As a construction professional, you know firsthand the importance of staying on budget and delivering projects on time. However, simply completing a project within the allotted budget and timeline is not enough to ensure the financial success of your business. In order to truly be profitable, it is crucial to track the costs of each job and understand where you are making or losing money.
One of the biggest challenges in the construction industry is the unpredictable nature of costs. Material prices can fluctuate, unexpected site conditions can arise, and labor costs can vary. Without proper cost tracking, it can be difficult to accurately predict the financial outcome of a project.
Reporting costs on jobs is extremely important. You can quote and win a job but if you have no idea if your making money or not that is a concern.
The big costs are easy to manage but to say for example on a small bathroom project worth $30,000 you go to your trade accounts at the end and find 4 receipts for
- $45.00 consumable saw blades
- $101 Additional packers kit
- $72 Additional drill bits
- $86 2 x extra sheets of GIB
You should always have a allowance for small consumables but if you add up a whole heap of smaller purchases over 40 jobs a year and each job is another $306.00. 40 Projects and average an additional $304.00 / $12,160.00 off your companies bottom line at the end of the year.
When you are on fix price contracts builders you want to make sure you can track all your costs.
By cost tracking each job, you can gain a better understanding of the true costs of your projects and identify areas where you may be overspending. This information can then be used to negotiate better prices with suppliers, streamline processes, and make more informed decisions about which projects to pursue.
Effective cost tracking also allows you to identify and address issues early on in the project, rather than waiting until it is too late to make adjustments.
For example, if you notice that you are consistently over budget on a certain type of work, you can analyze the causes and make changes to your processes in order to improve profitability.
In addition to helping you identify and address problems, cost tracking can also help you to improve your estimates and bid more accurately on future projects. By keeping track of the costs of previous jobs, you can develop a more accurate understanding of the costs associated with different types of work and use that information to improve your bidding process.
Another benefit of cost tracking is that it can help you to improve your cash flow. By understanding your costs and having a clear picture of your financial performance, you can make more informed decisions about when to invoice your clients and when to pay your bills. This can help you to better manage your cash flow and avoid financial pitfalls.
In conclusion, cost tracking is an essential tool for any construction business looking to achieve profitability. By understanding the true costs of your projects, you can identify and address problems, improve your bidding process, and better manage your cash flow. Implementing a cost tracking system may require an upfront investment of time and resources, but the long-term benefits to your business will be well worth it.
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