Having a process to detect and manage profit erosion is critical to your construction business. As a project progresses, the original margin calculated can fluctuate, sometimes considerably. Proactively monitoring your jobs in real time and identifying events causing profit erosion will allow you to take action to preserve your profit margin before it’s too late.
Many contractors today are using construction software technology to help them more closely monitor their profit. Here’s how you can, too:
Make sure you are billing for all the work you’re permitted to
Changes made during a job aren’t always reported and approved, jeopardizing your ability to get paid for your work. To address this, you can set up a software alert that tells you right away if time or an invoice is entered to a cost code without an estimate. And if the activity is unplanned, you can submit a change request immediately. Other concerns can also be tracked, such as when an answer to an RFI that has cost or schedule impact is not affiliated with a change request.
Once a change request has been submitted, construction software can notify you as soon as approval of the request is late. Always make sure if you receive a notice to proceed, or the work is already complete, that the change request is included in an approved change order.
Keep a close eye on your actual versus planned spend
As soon as costs exceed your estimate, you can inform everyone automatically. If you self-perform your work, you can set up alerts to tell you if your labor hours or dollars are approaching going over budget or if productivity falls too far below estimates at a job, phase, or category level. Construction software can also help you:
- Better manage your buyout process.
- Receive alerts when committed costs exceed an estimate.
- Protect against over payment.
- Stay on top of trends such as identifying when your spend rate exceeds your reported percent complete at any level.
- Know the moment a project falls below a profitability threshold.
By using construction software to automatically monitor your business, you have much more control of your profit margin. And demonstrating more consistent profitability throughout your work will go a long way to building trust with your bonding and financial agents.
Want to better understand how software technology can strengthen your profitability? Start by checking out Sage 300 Construction and Real Estate.
About the Author
Jeff Adams is a Product Director for Sage Construction and Real Estate Solutions. With a strong sense for what contractors and property managers need from technology tools, he has developed some of the company’s most successful products, including the Sage Project Management application.