Hot on the heels of Tesco’s £250 m profit overstatement, construction kingpins Balfour Beatty, have issued a profit warning after discovering a massive £75 million profit shortfall in its Construction Services UK division.
In a trading update to the London Stock Exchange the company identified where and how the shortfall occurred and that KPMG have been called in to carry out a detailed investigation of the contract portfolio within Construction Services UK.
As we’ve outlined in our introduction to the “Book of Accounting Blunders,” no one and no one organisation can hope to be perfect but the scale of the profit shortfall is a worrying development for an already beleaguered division of this construction giant. What KMPG will uncover is unclear but one thing is for sure, proper accounting procedures appear to be lacking. How else could you explain £30m of write-downs in its troubled engineering services business, £20m in extra costs on London jobs, and £25m of write-downs across its regional building and major infrastructure arms?
For any small construction business or indeed any small business the lesson is clear – keep your books accurately so that you have clear line of sight in to how your business is performing. You can then take preventative measures to correct issues before they manifest themselves and cause cash flow problems or worse.
The manta here at Big Red Cloud is that is what good financial and accounting software is for: to keep the books accurately and consistently in compliance with the laws of the land and the Revenue.