Get the Cash Register Ringing in Construction

The first two parts of this four-part series concerning building an excellent bid package were Knowing What to Bid on a Construction Project and How to Price for Your Construction Projects. In this article, the emphasis will be on two foundational aspects of bid building: developing a doable spending plan and creating a feasible billing system.

Financial mismanagement is a recipe for disaster in the construction industry, where margins are tight and optimizing resource allocation is imperative. Therefore, developing a doable spending plan and creating a feasible billing system is vital to get the cash register ringing. It allows you to understand clearly how to continue your growth.

Get the Cash Register Ringing with a Spending Plan

Ironically, one of the ways to get the cash register ringing is to get a grasp on what you’re spending. Instead of asking, “Who ya gonna call?” the question must be, “What’s it gonna cost?”

For example, here are some cost factors to consider:

• Buying what you want versus what you need.

• Financing versus paying cash (for things like vehicles or equipment.)

• For employees, what’s the hourly rate versus the labor-burdened rate?

• What is the cost of an approved change order versus an unapproved one?

It is imperative to understand your expenses and implement a solid spending plan to keep job costing and estimates within the proper ranges.

Job Costing in Spending Planning

Now, consider what job costing allows you to do.

Job costing:

• Tracks costs for labor, materials, equipment, subcontractors, and overhead for each project.

• Allows you to see the division of labor and labor burden.

• Helps understand how much money is being made on each project.

• Factors in overhead expenses to better understand individual job profitability or loss.

• Helps identify labor inefficiencies and optimize workforce allocation.

• Compares actual costs to estimated costs for each project phase.

• Improves estimates for future projects.

• Helps build a spending plan by providing detailed information about the costs associated with individual projects.

Pro Tip: You can use the information concerning labor and materials costs to determine overhead costs. Here is the formula: fixed cost + variable cost = overhead cost.

1. Direct costs – Such as materials, hourly wages, and labor costs.

2. Fixed costs – Like rent or mortgage, advertising and marketing, and memberships or subscriptions.

3. Variable costs – Like vehicle maintenance and repair, office supplies, or travel.

Get the Cash Register Ringing with a Billing System 

Get the cash register ringing with a billing system tied to actual and committed costs.

A billing system in construction is tied to invoicing. Invoicing is simply the process of billing clients for direct costs:

• Materials

• Labor

• Equipment

And indirect costs:

• Permits and Fees

• Site Preparation

• Insurance

• Overhead Costs

• Contingency Funds

It details the work completed, the associated costs, and payment details.

By implementing an effective job costing process, you can confidently bill customers for their individual projects. Job costing allows you to obtain information that gives you the advantage of being more precise concerning billing.

Keeping your clients informed with clear invoicing based on consistent job costing factors makes them more comfortable and helps keep the contractor relationship healthy. The idea is to get invoices sent promptly with outstanding clarity and professionalism.

Pro Tip: You develop more competitive bids by analyzing historical job cost data. By understanding the actual cost of similar projects, you can provide better bid accuracy.

Ambitious Construction Contractors look to The Profit Constructors to provide advocacy in dealing with:

• Clients and customers

• Employees and subcontractors

• Vendors and service providers

• Governmental entities

Working with The Profit Constructors gives Construction Contractors the means to organize their operations in ways that help them:

• Remain informed

• Avoid hassles

• Reduce risks

• Be future-ready

Ready for action? Or want to know more? Get in touch today to schedule a complimentary discovery call. 866-629-7735