Q: Ian, let's start with the VAT domestic reverse charge – what are your views?

A: To be honest, I can understand why HMRC is introducing it. There is a significant amount of VAT fraud in the construction industry. It's well publicised.
I remember attending a RedSky User Conference, back in October 2017, when a guest speaker presented a number of government statistics about the huge amount of money the Treasury was losing due to VAT fraud in construction. So bringing in a reverse charge system – along the lines of what's already in place in Ireland and other UK industries – does make a lot of sense.

Q: What effect will it have on your business – and on the construction industry?

A: Although I can completely understand why HMRC is introducing the VAT reverse charge, I don't think the government really appreciates the impact this change is going to have on the construction supply chain from a cashflow perspective.
I'm expecting the impact to be minimal from our perspective as a main contractor. But it is going to affect the smaller subcontractors who rely on that VAT cashflow to pay their monthly outgoings. They don't currently have to pay their VAT until the end of the quarter, so they use it as part of their working capital facility.
Removing that money in one fell swoop from April is going to cause a number of issues with our supply chain and throughout the construction industry. To mitigate that, we provide a subcontractor early payment system that enables subcontractors to take their certified money earlier than the payment terms. It comes from a working capital facility that we've set up with an external provider and the subcontractor pays a small amount of interest on the amount advanced.

Q: Is the prospect of the necessary software changes keeping you up at night?

A: No. It's important to have a system provider that understands the construction industry and is in tune with its requirements. I'm fully confident in RedSky's ability to do the necessary software updates, which it has been working on for some time.
The reverse charge is based on CIS operations. Given that the RedSky system already has a specific subcontractor ledger that deals with all the CIS, I'm expecting it to be quite a straightforward software tweak that will allow the information to flow through to the VAT returns. I see it as the latest step on our digital transformation journey.

Q: When did John F Hunt embark on that journey?

A: I joined the company in November 2016. At that time, many processes were still paper-oriented, especially within Accounts Payable and Payroll, so my initial task was to migrate to RedSky's latest software, to allow us to benefit from all the new features. We set up the emailing of remittances, statements, payslips and P60s from within the RedSky system. It was all pretty straightforward.
I'd say we're saving about a day a week in time spent by the Payroll team, which equates to around £5,000 a year. And we're saving an additional £4,000 a year by emailing encrypted payslips and P60s direct from the RedSky system.

Q: Fast-forward to 2020 and you describe automating the Accounts Payable process via RedSky as "an absolute godsend" during the COVID lockdowns. Why?

A: There are many reasons. We've been hosted by RedSky since 2013, which was a big help. The day before the first lockdown, I was able to get my teams up and running, working from home, with minimal assistance from our IT team. The transition went very smoothly.
It all happened the week before we were supposed to go live with the RedSky Invoice Register. I'd heard so much positive feedback from the RedSky User Group community about the dramatic difference it had made to their invoice processing, so we decided to go ahead, despite the lockdown.
Implementing the Invoice Register forced our people to switch their mindset overnight, from manual to electronic processing. They overcame their fear of change because there was no other choice. The digitisation had a transformative effect on the organisation.

Q: What benefits has the Invoice Register brought to John F Hunt?

A: We used to have to wait days for the invoices to be signed manually each month and sometimes the documents would be lost. We incorporated Workflow Approvals in the Invoice Register process from the outset and it now takes around 30 seconds for an invoice to be approved digitally, from start to finish. Eliminating the need to pass physical paperwork around also made good sense in the time of COVID.
The Finance, Commercial, QS and Project teams no longer have to be in the office to access documentation because they can all access an image of the invoice on screen. It's a big timesaver that makes it much easier for me to check that invoices have been coded correctly, too. It's difficult to come up with an exact figure, but I would estimate that the Invoice Register is saving us at least £6,000 a year.

Q: You also implemented RedSky Web Timesheets for two divisions during the first lockdown. What benefits did that bring?

A: Our Payroll team was wasting a lot of time identifying and correcting weekly payroll errors for our many service contracts. RedSky Web Timesheets removed paper from the process and introduced important controls, including restricting users to their specific list of employees. Information is now entered directly into Web Timesheets and the data then goes through the Approvals Workflow before being imported straight into the Payroll system.
The divisions no longer have to wait for the previous week's payroll to be run before entering the current week's timesheets, so they're 'ahead of the game'. Similarly, our QS team can now analyse the timesheets and make any adjustments that are needed, well before the weekly payroll is processed on the Wednesday. It's far less hectic and has improved overall accuracy.

Q: How would you sum up how RedSky has supported your business during these unprecedented times?

A: Everything worked really well in a hosted environment, across all our companies and all the different ledgers we use. When the restrictions were lifted after the first lockdown, we returned to the office on a rota basis. Then when the second lockdown was announced, we all just switched back to working remotely, without any fuss. From an operations perspective, it's been seamless.

About John F Hunt
The John F Hunt Group of construction-related companies provides specialist, industry-linked services ranging from demolition and asbestos removal to remediation, concrete cutting and plant hire. It employs approximately 450 people in the UK.

About RedSky
RedSky software enables construction companies to achieve and maintain competitive advantage. We make real-time actions visible, enabling companies to control change, eliminate risk and achieve ongoing incremental gains from improved operational efficiency. Across all types of construction and contracting projects our software is scalable, modular and proven to improve performance and productivity.

https://www.redskyit.com