important that you listen to the people that are working for you and adjust your training accordingly.

Manage your client’s expectations 

With large construction projects, it’s inevitable that there are going to be setbacks and areas of tasks that don’t go exactly according to plan. Because of this, it’s important that you set realistic timeframes and expectations with stakeholders before going ahead with a project.

Planning is everything

It might sound fairly obvious and rudimentary, but effective planning is crucial to businesses that are operating within the construction industry. A good place to start with planning improvements would be to look retrospectively at other projects that you have completed and consider what could have gone better in terms of planning. 

If the Carillion collapse has highlighted one thing, it’s that small businesses need to have access to the relevant finance for their needs.

Small firms that are owed money by Carillion have now been confronted with cash flow issues, meaning that many jobs have been put at risk. The government has responded quickly to help the small businesses that have been affected, but what can we learn from the Carillion crash in terms of finance? 

In order to avoid becoming supply chain casualties, SMEs can take a number of actions.

Firstly, they need to look out for red flags and classic warning signs.

In the case of the Carillion, there were a number of things that pointed to the fact that the company was in trouble. Firstly, the fact that the company was taking up to 120 days to pay suppliers, with 30 days being the standard.

Another sign is the fact that some SMEs in the supply chain were quoted as saying their invoices were routinely being questioned on the grounds of the quality of the work or goods provided.

Both of these factors are classic hints that a company could be in trouble, and SMEs need to consider how this could result in negative side effects for them, including cash flow problems.

How to stay in control of your finances

When it comes to managing your SME, there are a number of things that you can do in order to stay on top of your finances. Firstly, it’s really important to have a financial plan that factors in any type of financial difficulties that you may run into.

Understanding your financial position is also really important, and what this means is that you are constantly aware of your outgoings and how much money your business has. Consider signing up for internet banking and getting an app on your phone that will allow you to constantly track your finances.

How we can help SMEs

We have a number of financing options available that can help SMEs sustain themselves and grow. We offer business loans, overdrafts and expansion capital from trusted lenders and always take into account the individual circumstances of every SME that we work with. To find out, more visit our website.