It's now become cliché to state that turbulence in the current economic climate is forcing companies to adapt and evolve. But the recent bankruptcies in the UK construction sector show us that this is a reality for businesses of all sizes.

House builders and residential developers in particular are having to deal with high levels of both financial and operational risk. Their ability to mitigate these risks are crucial to their survival.

Managing risk 

For house builders, maintaining healthy working capital that enables packets of land to be acquired for future development – at opportune times and opportune prices- is a key challenge. Missed opportunities equate to reduced competitiveness. Seized opportunities underpin healthy growth and a profitable future.

Well-managed financial risk is achieved by adopting a strategy based upon an in-depth understanding of the risks and taking measures to mitigate them.

At the heart of such a successful strategy is accurate cash flow forecasting for each project, each division and across the entire company. Improving the visibility and management of supply chain transactions is therefore critical.

Managing the supply chain 

A major drain on time and resources within many house building companies is the management of transactions with potentially hundreds of suppliers and sub-contractors.

It has been calculated that an average-sized house builder could receive several hundreds of thousands of invoices each year. Each of these invoices will have been preceded by the issue of a purchase order – and these two will need to be matched together as each invoice is received.

The result is many hours of time spent simply ‘shuffling bits of paper’. Further time and resources are then invested in filing and archiving each document, and then searching them out when someone wants to refer back to them.

A more efficient and money-saving alternative is to introduce electronic trading (e-Invoicing) with suppliers and sub-contractors. With trading documents being exchanged electronically and matched automatically (with exception reporting for the few that don’t match) all of the costs mentioned above are reduced significantly, with some companies managing to reduce their invoice-processing costs by up to 60%.

In parallel, the right electronic trading solution will provide exceptional visibility of the financial data required to maintain tight control of cash flow and predict future commitments.

Choosing the right e-Invoicing partner 

Here are four criteria to consider when choosing an e-Invoicing solution.

1. Will the chosen solution connect easily to my own finance system?

Integration between your own back office finance system and the e-Invoicing solution will make it very straightforward to build in automated validation, thereby streamlining your entire trading process. Additionally, automated procedures ensure that the data used for cash flow forecasting is accurate and up-to-date.

2. Can the solution be adopted easily by my suppliers? 

Your supply chain will probably comprise of companies of different sizes and with a range of in-house IT expertise. To gain the maximum benefits for your own processes, it’s important to ‘onboard’ as many of your supply chain partners as possible. This requires a flexible solution that offers a number of different connection options to suit different companies. 

3. Does the e-Invoicing platform already contain many of my suppliers? 

Widespread adoption is greatly facilitated when a high proportion of your suppliers are already using the same e-Invoicing platform. Additionally, does the trading hub integrate with other hubs? Where suppliers are already using a different electronic trading platform it’s useful if your chosen solution integrates with the system they are using. 

4. Does the supplier understand your industry? 

Every industry is different and the house building industry has a number of practices that a general provider may not fully comprehend, such as plant hire rental agreements and differing definitions of ‘on-hire’ and ‘off-hire’ periods. If your supplier understands these issues and has experience in solving them, the implementation will be quicker and simpler. 

The Tradex eInvoicing solution

The Tradex e-Invoicing platform hosts the largest business trading community in the UK construction sector, with more than 35,000 companies trading 5.5 million electronic documents per year. It is flexible and easy to deploy and delivers significant cost reductions as well as underpinning efficient management of transaction data.

Want to find out how Tradex has helped other house builders eliminate cost from their invoicing process? Click the button below to find out more.

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