An audit trail serves as a time-stamped record of actions in a business environment. They’re useful for tracking financial transactions as well as other events, such as changes to documentation or message notifications.
One of the big benefits of implementing an audit trail system is that it boosts accountability. It simplifies the process of establishing who did what and when in case any issues develop later.
That said, not all construction companies use them. This post looks at why the organizations that don’t are missing out and how your construction teams could benefit hugely from the introduction of a comprehensive audit trail process.
Benefits of Audit Trails for Construction Teams
Implementing a company policy of maintaining an airtight audit trail has a number of advantages. Keeping an accurate chronological record of activities and associated transactions helps with every aspect of running a construction business, from simplifying communication to avoiding common credit problems.
Here are a few of the main benefits:
Improved Accuracy and Reduced Errors
When you create a complete audit trail record of your business activities, it encourages everyone on the team to focus on eradicating errors. That’s because generating a detailed audit trail enforces a higher degree of transparency and accountability in all your processes.
Businesses’ tools can also be helpful when it comes to auditing. For example, many companies use online invoicing software to automate the invoicing process and reduce the inefficiencies integral to manual billing systems.
This software provides instant access to real-time data about all financial transactions. This makes it much easier to generate an accessible audit trail of invoices and related payments that is simple to analyze if there’s any dispute further down the line.
Enhanced Team Collaboration and Communication
One of the biggest project management challenges is making sure everyone, from the finance team to the procurement manager or site foreman, is working effectively together.
Construction projects can be highly complex. There are many moving parts, so it’s not uncommon for things to go wrong through miscommunication or siloed information. Proper records can be kept to generate an accurate audit log and stored centrally within a single source of truth.
This data centralization allows those involved in a project to stay up to date at all times and simplifies collaboration because everyone knows exactly what needs to be done, by when, and by whom.
Increased Efficiency in Project Management
One key benefit of keeping an audit log is that it cuts down the amount of time you need to spend looking for business-critical information. Audit logging simplifies the process of tracking down the details of an individual event or financial transaction so you can quickly access whatever you need to know.
With a robust data audit trail, all your data-driven processes become more efficient. The ease of accessing information means you can accomplish complex tasks in good time and optimize your workflow at every stage of a project to guarantee timely delivery.
Better Risk Management and Mitigation
According to design and engineering consultancy Arcadis, the average value of disputes in construction projects in North America rose by 42% in 2022 year-on-year to an eye-watering $42.8 million.
The number one reason for disputes was reported to be “errors and/or omissions in the contract document”. This kind of misunderstanding arising from poor contract drafting can be an indication of a broader problem.
The truth is that in construction, as in any other industry, companies have to take a serious approach to generating and managing information if they aim to minimize the risk of losing money to disputes.
And in the modern digital era, disputes are not the only potential hazard a commercial entity faces. Your organization also has to systemize its data-keeping practices to guard against other threats, such as:
- internal fraud
- unauthorized access to data
- hacking and ransomware crimes
- risk of security breaches
Keeping accurate digital records of all your project details and implementing robust audit procedures helps mitigate these risks. An audit trail allows you to keep track of everyone’s movements and analyze user behavior so you can take action to stop potentially fraudulent activities and breaches before it’s too late.
How to Implement Effective Audit Trails in Construction
Having examined the reasons why audit log collection is a good idea, it’s time to look at how to achieve it in practice.
Given that construction projects generally involve input from many hands, it’s crucial to take a systematic approach to compiling audit entries. Here are some of the most important steps to take to make it work for your organization.
Identify Critical Data and Processes
The first step is to decide which data and processes to incorporate into your audit histories. Bear in mind that the objective is to generate a historical record that’s as comprehensive as possible.
You need to be sure that the quality of your data and record keeping can stand up to an exacting external audit procedure, which means all your business transactions should be included. Automating financial processes can help here, but it’s not the end of the story.
The exact choices you make will depend on what kind of projects you take on, but typical examples would be:
- procurement transactions
- accounting entries
- financial documents
- project details, including change requests
- invoicing and payment records
In other words, track any data or process central to your business operations. You never know what information may have to be reviewed later, so being consistent in your approach to compiling and storing the data is crucial.
Choose the Right Tools and Software
There’s no doubt that making active audit trails work on an ongoing basis can be a challenge, particularly if it’s not something you’ve tried before. It can be especially demanding for smaller businesses that may not have anyone on the team with the right kind of expertise to manage the transition.
That’s why acquiring dedicated tools and software is important. If you haven’t yet embraced the digital revolution by adopting cloud-based accounting software, now’s the time to start. These tools greatly simplify the task of keeping all accounting details up to date, which in turn provides a solid basis for building an effective audit system.
There are also a number of other online platforms available to assist with project management. Depending on your needs, it may be worth looking into construction-specific project management software that incorporates risk management features to help you manage site dairies, inspections, and incidents all in one place.
Establish Clear Procedures and Protocols
Deciding which data to record is only half the battle. You also need to consider:
- how the data will be stored
- where the data will be stored
- who will have access to the data and how permissions will be implemented
- what the procedure will be for accessing an audit log entry
Security is paramount. IBM found that the average global cost of a data breach has reached $4.88m, so keeping all of your organization’s data safe should be a top priority. Make sure wherever you store your data incorporates security features such as advanced user authentication and encryption.
Creating robust protocols and documenting them properly not only helps keep data secure. It also makes life easier for everyone on your team.
After all, making such a big change to your operations as launching an active audit trails initiative means everyone has a lot of new learning to pick up. The more information you can document about the new system, the better.
Train the Team on the Process
But documentation alone isn’t enough. Sure, it’s good to have all the information freely available for authorized personnel to access, but for your audit trail procedure to be effective, you need to give all your stakeholders dedicated training as well.
Everyone must know which data should be recorded and fully understand the process for doing this. Explain the thinking behind it as well, since you’re more likely to achieve genuine buy-in that way.
There can often be resistance to change, but if you give a clear explanation of how the new audit logs will increase efficiency in your projects, people will be more willing to commit to maintaining them.
In addition, be sure to train all team members on the digital tools they’ll be using to implement the new audit logs system. You need to make certain that everyone can use them with confidence so they can hit the ground running as soon as possible.
Regularly Review and Update Audit Trails
There’s always room for improvement. Set a schedule for conducting regular reviews on your audit trail processes. Carry out tests to check how quickly you can find information and to make sure all the relevant details are stored.
You may find you need to tweak your audit trail procedure as time goes on. For example, if you start to take on new kinds of projects, then the types of audit trails you create could need to change as well to keep up with new circumstances.
Also, there’s always the possibility of new regulations coming into effect. For instance, there may come a time when you need to broaden the types of audit events you retain for compliance purposes.
Final Thoughts
The use of audit trails can have a huge impact on project efficiency. That’s mainly because the transparency it provides about every transaction, change request, or other operational action means it keeps everyone working on the project accountable.
For companies working in the construction field, it’s especially important to be able to trace the provenance of actions taken by a broad collection of different stakeholders.
When you implement a digitally-based audit trail system in your organization, you’ll soon find it becomes much easier to collaborate across teams. With all this crucial data being available on a centralized platform, everyone can access it whenever they need to. This results in better communication, fewer delays, and more projects delivered on budget and on time.