5 project
management
tips for
construction
contractors
If you want to obtain maximum profitability from each contract, first you must make sure that you are using the best project management practices. To do this, technology is certainly your greatest ally.
A specialized construction accounting application will help you to understand and control your expenses and allow you to optimize your sources of income. For example, with a good software application, you can easily...
01Follow the holdbacks receivable
In Quebec, it is customary to provide for holdbacks (amounts that are only paid on acceptance of the work). As invoices are sent to the client, the client pays just 90% (for example) of the amount and waits for the work to be completed to pay the outstanding 10%.
The amount of the holdbacks can easily represent the total profit that you make on a project. If you do not recover the full amount, you might as well say that you worked for nothing! Therefore, an application that allows you to closely follow your holdbacks will help you to optimize the profitability of your projects.
02 Establish a project budget and follow overruns closely
It's not enough to simply establish a budget for each project. You also have to follow this budget every day and, even more importantly, follow cost overruns every day. This allows you to be proactive. Once the work is completed, it will be too late to have the client approve a cost overrun.
A management application designed for construction will help you to follow your budgets and will allow you to know at all times if a specific project is on track to be profitable.
03Verify the estimate of the work
Once a project is completed, go back to your initial estimate of the work. This exercise will help you refine your project estimation methods and will contribute to the profitability of your future projects.
How well did you evaluate the costs? If there were cost overruns, were they caused by unexpected events on the site or because the initial estimate was not adequate? Hard to say? With an application that offers advanced reporting functions, it becomes much easier (and faster) to answer these questions.
04Ensure the company's cash flow by invoicing the client as the work is done
Good cash flow management practices allow you to fully benefit from the cash that flows through the company.
In the construction sector, a good habit to develop to ensure cash flow is to invoice the client based on the work done. For example, take a project for which you budgeted $1000 in expenses for $2000 in sales. Once you reach 50% of the expenses ($500), it would be wise to immediately invoice 50% of the work to the client, i.e. $1000.
By invoicing regularly based on your expenses, your cash flows will be more stable and more predictable. This may seem a bit complicated to manage, but a good invoicing application will help you achieve this easily.
05Analyze the profitability of each project
It is astonishing to see to what point many contractors have no idea where they lose money, because they follow their costs for all projects combined, rather than follow them individually.
You will do yourself a big favour by acquiring an application that allows you to individually analyze the profitability of each project. By proceeding this way, you will be able to identify which project managers offer a good return and those that need a little more supervision or training.
You will also be able to see if certain types of project are more profitable than others, which will help you to choose the best contracts for your business.
Get the right tools to succeed
To easily apply the tips provided in this article (and to take advantage of many other benefits), we suggest that you take a look at Acomba Construction Suite.
Designed to make life easier for general or specialized contractors, Acomba Construction Suite is the most accessible and most flexible software on the market. In addition to managing invoicing, accounting and CCQ payroll, it allows you to rapidly determine if projects are profitable or not (accounting of work in real time, closely monitor on costs and profits, etc.).
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