For many businesses in the construction industry, the last few years have seen enormous growth. But this growth has created several challenges – especially with ongoing materials and worker shortages. Now rapidly rising material costs, labour hire costs and interest rates are putting pressure on construction businesses.
That’s why learning more sophisticated ways to manage work-in-progress and project scheduling is important. Relying on your memory simply won’t work anymore.
In addition, when you understand the types of jobs that provide the most profit, you can focus on those to decrease your stress levels and increase your revenue.
There are 3 aspects to improving project profitability.
- Project management and scheduling
With a growing business and more or larger construction projects to manage, your ability to rely on memory diminishes. So customer service levels drop in addition to holdups in material deliveries or delays in getting trades and labour onsite. These factors mean progress and final payments are delayed. To keep on top of everything, you need to invest in good project management systems. Part of our service includes helping our clients find the one that will work best for their business.
2. Keeping on top of work-in-progress
Construction jobs generally include progress payments. If you aren’t invoicing customers as soon as progress payments are due, you will create cash flow problems for your business. That’s because you usually pay for materials and labour before the progress payments or final payments are due.
The solution is having clearly defined benchmarks on when payments can be requested. You also need to ensure each customer understands what these benchmarks include as well as tracking processes so you can send invoices quickly once a benchmark is achieved.
3. End of project analysis
The reality is, most businesses don’t measure their overall profitability on a regular basis – let alone the profitability on a job-by-job basis. However, it’s critical to your long-term success to understand the types of projects that are contributing the most profit to your business.
Factors to look at are:
- The types of projects and whether there is an opportunity to specialise in a particular area of construction
- The size of projects to evaluate whether smaller is better for you or should you scale up to work on larger projects
- The category of client that generates the best margins, e.g. commercial, residential or infrastructure projects
- What went wrong – from quoting to final payment – so you can learn from your mistakes and change your processes
At CFO@Call, we work with construction businesses who want to grow significantly. We do this through our exclusive Construction Business Navigator Growth Program.
If you are curious about what it could do for your business, book your FREE, no-obligation 15 Minute Construction Growth call. After the call, you may be invited to participate in the Construction Business Navigator Growth Program.
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