When you first started your construction business managing costs and profits felt fairly simple. Your jobs were smaller, and you handled every aspect of them yourself. Since you did all the purchasing of materials you had a clear understanding of costs. Since you did the work, probably alone or with an independent contractor for a helper, payroll was not necessary. You ballparked an estimate for a client, worked hard, pocketed what was left when the job was done.
That was a long time ago. Today your business has grown into a full-fledged company. You manage staff, crew, equipment, inventory, payroll… your responsibilities have grown exponentially. The pressures of the business are overwhelming. You are working harder than ever, but are you making more money? Managing multiple aspects of a construction company to maximize profit is everyone’s goal, but it may not be as easy as it sounds. Software that is specially designed for your business can help you increase your construction profit margin. Here are five ways to use construction software to increase your profit margin.
1. Streamline Project Management
Good construction software includes a project management module that will allow your staff to manage all aspects of a job in a shared environment on the computer. It allows for remote collaboration, meaning all project shareholders can access information and decisions in real-time from wherever they are. When every member of a project team has correct information at their fingertips, RFIs are reduced and profitability is increased.
2. Reduce Rework
Using software to manage job costing and scheduling, as well as document management and project management, can ensure that a job stays on schedule and that client expectations are met the first time. Since the cost of construction rework averages 20% per project, eliminating the need for rework can increase the profitability of the average project by the same amount. Automating change requests and logging them into a software program that all project shareholders see in real-time means that mistakes are harder to make. This creates demonstrable increases in profits on current jobs. In addition, having a reputation for getting it right the first time pays off in new projects in the future.
3. Manage Risk
Providing clear documentation to clients, employees and subcontractors can increase communication between parties and eliminate misunderstandings and disputes. When the software is used properly data is recorded accurately and is easily reported. If disputes result in legal action the software can provide reports and documents that accurately detail a situation, potentially saving money in litigation and legal fees.
4. Shorten Project Timelines
Construction project timelines can be off track within the first week, when blueprints and permits are not managed properly, Throughout the project lack of communication and inaccurate information can cause timelines to lengthen, costing a construction company both time and money. Streamlining the process electronically and using software to manage all aspects of a job, including crews, subcontractors, materials and equipment means that timelines stay tight and expenses do not balloon out of control.
5. Use Accounting Modules
By using software that integrates accounting with project management and other modules, you can eliminate many costly errors. Invoicing, accounts payable, accounts receivable, payroll and tax preparation can all be automated. By eliminating confusion and user error, simplifying the accounting process helps save you money. Being able to invoice clients correctly and on time certainly increases the profitability of any project.
If you are interested in increasing your construction company’s profit margins you should consider using a software program written specifically for your industry. Look for these five features that can help your company run more smoothly and make more money in whatever software you choose.