EXPENSE MANAGEMENT CAN CONSTRUCTION GRAB THIS OPPORTUNITY?

BY ARMIN MORADI, CEO & CO-FOUNDER OF QASHIO

In 2018, the government introduced a value-added tax (VAT) to the UAE — something the construction industry is still getting to grips with. Adding fuel to the fire, a 9% Federal Corporate tax will be levied from 1 June 2023. But, is this an opportunity for the construction industry?

In the UAE many great opportunities still attract new people and new investors, customers and tourists. The GCC construction sector is undergoing steady growth of 3.5‑4% a year on average in 2023-24, outperforming the wider economy, which means investment in infrastructure. All this is positive for the construction industry and the ‘built environment’.

But the real opportunity lies in compliance. To comply with new legislation, changes must be made to bring more control over business operations. The best way to achieve this is through sound expense management.

Let’s look at why construction struggles with expense management and how this challenge is a blessing in disguise:

Messy processes for job expense submission

Petty Cash is common in the construction environment. Each expense requires a receipt and the number of receipts could rocket into the thousands by the end of a weekly cycle.

How does the site team store them safely to claim reimbursement? It doesn’t happen instantly. What does that claim process look like? Hours wasted on manual data entry and uploading photos — think about the costly human errors in that process. With high-stress levels and a lot of moving parameters, it’s easy for money to “go missing”. According to MasterCard’s 2022 Global Payment Report, there is a substantial push to replace cash and checks for bills and government payments.

A robust process for petty cash and better control on corporate cards (if any) ends up with a need for ‘expense management software’. The software will eliminate these issues along with paper trails and physical cash. Everything can be uploaded through a smartphone and stored in one place, instantly — reducing the time and cost of expense processing.

Lack of visibility for field and jobrelated expenses

A smaller construction company will manage several projects simultaneously. At the enterprise level, it could be hundreds spread across the country and the region. If expenses are submitted weekly, that’s seven days without any idea or control over what’s spent.

It’s not just the week because it takes time to verify, approve and calculate expenses, and longer to measure the impact on budget and profits.

On a project level, the consequences could destroy the profit. When you scale the issue, it could kill the cash flow for the business and leave you with significant problems.

The clarity given when costs are seen, tracked and analysed is invaluable. The business can track what and why something was bought, and who from, on dashboards. This leads to sourcing opportunities, leaner processes and bigger savings.

Lengthy and awkward approvals

Approval workflows can be challenging. One type of expense might need to be sent to one approver while another goes to someone else. The employee must remember which expense goes to whom, and this is all done manually by phone, email and spreadsheets.

Let’s use expenses that exceed the budget amount. In that case, the expense report might have to be approved by the Project Manager and Department Head. Once both approve, the report goes to the finance team for final approval before payment processing — all manually done.

Throw in the lack of expense report submission guidelines and you have trouble. Everyone will submit them in their way, adding to the processing time and almost guaranteeing mistakes. According to a report by Global Business Travel Association (GBTA), the average time to complete one expense report is 20 minutes while the cost of compiling it stands at USD 58. The average time to correct a report is 18 minutes while the cost of correcting it is USD 52. When auditing comes around, it will be a long and arduous process.

An expense management software will help set and automate custom approval processes like that above, no matter how complex. The construction company will have audit-ready request and approval trails with accurate memo and receipt records.

Floating aimlessly in a sea of data

A new whitepaper by FMI Corp shows that the construction industry generates a mass of data in everything it does. Over 2.5 quintillion bytes every day, globally — an unfathomable amount. Despite this, a staggering 96% goes unused and an opportunity is missed. Currently, most companies cannot set metrics, KPIs and benchmarks that improve performance. They are shooting in the dark because the expense management processes are manual and haphazard, doomed to repeat the same mistakes.

Also, the project and finance teams are forced to make crucial decisions with a small percentage of the information available hurting the project’s and the business’s health.

Expense management software will help to define processes, understand the state of play, and pull insights that aid decisive action. They can define benchmarks and set metrics and KPIs to improve performance, shortening approval times, for instance.

Why is expense management, like Qashio, so important?

On a high level, it simplifies travel and expense operations, increases productivity and boosts profits. But it’s more than that — employees can submit expense reports with photos and scanned receipts directly into the software using their devices. No more paper forms and chaotically stored documents that may or may not arrive or be accurate.

This means everyone gets paid faster, removing the frustration that comes with delays. Couple that with the time employees get back to focus on highvalue work - instead of manual data entry - and you have a happy, productive team.

By storing everything in one place with analytical tools, a construction business can source insights that allow for planning, forecasting and improvement. According to a Gartner report, companies are looking to spend smarter; maximizing ROI on every spend, automating processes and focusing on sustainability over growth.

Essentially, expense management automation software like Qashio takes a chaotic landscape and paints an ordered picture that’s easy to interpret — ensuring its users are equipped to thrive when the Federal Corporate Tax is started.