The primary goals of construction firms are to construct buildings and generate profits. However, many struggle to remain profitable despite excelling at the former.
One reason for this is the way bids are performed and contracts are negotiated. Clients, particularly in the public sector, often prioritize cost over the expertise, experience, and quality of the contractor's work when hiring a construction contractor.
During the previous economic downturn, intense competition and a decrease in opportunities caused many companies to reduce their bids in order to remain competitive. They survived on very narrow profit margins, simply to have enough work to keep their businesses afloat.
With the economy and construction industry now in recovery mode, labor shortages have emerged, prompting some contractors to offer higher wages as a means to attract and retain skilled and experienced workers.
Instead of focusing on issues outside of your control, think about ways your business can reduce expenses, submit more competitive bids, and deliver exceptional work.
However, if you lack skills, resources, or the right technology, you can go for Business Central Construction Partner to thrive in the market.
Here are some recommendations for boosting the profit margins of your projects.
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Managing your business efficiently
Despite your company's efficiency, there is always room for improvement. To keep track of performance, use key performance indicators (KPIs) to measure efficiency.
KPIs are high-level benchmarks based on specific established measurements that monitor, manage, and measure progress. Use KPIs as a tool to evaluate progress, identify warning signs, and take timely action.
If you work as a contractor, the most important project KPIs are driven by client requirements. It is crucial to stay informed about the status of your project, including its accuracy, safety, schedule, and budget compliance.
Indicators you should track include:
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Leverage the benefits of automation
Keeping track of everything can be overwhelming, but the good news is that you don't have to do it alone.
Automation can give you complete visibility over all cash inflows and outflows, allowing you to quickly identify any issues. Payroll, expense management, bank reconciliation, accounts payable, accounts receivable, and compliance are just a few of the critical financial tasks that can be streamlined through automation.
Imagine searching a typical report or spreadsheet for a specific piece of information. There is a significant chance that the information you find will no longer be relevant by the time you finish monitoring, filtering, and searching.
However, accounting software for construction can help you monitor your data and provide alerts. In this way, you can get real-time information that can be immediately utilized.
The system will send you an email, desktop notification, or text message as soon as one of your recorded events, like a late invoice, occurs.
This allows you to respond promptly. Subsequently, you can examine any issues and tackle their underlying causes before they impact your revenue.
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Generate accurate estimates
Providing quick and accurate estimates is one of the most challenging aspects of construction, as it helps you secure the right work at the right price. Although a single incorrect estimate may not be enough to harm your company, continuing to take on unprofitable work can quickly diminish your profits.
Therefore, it's important to be strategic when submitting bids. Many companies approach it as a numbers game, submitting as many bids as possible to increase their chances of securing more business.
However, investing resources in bids you are unlikely to win can reduce your revenue. Instead, prioritize quality over quantity and focus on initiatives that will generate the most profit for your company.
Conclusion
Take a look at how your company can improve its performance in the four areas we've identified: efficiency, automation, reporting, and estimates. While it's impossible to anticipate every issue, being better prepared to handle problems as they arise can provide valuable insight.
Implementing the right changes now can help prevent revenue loss and set your company up for even greater success down the line.