CONSTRUCTION Accounting ARTICLE -
Four Profit Killers to Keep Away from Your Bottom Line

Target Audience: Construction Industry Professionals, Business Owners, Commercial Construction Businesses, Contractors, Construction Companies, Construction Consultants

From unnecessary delays to insufficient communication, profit killers lurk throughout the construction business. They’re usually not hard to spot once you start looking — and in today’s market, you really ought to be looking. Here are four profit killers to keep away from your bottom line:

1. Lack of coordination. You cushion your bids to allow for unforeseeable delays, but are your own field operations creating slowdowns? If your site supervisors aren’t efficient at coordinating subcontractors, vendors and their own crews, they may be creating delays that are costing you money.

Look at how your best supervisors run jobs to gain insights you can share across the company. If time and resources allow, hold a meeting (or series of meetings) during which your brightest management stars share their best practices.

2. Stay on top of your paperwork. In tight times, it’s logical that change orders and specification changes may be harder to collect. When approached about additional work, check the contract specifications carefully to be sure that you’re not being asked to do something out of scope.

If the work requires a change order, be sure to revisit your record keeping practices to be sure that you have all the documentation you’ll need to back it up. And, going forward, be sure your change orders are being followed up on and pushed to approval and completion as soon as possible. Doing so not only improves your chances for profitability, but also prevents costly conflicts later in (or after) the job.

3. Poor communication. You’re clear on what every job entails and how it should proceed, but if you aren’t sharing your insights you may be eroding your profits. When information doesn’t get transmitted from the office to the job site promptly, your foremen and superintendents may do things their way — and that could be dangerous.

Similarly, if your job-site supervisors don’t understand the scope of the work or the hours budgeted for it, they may not meet your expectations. To keep everyone on track to make your budgets, keep information flowing.

If the money is there, upgrade your technology so you can send detailed reports to managers’ mobile computing devices. Otherwise, revisit your job-costing procedures to provide more frequent updates.

4. Inefficient hiring. Avoid two basic personnel mistakes to help keep your profit margins high: don’t hire too fast, and don’t fire too slowly. If you take your time recruiting, training and hiring people, you’ll have employees who fit in, know their jobs and perform well.

Rush the process and you may find yourself with people who aren’t working out — and are probably slowing down your jobs. If that happens, don’t delay letting them go. Accept that someone was a poor choice, learn from the mistake, cut the cord and look for someone else. Just be sure to stay within the law, consulting with an employment attorney if necessary.

Find out how our expertise in construction accounting can add value to your business. Email us or call us at 1 (888) 875-9770.

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