How Not to Run Your Finance Function: 5 Critical Mistakes SMEs Must Avoid

Introduction

Running a construction or engineering business is hard enough without your finance function slowing you down. Yet many SMEs grow quickly, take on bigger projects, and suddenly realise their numbers are unreliable, late, or impossible to interpret.

In this blog, we break down the five most common ways businesses accidentally sabotage their finance department, why it causes real-world problems, and how to fix it.

If you’re scaling, taking on £1m+ projects, or juggling CIS, VAT and complex job costing, this guide will help you build a finance function that grows with you, not against you.

1. Relying on Manual Processes Instead of Automation

If your team is still manually typing invoices, entering receipts, or updating spreadsheets, you’re burning hours on admin instead of solving real problems. For construction and engineering firms, where costs move quickly and supplier invoices land late, manual entry creates delays and errors. One wrong figure in a job costing spreadsheet can distort the entire project margin.

Done Right:

Automation via tools like Xero, Dext, and project systems means real-time data, accurate job costing, CIS automatically calculated, and less time wasted fixing avoidable errors.

Done Wrong:

Manual entry slows down month-end, creates duplication, delays CIS returns, and hides margin problems until the job is already losing money.

What to Review

• Are supplier invoices automatically captured?

• Is your CIS being pulled from site systems or manually typed in?

• Are timesheets integrated with job costing or sitting on someone’s desktop?

  
  

Strategy to Fix It

Start by automating the easiest wins:

• Use Dext for supplier invoices

• Use Xero bank rules for recurring entries

• Integrate project management tools directly into accounts

• Move staff expenses to a digital tool

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Download JFA’s free templates here to help streamline your reporting:➡️ https://www.jonesfa.co.uk/resources

Misconception

“Automation replaces staff.”No, it frees staff to work on higher-value tasks like margin reviews, WIP and forecasting.

2. Expecting the Office Manager to Become the Bookkeeper

Office managers are brilliant, but they are not trained in VAT, CIS, accruals, DRVs, or cost allocation. When they’re asked to “handle the books,” the business ends up with muddled numbers, missed deadlines and year-end surprises.

Done Right:

A trained bookkeeper understands VAT rules, CIS reverse charge, retention accounting and how to code costs correctly.

Done Wrong:

Costs end up in the wrong places, margins are overstated, VAT is miscalculated, and suppliers go unpaid.

Related reading:➡️ How to Read Your Profit & Loss in 10 Minutes: 

What to Review

• Are costs consistently coded?

• Are retentions, accruals, and WIP reflected correctly?

• Are VAT and CIS rules being applied correctly?

  
  

Strategy to Fix It

Even if you can’t hire a full finance team, invest in:

• A part-time bookkeeper

• Proper training

• Written finance processes

• Monthly checks by a management accountant or FD

  
  

  
  

A small groundwork company overstated profit by £74k simply because retentions were coded as income. The office manager didn’t know the difference. Fixing it avoided a painful cashflow crisis during the next job cycle.

Misconception

“Bookkeeping is just data entry.”Absolutely not. It’s coding, rules, and compliance, and getting it wrong is expensive.

3. Expecting the Bookkeeper to Run the Entire Accounts Department

A bookkeeper is not an accountant, a finance controller, or a strategic FD. They are not responsible for tax planning, budgeting, forecasting, margin analysis or financial leadership. You need senior oversight.

Done Right:

A bookkeeper handles inputs; a management accountant interprets the numbers; an FD gives direction.

Done Wrong:

The business gets no forecasts, no margin reviews, no project reporting and no strategic financial decisions, leading to overspending and late surprises.

See also:➡️ Why You Need a Monthly Finance Health Check: 

What to Review

• Does the team understand project profitability?

• Are budgets and cashflow forecasts being produced?

• Is the bookkeeper expected to do tasks they aren’t trained for?

  
  

Strategy to Fix It

Split the finance function properly:

• Bookkeeper → admin and processing

• Management accountant → reporting & analysis

• FD → strategy, pricing, forecasting

  
  

Real Example

A roofing company’s bookkeeper “reconciled” the bank but missed £180k of unbilled work because WIP wasn’t part of their role. Profit looked fine. Cash said otherwise.

Misconception

“We don’t need an FD until we hit £10m.”Most businesses actually need part-time strategic finance support at £750k–£2m.

4. Relying on Your Year-End Accountant for Management Accounting

Year-end accountants specialise in compliance, not operational insight. They prepare accounts, but they don’t dive into job margins, cashflow cycles, material variances, or weekly site-level reporting.

Done Right:

Management accounts give you monthly insight into jobs, cash, margins, overheads and performance.

Done Wrong:

You only find out the truth 9–12 months later, when it’s too late to fix.

What to Review

• Are you getting monthly management accounts?

• Are margins reviewed by project?

• Are forecasts updated monthly?

  
  

Strategy to Fix It

Use your year-end accountant for annual filings. Use a management accountant/FD for:

• Budgets

• Cashflow

• Cost analysis

• Project profitability

• WIP

• Commercial decision support

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Download: JFA’s Free Cashflow Template➡️ https://www.jonesfa.co.uk/resources

Real Example

A £2.8m contractor relied on year-end accounts only. They didn’t realise prelims were eating project margins until the year-end accountant told them, 10 months too late.

Misconception

“Year-end accountants are expensive, why hire more people?”Because not having monthly insight costs far more.

5. The Managing Director Taking All the Finance Responsibility

You can’t price jobs, manage staff, run site meetings, handle suppliers, and also be the finance department. Something will break and usually it’s the cashflow.

Done Right:

The MD leads the business; finance provides reporting and strategic guidance.

Done Wrong:

The MD becomes reactive, stressed, and blindsided by financial surprises.

What to Review

• Is the MD preparing cashflow forecasts?

• Is pricing based on proper cost data or gut feel?

• Is financial information arriving too late?

  
  

Strategy to Fix It

Shift financial ownership:

• Monthly MI pack

• Weekly cashflow

• Clear KPIs

• Delegated responsibilities

• Part-time FD support

  
  

A director priced jobs based on “going market rates.”After a professional pricing review, they realised their day rate was £140 too low. Fixing it increased annual profit by £112k.

Misconception

“No one understands the business like I do.”True, but finance insight helps you make better decisions with less stress.

Key Takeaways

• Automation cuts admin, errors and wasted time, freeing your team to focus on margins.

• Your office manager isn’t your bookkeeper, coding mistakes cost thousands.

• Bookkeepers can’t replace management accountants or FDs, each has a role.

• Year-end accountants do compliance, not insight, monthly reporting is essential.

• The MD shouldn’t carry all the finance responsibility, delegate and structure the function.

  
  

If you want to build a finance function that supports growth, without adding a full-time finance team,download our free toolkits or book a call at www.jonesfa.co.uk.

Wrapping up today's insights, tomorrow we simplify another accounting challenge