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Posted on January 5, 2023 at 7:57 PM
Written by Plumb
There are many moving pieces that need to work together in order to successfully manage a construction firm.
Here we list 5 key elements to help capture insights that are pivotal to running an efficient and lucrative construction firm. If you can create a plan where these 5 crucial pieces are in place, you’ll be setting yourself up for clarity in your finances, which can lead to increased productivity and profitability.
Collecting, summarizing, and reviewing data from the field and each project, and providing the necessary data to financial institutions for audits, is crucial for success. Understanding the variance between a contract and the actual project cost, the debt-to-equity ratio, how long it takes to collect receivables, and even how many safety issues there have been on any given job site can make the difference between making or losing money.
Real-time access to what’s happening on your projects and in your firm can help you course correct as needed. Understanding labor productivity, gross profit margins, and even if one of your subs has insurance that’s about to expire are of vital importance to the health of your business.
Looking back and being able to draw conclusions about what worked and what didn’t work can help guide future plans and decisions for better outcomes. Understanding the type of work that is most profitable, which subcontractors are the best performers, how change orders impact the bottom line, and how far off your estimates are from your actuals are all tremendously valuable and necessary data points to have.
Understanding what has happened in the past can help you forecast into the future. Additionally, running the numbers to understand the impact of different scenarios – e.g. renting equipment or buying, or what happens if your labor costs are consistently running over by X% - can help prepare you for potential pitfalls. Preventing a job from going sideways is well worth the additional time spent on these types of predictive analyses.
We live in an “access anywhere, at any time” world. Your construction accounting and finances are no exception. You should be able to pull up a dashboard of KPIs on your mobile so decisions can be made at any point, from any location.
At Plumb, we have a narrow focus on a few key industries, Construction & Real Estate among them. We also have an extensive knowledge of the construction software solutions we offer, and a commitment to serving our clients. We can help take your business to the next level. We are here to help guide you through the outsourced accounting and accounting software process, and to answer any questions you may have. Please let us know if you’d like to schedule time for a free consultation. We’d love to help.
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