Why Cost Reports are Crucial for Construction & Design
Cost reports can be fun. Everyone likes to see the profits their hard work is bringing in, or plan where to allocate future funds for company growth. The optimism and promise of a new report – whether it’s monthly, annually, or yearly – is very exciting, and it’s a strong indication of your company’s current state.
On the other hand, cost reports can also be very frustrating, especially if the profits aren’t as large as expected, aren’t accurate, or are absent altogether. The silver lining? Cost reports can identify where you’re losing money, or pinpoint a part of your business that needs to be tightened up from a fiscal standpoint.
Mastering cost reports is crucial for the health of your business. They can be the basis for pricing future projects, help you streamline material purchases, and provide information on which projects are the most profitable.
You’ll want to take advantage of your cost reports and get the most useful information from the data. So what are the benefits of doing cost reports?
1. Know where money was made and how much.
This will help price future projects more accurately. You will start to see trends and be able to pinpoint how much money you’ll need to allocate to different projects.
2. Investigate losses.
Losses could be due to a number of things – wasted material, theft or fraud, or poor productivity. Knowing what issues to address can help prevent further losses, and give you a fighting chance to recover from them. For example, losses due to labor or equipment are often an indication that project productivity is lower than expected. You can address these issues with your project team, and discover what tasks can be put on the backburner or eliminated altogether.
3. Hold your staff accountable.
Use available reports to keep your team in check. Project targets and goals will stave off complacency. They will also ensure that your team is driving toward the same goal, ie. a finished project completed on-time and under budget.
4. Have contingencies in place for the unexpected.
Unforeseen losses happen in the construction business. That will never go away. Plan ahead by assisting with financial forecasts, budgets and cash flow. If you know the project is losing money, make sure you can pivot to survive the loss. Side note: Identifying project losses can be indicative of other underlying problems.
5. Provide information on which types of projects are profitable.
A big mistake contractors make is taking on multiple projects that are ultimately unprofitable. Having profit information readily available will help you avoid projects you shouldn’t take on. That way you can concentrate on the projects that will make you successful.
David Miles is a digital marketer with ClockShark – the GPS Time Tracking App that was built specifically for construction businesses.