You probably got into construction because you love to build things, or design buildings, or work with heavy equipment. Or you had an aptitude for one or more of the many other skilled and challenging capabilities that combine to make up the world of construction workers and the companies large and small that make up the construction industry.
Start With Why You Started Your Business
The love of that particular skill might be the reason you got started, the reason you got hooked on the career path that led you to start your own business. But the most likely motivation that keeps you going and pushing harder year after year is the opportunity to grow your business and increase your earnings.
Increasing earnings comes down to managing your business and finances as much as it does to managing your job performance. In fact, the financial end of the business is actually more important, because any company will go broke doing excellent work if expenses are allowed to exceed revenues for an extended period of time.
How do you balance those financial pressures against the love of building that got you started in the first place?
Add State of the Art Construction Management Software
Construction software technology has advanced so far and so fast over the past decade that many industry participants have struggled to keep pace. Every aspect of the business, from RFP tracking and bid processing, to CRM and target marketing, to safety and quality assurance, now flows into and out of the cloud on demand, in real time.
All job site labor, material and equipment can be tracked, analyzed, sorted and reported to drive people, processes, and productivity to higher levels of profitability. The trick is to pull together the technology you can use effectively in your particular business now, and use that technology to push the boundaries of financial growth.
Financial Strategies That Make Every Dollar Count
So if you started your business to make a bigger contribution to the built environment around you, and to access the bigger financial opportunities that go with it, you need to make sure your financial strategies scale up as you grow.
When it comes to finding financial strategies to scale up your business results, it’s important to look at every aspect of your business from a fresh perspective. Even seemingly minor changes can provide immediate benefits in improved cash flow and reductions in repetitive administrative tasks.
Over the longer term, small changes can have a big impact on the bottom line and on the ability to safely expand operations and grow the business. This is especially true when the right financial strategies are backed up by the right project or ERP software tools.
Here are a few quick examples of financial strategies you can implement today, and use technology to automate the implementation, tracking, reporting and refining of results.
Structure Terms of Payment to Pay Yourself First
Change terms of payment in your contracts to reflect more frequent milestones. Make payment points clear in the contract, and make them subject to late and early payment provisions.
Offer clients early payment incentives, enough to add up over the life of the project to a decent discount. Similarly, set a penalty high enough to act as a deterrent for late payments.
Structure your contracts so that you are billing ahead of costs rather than after costs are incurred. This way you can avoid carrying cost burdens on company resources (ie, lines of credit, wholesale accounts, etc) that negatively affect your cash flows.
An automated software system for contracts and accounts can help to coordinate all these moving parts. It will also signal the onset of any milestone events and trigger the appropriate accounting and documentation response.
Optimize Job Site Productivity For Financial Performance
Material procurement is a critical piece of the project management process. Schedule the timely purchase and delivery of materials to jobsites. Avoid unnecessary carrying costs caused by purchasing too far in advance of scheduled needs. More costly still is running short of material and leaving high-priced labor and equipment stranded on a job site with no materials to work with.
Manage and analyze productivity around specific work tasks and procedures. Identify high return profit center activities and low return loss leader activities. Track and analyze reasons for low return on specific activities and improve efficiencies to increase margins.
Track and compare productivity trends across work crews and individual workers. Compare with regional and national standards (where the data is available) to establish company benchmarks for improvement and incentivization programs.
Use Long-Term Financing Options for Efficient Amortization
Purchasing new equipment can tie up cash and working capital for long periods of time beyond the purchase date. Financing or leasing the equipment can spread the payments over the productive life of the equipment to reduce strain on cash flows and capital accounts.
Monitor and manage loan or other finance covenants to let lenders know in advance of potential problems. Include proposed solutions, detailed project reviews and forecasts as part of the communication and consultation process.
Bring New Technology and Strategies Onboard Step By Step
Avoid overdoing the pace of change. Remember that people still have to carry out the day-to-day duties of their jobs. They can’t be totally dedicated to revamping management systems and practices and still be able to keep projects on schedule and on budget.
This is where the value of a construction management software package becomes apparent. Not only is it less expensive than extra human resources would be. It makes the process move much faster.
A year’s worth of change management by trial and error can be condensed into a calendar quarter or two of implementing phases of an integrated package of proven digital processes.
Data-Driven Decisions Foster Accelerated Growth
Data processing and analysis can be automated under the right software package for all aspects of business and financial management. Combined with cloud access and mobile-friendly platforms, field productivity and profitability can see instant improvements.
Job costing, project management, employee and equipment allocations, client relations, account billings and payments, can all be streamlined and integrated at the business end of your construction operations. Management control is available through any authorized mobile or fixed access point anywhere, anytime, in real time.
With instant transparency and accountability up and down the value chain, enhanced financial strategies can yield increasingly profitable financial results. And that, after all, is the reason we’re all here in the first place.
