For small and medium-sized construction firms, managing cash flow and compliance is a daily challenge. Projects often span months, involve multiple subcontractors and require strict adherence to industry regulations like the Construction Industry Scheme (CIS). Without the right systems, it’s easy for costs to spiral, invoices to be delayed and compliance risks to mount.
Microsoft Dynamics 365 Business Central provides construction SMEs with the tools to manage projects, billing and subcontractor relationships efficiently. By combining project accounting, retention handling and approval workflows, businesses can tighten cash flow and stay compliant. This blog explains how Business Central supports progress billing, subcontractor management and CIS compliance for construction firms.
Why cash flow and compliance matter in construction
Construction projects are capital-intensive and cash flow is critical. Delays in billing or collecting payments can put serious strain on working capital. At the same time, compliance with CIS and subcontractor regulations is non-negotiable. According to a recent Forrester report, businesses that adopt integrated ERP systems for project-based industries see up to a 25% improvement in billing cycle times and a significant reduction in compliance errors.
Common challenges for construction SMEs include:
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Slow progress billing: Manual processes delay invoicing for completed work, creating cash flow gaps.
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Complex subcontractor management: Tracking payments, approvals and compliance across multiple subcontractors is time-consuming.
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Retention handling: Managing retention amounts and ensuring they are released correctly adds administrative burden.
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CIS compliance: Incorrect deductions or reporting can lead to penalties and reputational damage.
How Business Central supports construction finance
Business Central offers integrated features that simplify financial management for construction SMEs. Here’s how:
1. Project accounting for accurate cost control
The Jobs module in Business Central allows you to set up projects with detailed budgets, tasks and cost tracking. You can monitor actual costs against estimates in real time, helping prevent overruns and maintain profitability. This visibility is essential for managing complex construction projects.
2. Progress billing to accelerate cash flow
Business Central supports progress billing by allowing you to invoice based on project milestones or percentage completion. This means you can bill clients as work is completed rather than waiting for the entire project to finish. Faster invoicing improves cash flow and reduces reliance on credit.
3. Retention management for compliance and clarity
Retention is common in construction contracts, but managing it manually can lead to errors. Business Central enables you to set retention percentages on invoices and track outstanding amounts. When retention is due for release, the system ensures accurate calculation and compliance with contract terms.
4. Subcontractor management with approval workflows
Managing subcontractor payments and compliance is simplified with Business Central. You can set up approval workflows for purchase invoices, ensuring that work is verified before payment. This reduces disputes and strengthens financial control.
5. CIS compliance built in
Business Central supports CIS by calculating tax deductions on subcontractor payments and generating the necessary reports for HMRC. Automated compliance reduces the risk of errors and saves time during monthly returns.
Practical steps for construction SMEs
To get the most from Business Central, follow these steps:
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Set up job templates: Use templates for common project types to speed up setup and ensure consistency.
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Configure progress billing rules: Define milestones or percentage completion triggers for invoicing to keep cash flow healthy.
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Enable retention tracking: Configure retention percentages and workflows to manage release accurately.
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Implement approval workflows: Ensure subcontractor invoices are reviewed and approved before payment to maintain control.
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Train your team on CIS processes: Make sure finance staff understand how Business Central handles CIS deductions and reporting.
The payoff: stronger cash flow and compliance
By leveraging Business Central for project accounting, billing and compliance, construction SMEs can achieve:
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Improved cash flow: Progress billing and retention management accelerate invoicing and reduce delays.
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Better cost control: Real-time visibility into project budgets prevents overruns.
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Simplified compliance: Automated CIS calculations and reporting reduce risk and save time.
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Operational efficiency: Integrated workflows streamline subcontractor management and approvals.
As Microsoft notes, “Dynamics 365 Business Central enables organisations to manage complex projects with precision, delivering financial control and compliance in one platform.” For construction SMEs, this means focusing on building, not battling spreadsheets.
Ready to modernise your construction finance?
If you’re still relying on manual processes or disconnected systems, now is the time to explore Business Central. Start with project accounting and progress billing, then add retention and CIS compliance for complete financial control.