Hidden business losses image7/21/2023 So why does communication about problems on a construction project break down? Sometimes, the lack of communication is the fault of the people that are closest to the problem, but maybe not for the obvious reasons. This means that effective communication is a must for any successful company, and when communication breaks down – or when the communication level wasn’t very healthy to begin with – small problems go unnoticed or unattended to, becoming big problems that can have a significant impact. And generally speaking, the earlier that problems are dealt with, the easier they are to fix. In order to solve a problem, you have to know about it first. Having a strong credit and accounting team is an absolute must for any construction business that wants to achieve financial success. in the whole operation! Let the people pleasers and the nice guys work in sales – when it comes to accounting and office managers, I want TOUGH.Ĭredit management in the construction industry is so specialized, and so challenging, that it practically stands apart in the business credit world as it’s own specialized discipline. Well, if it was my company, then I’d want the person watching all of the money going in and out to be the toughest S.O.B. There’s a good reason why the title of the person that’s in charge of accounting is the “controller.” That’s because they have to be able to control things! Too often, the accounting department gets an undeserved bad rap, described derisively by others in the company as “bean counters” or worse. And every time something slips through, the bottom line takes a hit. Without strict financial control and a capable, disciplined accounting department, it’s easy for things to slip through the cracks. I just hope that at the end of the day, more money ends up coming in than goes out!” During our conversation, he said (only half-jokingly), “I’ve got a bunch of money coming in, and I’ve got a bunch of money going out. Unfortunately, he also had an equally well-earned reputation for being lackadaisical when it came to the financial side of this business a character flaw that was compounded by keeping a very messy office (drawings, documents, random tools and construction gear strewn about) and an extremely disorganized accounting department with very little financial control over the company’s finances. He was beloved by both his customers and employees with a well-earned reputation for delivering outstanding work. We once had a conversation with the owner of a busy plumbing subcontractor about his business. Poor Organization and Financial Control Originating in the Office Sometimes these fixes come with a hefty price tag, and winning too many battles (solving problems) might mean losing the way (losing profits on the overall project). Project managers that possess a problem solving mentality will proactively want to do everything on their power to fix the problems, all in the normal course of just doing their jobs. It’s almost not fair how many things can go wrong on site. Later on when it’s time to settle up, that legitimacy of that change order is called into question, and the resulting invoice is disputed or declined. ![]() We could write a book on all the ways that change orders can lead to hidden losses, but the most significant problems with change orders all seem to boil down to one major factor: work is performed on an unapproved change order, incurring extra expenses that were not accounted for in the original contract. In project management, a change order (or variation order) is a component of the change management process in which changes in the scope of work agreed to by the client, contractor and architect are implemented. Another issue that impacts the whole company, is change order management. ![]() However, even authorised overtime hours can get out of hand, and eat up a huge chunk of profitability for the construction company. ![]() “Throw more labour into the field”, said the project manager as if that is the only way to fix everyday problems on site.
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