3 Simple Tips for Maintaining Positive Cash Flow Through Each Construction Project

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April 05, 2019
Author: Ben Halverson
Organization: Lorman Education Service

In all business spaces, of course companies strive to continually grow year-over-year. But in the construction industry, market shifts and countless uncontrollable circumstances means weathering periodic dips is a natural part of doing business.

The overall economic health of your local or national economy is just one indicator that contractors will have to weather lean months; sudden shifts in crucial materials prices, labor costs and more can all add up to fewer contracts.

This makes it more important for construction businesses to truly sweat the small stuff, making sure every contract -- whether during a lean period or during major booms -- pulls in as much revenue and cuts losses as much as possible.

With that in mind, let's take a look at three efficiency-focused tips known to improve either profit margins or gross revenue for construction projects:

Track, Then Eliminate, Conditions That Lead to Delays and Changes

Delays and Changes -- when clients are unhappy with the results of a job and ask for changes -- is a major driver of costs in construction at all levels. Between 2-20% of a projects total expenses can quickly rack up through rework alone, in terms of labor costs as well as discounted fees that might have to be offered.

Take some time to go through previous jobs, flag those that led to the most rework incidents, and take a deep dive into the circumstances involved.

This is a great way to target the causes of most rework, and address the biggest offenders head-on.

Formalize Communication From Top to Bottom

In an industry as storied as construction, there are a lot of old habits and internal culture issues that might need addressing. Often, these lead to communication styles and standards that are deeply inefficient compared to modern methods.

A simple way to increase job efficiency is to standardize communications media. Even something as simple as requiring each team to communicate within the same group SMS software can lead to leaps in communications efficiency, adding up to less time on the job.

If every laborer and manager uses the same formalized communications system that everyone has access to, it's difficult for wires to get crossed and lead to costly mistakes due to simple human error.

Establish an All-Encompassing Software Solution

Many construction firms are built on a rickety network of old-school habits and patchwork software that often requires costly training.

Changing over to an all-encompassing Enterprise Resource Planning (ERP) suite changes the game entirely. Instead of sinking resources into major training on isolated methods that are prone to adding up to costly mistakes, a construction ERP unites every database and job tracking system under one software roof.

Software has always been something of a double-edged sword for construction. Databases are invaluable for every industry, but much of the software currently used by construction firms is dated and generic -- not meant specifically for construction.

A construction-focused ERP unites all aspects of the business under one networked solution that any employee with appropriate levels of access can reference. As with the previous tips, this limits the potential for mistakes, and makes communication much faster.

But the most crucial aspect of an ERP suite is in the power of interconnected data. To truly target methods of cutting costs without sacrificing the value of service, an ERP gives managers and owners a much more grounded and realistic picture of how each job pans out from start to finish. Using this data to make agile, systemic changes is a straightforward path to improving profits on a per-job basis.

Interested in exploring more ways to stabilize your construction business so that it holds strong during the leanest periods? Contact us at Lorman Education Services to learn more today.

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