It is important for finance and development teams to have a strong working relationship to ensure the greatest number of high quality houses can be built for customers within a reasonable budget. Transparency of information and an ability to trust the information being shared interdepartmentally is the key to strengthening the communication between these two vital teams within housing companies.
Finance and development teams are united in the common goal of providing high quality affordable housing for customers. However, as they each manage different aspects of new building schemes information can be poorly communicated, mistakes made, and money lost.
From a financial perspective, it is important to stay in control of project budgets and to know when large expenditures are going to take place. When housing associations draw down large portions of money to pay development bills, they lose the ability to earn interest on it. Large sums sitting unspent in the current account is an inefficient use of money. Therefore, clear expenditure forecasting is imperative for the finance department.
On the flip side, if the finance team is given short notice for a large bill and the money needs to be withdrawn outside of the banks’ notice period then they will incur a penalty, once again losing them money. Moreover, if the organisation lacks the immediate funds to pay a contractor, for example, the development team may develop a poor reputation within the sector and struggle to find reliable building contractors in the future.
For development teams, the ability to calculate what they can afford to pay for a scheme quickly and accurately is the key to moving competitively within the housing sector. Once approved, the development team must control costs as part of their project management role. If up-to-date financial information is difficult to access, they will struggle to manage their cash flow forecasts.
At the root of these cyclical problems is visibility, trust, and open communication. If the finance and development teams fail to adequately share information across the board the organisation is at risk of losing interest gains, incurring additional penalty fees, and falling behind on development schedules.
ProVal serves as a starting point for developers as it enables them to appraise schemes easily and to assess the impact of various projects on the overall business plan. ProVal is not Excel-based and the functions within it cannot be altered by the user. Financial teams can be confident that any appraisals produced within ProVal will work consistently, reliably and can be audited. Moreover, ProVal offers developers a high degree of flexibility in altering scheme lengths, tenure types, and maximising the NPV. These ProVal appraisals, once approved by finance and the board, form the approved budget, which is secured within Sequel.
At its heart Sequel is an expansive project management system that facilitates transparency between the developer and the finance team. Once the approved budget is imported into Sequel, the development team can begin forecasting the project expenditure. These forecasts can be logged on timelines and then updated with the true start and end dates throughout the build. This allows finance to manage their spending forecast with an accurate overview of the project. Therefore, money can be withdrawn from the bank at exactly the point it is required, consequently incurring no fees and maximising the amount of interest that can be earned within the bank. Like in ProVal, these cash flow forecasts are auditable and controlled, allowing finance teams and developers to execute large-scale projects confident in their overall budget and project management.
To find out more about how ProVal and Sequel can improve the communication between teams within your business, book a discovery call with our Business Development Manager, Ricky Prota.