Bibby Financial Services is advising construction firms to get their finances in order to make the transition to the online system stress-free and to avoid any potential cash flow problems.

April deadline could 'cost unprepared dearly' warns Bibby. Ahead of the 6 April deadline for the new Construction Industry Scheme (CIS) for taxation, Bibby Financial Services is advising construction firms to get their finances in order to make the transition to the online system stress-free and to avoid any potential cash flow problems. From April, the current CIS will be replaced with an industry-wide online financial reporting system.

The aim of the new scheme is to streamline processes and provide alternatives to the current paper-based processes of construction taxation.

'The main difference for construction companies is that there will no longer be a need for CIS annual returns, or CIS cards, certificates or vouchers'.

'Despite the fact that the majority of subcontractors registered under the existing CIS rules will be automatically transferred over to the new system without the need to re-register, inability to use the new system correctly will have real ramifications for companies', said Bibby Financial Services product development director Andrew Dixon.

Construction firms that don't understand the changes and fail to use the new scheme correctly could see a significant drop in income as a result of the 30 per cent emergency taxation that comes into play if the new system is not adhered to, which, Bibby warns, could cause a serious cash flow crisis and, in the worst case scenario, could even lead to insolvency.

'With a fast-approaching deadline, businesses must really focus on getting paperwork and financial processes organised before the new electronic reporting systems become mandatory'.

'Getting financial records in order is not only worthwhile to ensure CIS compliance, but it is also good business practice for maintaining a healthy bottom line and cash flow', added Andrew Dixon.

With this in mind, Bibby Financial Services has developed the following tips to help construction companies get their finances in shape and aid a smooth transition to online reporting:.

1.

Perform checks.

Under the new CIS scheme contractors must check or 'verify' new subcontractors with HM Revenue and Customs.

This will not only ensure the company is compliant with the CIS, it will also act as a safeguard against 'cowboy' operators.

2.

Organise financial records.

Contractors must make a return every month to HM Revenue and Customs, showing payments made to all subcontractors.

Having a system in place to summarise all the information required will make this a simple process, if not it will be impossible to transfer information to the new CIS electronic format.

3.

Communicate.

Under the new scheme subcontractors will still be paid either net or gross, depending on their own circumstances, but it will be HM Revenue and Customs who tell the contractor which treatment to use during verification.

4.

Keep the cash coming in.

Perform credit checks and set sensible credit limits, do not accept excuses.

If in doubt, review current credit limits and if necessary reduce them.

Keep records and don't let customers slip behind or your business will pay the price.

5.

Send accurate invoices.

Do not delay sending invoices, statements and applications for payment out on time.

Keep a record of all ongoing projects so it will be easy to raise an accurate invoice.

On completion of the job, raise the invoice immediately clearly stating the date payment is due.

6.

Investigate funding options.

Think about how your business is funded.

Will it carry you through any temporary financial difficulties?

If you are stuck with a bank overdraft that is repayable on demand then consider more innovative methods of funding.

Specialist solutions like Bibby Financial Services' Construction Finance takes into account the individual and specialist requirements of those operating in the construction industry'.

'Construction firms heeding this advice will ensure a healthy cash flow and will find the transition to online reporting a much smoother process than those who simply bury their head in the sand'.

'Most importantly however, those that are prepared won't run the risk of facing a 30 per cent emergency tax, which could spell real difficulties', said Andrew.

To find out more about Bibby Financial Services' Construction Finance solutions please visit the website.