0337: Practical Procedures To Boost Your Construction Business Profitability

This Podcast Is Episode Number 0336, And It Will Be About Practical Procedures To Boost Your Construction Business Profitability Cost is what you see; the profit potential is what you don't see.  High-profit construction company owner's focus on both and understand that "It Takes Money To Make Money."   Strategy comes from the office. Fieldwork is vital - labor, material, and subcontractors get things built, maintained, and repaired; however, efficient operations and fast workers who give 110% cannot overcome lousy strategy. Office and field are separate but equal. Each skill-set requires different working styles and different cultures. It is your profession as the business owner to help everyone come together and understand each other's job and how it fits in the grand scheme of things.   Successful contractors understand how and why the business cycle of construction works through implementing these actionable steps:   Examine all your processes   Take a long hard look at your construction company and list all of the recent mistakes, warranty work, rework, and time-wasters. Then develop a project plan to remove them, one at a time.    Often your office staff is working with misinformation:  - a receipt without a job, name, or address (or any note) which job it goes to - a bank statement that only shows the date the check cleared - the check number and the amount without any information regarding who it went to, why, or a job name   Office staff believes field workers are lazy and incompetent; field workers believe office staff is too nosy and wasting field workers' time. Many times field workers will bring receipts for material, fuel, permits, or something else they paid for personally to the office, expecting to get reimbursed immediately. Most of the time, the paperwork does not have the job name or any authorization from you or your management team, and the office staff is reluctant to pay it. Again field workers judge the office staff is trying to cheat them or at a minimum, playing power-tripping games.   Spend some time with your field workers. Observe how they perform their work and understand what they do and why they do it. The number of steps required to mobilize on a job site and get tools, material, and field workers in place is a process in itself.   These little delays and setbacks contribute to everyday misunderstandings, which lead to a massive decline in productivity and steep deterioration in cash flows and profits. Find and stop cash flow leaks and profit drains by examining your processes and walking a mile in the shoes of both office staff and field workers.   Eliminate paperwork   One of the biggest struggles contracting business owners deal with is the overwhelming amount of paper they have to organize as part of their everyday tasks. Invoices, receipts, bills, contracts, client records, pay applications, insurances, licenses - are just among the few in the seem to be "never-ending etc." Keeping important documents is necessary. Most contractors go from one extreme to the other. One extreme is saving everything for decades, and the other is tossing everything out.   What to save? What to toss out? At Fast Easy Accounting, we no longer need to print and save every document in file folders and keep adding new file cabinets. Our paperwork processes ensure your happiness and peace of mind knowing that your papers can be retrieved electronically at any time in the future.   Empty inventory   Empty your trucks and vans, clean out the dirt and grime, and when you restock, see how much you can leave out. This one thing can have a massive impact on cash flow and profits. If you can increase your miles per gallon of fuel from 10 to 12, you will have increased your earnings from fuel savings by 20%. Let's run the numbers:    

If you stock your truck with every tool and load it to the sky with all the parts and inventory you think you may need and drive hard and fast, you are maximizing that resource, and that is not a good thing.

Benefit - Hopefully, fewer trips to the supply house, Lowes, Home Depot, or other places which will save you a little bit of time and money.

Costs - You will end up spending more money for each mile you drive because you use more fuel, your brakes will wear out faster from having to stop with more weight. Your tires will wear down quicker, and your vehicle suspension parts will need to be replaced sooner rather than later. You will have money that is tied up in tools, equipment, and inventory that could be invested elsewhere and make more money for you. Even worse, if you have any credit card debt or loans, that money could be used to pay them down and reduce your interest expense.

Risks - If you get involved in a traffic collision and the investigation reveals that you have exceeded the Gross Vehicle Weight Rating (GVWR) of your truck or van, then it is likely your insurance may not cover the damages. Besides, you may be liable for negligence charges. We recommend you contact your insurance agent and your attorney for their advice.

In conclusion

The office ensures your contracting company has a steady flow of projects. Proper accounting and bookkeeping develop timely financial reports to show which jobs are profitable so you can pursue more of them, thus, you can focus more on:   Acquiring the right clients Doing the project as close to on-time and on-budget as possible Get job deposits and timely progress payments Follow-up with clients to monitor satisfaction and line up new projects The key is continuously refining your construction company's best practices and procedures. Enlightened contractors like you understand the value of developing your own unique Construction Contracting System, which is a collection of documented repeatable processes and operations manuals.   Lost and tired of your bookkeeping system? If you are using QuickBooks and doing your own books (or have staff doing it for you), I recommend you head on over to our Construction Accounting Academy site and check all the classes available to you immediately. Master the skills needed to generate useful reports, repeat quality performances, and make informed decisions to operate and grow your construction company.  

About The Author:

Randal DeHart, PMP, QPA is the co-founder of Business Consulting And Accounting in Lynnwood Washington. He is the leading expert in outsourced construction bookkeeping and accounting services for small construction companies across the USA. He is experienced as a Contractor, Project Management Professional, Construction Accountant, Intuit ProAdvisor, and QuickBooks For Contractors Expert. This combination of experience and skill sets provides a unique perspective which allows him to see the world through the eyes of a contractor, Project Manager, Accountant and Construction Accountant. This quadruple understanding is what sets him apart from other Intuit ProAdvisors and accountants to the benefit of all of the construction contractors he serves across the USA. Visit http://www.fasteasyaccounting.com/randal-dehart/ to learn more.

Our Co-Founder Randal DeHart - Is a Certified PMP (Project Management Professional) with several years of construction project management experience. His expertise is construction accounting systems engineering and process development. His exhaustive study of several leading experts including the work of Dr. W. Edward Deming, Michael Gerber, Walter A. Shewhart, James Lewis and dozens of others was the foundation upon which our Construction Bookkeeping System is based and continues to evolve and improve. Check out our Contractor Success Map Podcast on iTunes.