How many times have you left money on the table during a job because you didn’t properly account for all of your project costs? Or, worse, how often have you done unexpected work to get a project over the finish line only to learn that your profits tanked?
Here are four ways to make sure unexpected costs don’t creep up on you during your next project:
Start with an Accurate Budget and Leverage Change Orders
In order to have a profitable project, you need to start with an accurate estimate. Think of your estimate as the North Star to guide you on the path to a successful project. Missing pieces in your estimate can lead to things falling apart down the road as your project grows in complexity. For increased accuracy, your estimate should include the following: a detailed list of costs for materials, labor, locations, project duration, building codes, special machinery, and conditions at your jobsite. It should also include any markups, margins, and taxes that your business may want to add to ensure profitability.
The ability to make updates to your budget in real-time is a gamechanger, especially when you consider the impact of change orders. An average project has at least four change orders, which means four times that the budget, estimate, or timeline may change. Change orders are widely used in project management when an original work agreement between a buyer and seller is modified in scope. A change order documents amendments to the original contract such as additional work, substitutions, adjustments to work, or any variation to the agreement.
Keeping track of all of these changes and new details is why many construction businesses use accounting software like QuickBooks. You want to make sure you are documenting every change that is made, and any new costs that arise. The first step to fixing a leak is knowing where the water is coming from. Making sure you’re accounting for and documenting all expenses is crucial to preventing unexpected costs.
How CoConstruct can help:
Using a software tool like CoConstruct can make processing change orders, invoices, and schedule changes quicker. CoConstruct ensures that both builders and remodelers can keep their building projects moving forward.
Everything in CoConstruct starts with our integrated estimating system. A builder can open their project’s financials, enter a change order, send that change order, and then make schedule adjustments in just a few minutes. Change order details tie directly to the project scope of work, so there’s no more question about what work is being performed. This process saves time and money and also ensures that you get paid your fair share at the end of a build.
Linking your CoConstruct account to QuickBooks, you can automatically pull in all of the actual costs for your projects where you are tracking the budget in CoConstruct. With your project management system and your accounting system working hand in hand, you can make this process easier for your team by saving time compared to tracking this information manually for your clients. Tied with QuickBooks, the CoConstruct Budget automatically pulls in and categorizes project bills and expenses. Use your Coconstruct Budget as a profitability tracker on autopilot. You don’t need to worry about updating changes or adding new expenses to the budget each time they pop up. CoConstruct has that covered.
Lock in Your Costs
A project is rarely just you, your team, and your client. There are many hands involved in getting a project over the finish line. Having a strong relationship with everyone along the way helps ensure that your project will be a success. Maintaining strong relationships with subcontractors, vendors, and trades takes time, negotiation, and most of all great communication. In order to be successful, everyone needs to be on the same page.
To achieve this, you can leverage purchase orders. A purchase order is a legally binding agreement that a buyer uses to request goods or services from a seller. Purchase orders include a tracking number and specific product details like the price and quantity ordered.
In residential construction, purchase orders are used by builders and remodelers to request materials or services for a project from third-party vendors, suppliers, or subcontractors. A purchase order plays an important role in job costing. By understanding what bills and expenses will come in the door before they actually arrive, you can properly predict where their bottom line is headed. A detailed purchase order defines the scope, price, and terms of the expected materials or services.
Purchase orders increase the likelihood that you and your trade partners will both feel satisfied with the work done and the price paid, which increases transparency, trade partner loyalty, and builds solid relationships.
With a recorded document outlining what work or materials a particular trade partner has committed to, you can double-check the validity of incoming bills. Purchase orders eliminate uncomfortable conversations and sticker shock which help build your relationships with your subcontractors, vendors, or trade partners.
How CoConstruct can help:
Trade partners with access to CoConstruct can login to view projects they have been given access to, along with their list of tasks. You can allow your trade partners to view the entire schedule and specs & selections on your projects. Sometimes it’s hard to convince your trade partners to jump on board with a new system. CoConstruct stands apart because most of the actions that you’ll want your trade partners to take can be done completely by email. Giving a trade partner web access does give them the ability to see further project information and more easily keep up with their tasks, but for those who resist change, it is not necessary for success on the system.
Eliminate Mistakes
Nothing is worse than realizing a job was derailed due to something that could have been avoided.
Good communication is key to avoiding mistakes. Even the smallest communication errors can set off a ripple effect. In fact, poor communication among team members, and incorrect or inaccessible information costs the construction industry tens of billions of dollars annually.
Miscommunication could be something as simple as missing a number in a document, not seeing an email, or not noting a selection change made by a client. You could lose up to two full working days each week solving avoidable problems and searching for project information. Making sure that you have a communication plan in place and allowing everyone access to the information needed for each job is crucial.
Less than one-fifth of residential construction companies consistently use apps or technology, aside from email, text, and phone calls, to access project data and collaborate with their teams. Making an investment in construction management software may help your business reach its full potential and reduce the amount of miscommunication.
How CoConstruct can help:
Luckily, communication within CoConstruct is a breeze, because everything is documented, and control is tight. You can allow your client to see as much or as little of the information as you want. This ensures every change order, purchase order, selection, and note is added to the job. You can see when you last talked to the client, and emails and notes are logged so there's no chance for miscommunication.
Deliver on Time
Completion dates are the quintessential Boogy Man that keeps builders and remodelers up at night. Missed deadlines cost you time and money, and they add stress to your relationship with your client.
In order to avoid costly delays, establish a solid schedule at the beginning of every project. Most project delays fall into two categories, client-driven delays, like missed selections, or unexpected delays, like weather or permit delays. Any scheduled delays need to be well documented, and all parties need to be updated on any or all changes.
Review the schedule and then review it again. If your estimate is your North Star, then your schedule is your anchor. It should reflect the living nature of a project, and it should hold your entire team accountable for the work to be done.
How CoConstruct can help:
Using the Jobsite Log feature in CoConstruct helps you stay in tune with everyday details on all active projects. Depending on the size of the building company, it’s not realistic for project managers to visit every active project every day. Jobsite logs are used to record important daily, weekly, or regular details about projects for official record. These records can include who visited the jobsite that day, if any incidents occurred, and delays due to weather or other events. It also covers any deliveries made, what was delivered, and most importantly, who reported to work that day and the hours they worked.
Want to learn more about how CoConstruct can boost your job profits? Watch a demo today.
