Recently, RubinBrown leaders attended the Construction Financial Management Association Annual Conference in Las Vegas. At the conference, some key insights were discussed by experts in the profession around improving profits, operations and liquidity.
When it comes to improving profits, you should always conduct a post job review to better plan for future projects. Also, consider contractor and contract size when evaluating if your company would be a good fit to take on a project. If you come across a cost-plus contract, make sure to evaluate what your actual return will be once all the work is said and done. Automation and integration are also key to improving profits as they should help streamline operations.
In terms of improving your operations function, understand where your bottlenecks exist to better allocate resources effectively and efficiently. When a job is complete, make sure you understand the rationale behind unrecovered costs and investigate ways to incorporate changes in the estimating process for future jobs. Review internal job costing and billing approval processes to ensure costs incurred are billed in a timely manner. And, it goes without saying, but resist the temptation to increase a project size too quickly without evaluating your workload, potential return and the effect on your day to day operations.
Finally, if your goal is to improve liquidity, consider selling your idle fixed assets. Re‐negotiate debt obligations to push out due dates of payments past one year. And, it sounds simple, but gain control of your overhead expenses. Overhead as a percentage of revenue for general contractors is usually in the 2% – 4% range, and overhead for subcontractors should be less than 10% annually.