The Hidden Cost of Debt in Subcontracting
- Yvonne Root
- Oct 1
- 2 min read
Debt Feels Like an Easy Solution – But It’s Not!
Got a cut on your hand? Clean it up, put on a bandage, and go about your day. But putting a bandage on a bandage, because the wound isn’t healing, is not an acceptable solution and can lead to any number of dire circumstances.
Sometimes, debt (a bandage) feels like an easy solution when cash is tight. Payroll must be met, or equipment must be purchased, or materials have already been ordered, and the coffers are running painfully low.
The problem is that debt eats into profit margins. There is the obvious to consider – Interest and Fees.
There are a few other hidden costs that must be taken into account, such as:
Loss of opportunity
Damage to credit scores
Increased insurance rates
What Causes the Cut?
The hidden cost of debt in subcontracting has to start somewhere. We’ve noticed that poor estimating or neglect of labor burden can both lead to gaps that often receive a bandage (called borrowing) in an effort to meet present needs.
Job Cost Tracking – Avoiding the Hidden Cost of Debt in Subcontracting
Yes, we know. We know resources are limited and must be utilized as efficiently as possible. Therefore, we recommend job cost tracking to avoid the hidden cost of debt in subcontracting.
A few of the ways you can leverage job cost tracking are:
Avoid risky assumptions and stay in control of profitability.
Know where projects are going right and where they’re going wrong.
Make adjustments as you go.
Be alerted to find more cost-efficient ways to handle issues.
Gain the advantage in the estimating process going forward.
See a true reflection of gross profit.
Leave Behind the Hidden Cost of Debt in Subcontracting
Job cost analysis allows you to answer critical questions to help you avoid the hidden cost of debt in subcontracting.
Which jobs are running within budget?
Which are not?
Are we within our target margins?
Who are the most profitable and least profitable general contractors we work with?
Do we have operational inefficiencies? Or can we do better?
Who are our most productive employees, subs, teams, or departments?
When is the right time to hire? Or fire?
Producing an accurate and useful job costing report is not just an accounting exercise. A job cost tracking report is an excellent tool that savvy construction contractors use to enhance their ability to lead and manage well.
Key Takeaway: Understanding actual job costs up front reduces the need to borrow just to stay afloat.
Want to know more about avoiding the hidden cost of debt in subcontracting? Call us at 866-629-7735 and let’s talk.
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
