2023 Tax Calendar
VIEWpoint Issue 2 | 2022
Inflation Reduction Act: Highlights of Key Changes for You and Yo...
A construction company’s profitability weighs in large part on how effectively it manages its jobs. You must maximize efficiency, minimize waste and seize every opportunity to build your bottom line.
Unfortunately, in the rush to do all this and get to completion, many things can go wrong. Doeren Mayhew’s construction CPAs look at some of the common mistakes in construction project management and how to avoid them.
Every construction company needs to gain new jobs to succeed. But taking on projects that are either too big or too unfamiliar in nature can wind up costing you more dollars than the projects bring in.
That’s why good project management teams know their respective companies’ strengths and don’t view risk as a roll of the dice. Rather, they see it as an analytical, quantifiable concept. In this sense, risk management has become a critical aspect of every construction project.
A variety of probability models allow you to calculate the likelihood of a given risk and adjust your building plans and job-site configuration accordingly.
Specific risks measured can range from something as general as an inexperienced client to something as specific as the need for specialized lifting equipment given the nature of the job site and potential weather conditions.
Bidding on the kinds of jobs at which your construction business has excelled in the past will more likely have the lowest risk and bring productivity gains. To facilitate this effort, create a historically based prebid checklist of objective and subjective criteria to evaluate every potential job.
The best project management teams don’t just set productivity expectations in a prejob planning meeting and forget about them. They regularly generate job cost reports and crunch the numbers.
As projects roll along, keep an eye on the key financial ratios driving your business. For example, the current ratio can give you insights into your capacity to meet your short-term liabilities with cash and other relatively liquid assets. Generally, this ratio should be at least 1.0, though 2.0 is a better.
A variety of software is capable of creating these reports, which can include charts and other graphics to illustrate productivity and budgetary data. As you obtain new financial information about a project, be ready to redefine your profitability goals for the job. Specifically, make sure the scope of the contract remains in balance with the remaining job tasks.
Once a job is underway, there’s a natural tendency to put your nose to the grindstone and focus more on doing the work than talking about it. But stellar project management teams establish clear lines of communication with everyone involved and use those lines regularly.
In addition to obtaining the information they need from owners, these teams clarify project requirements with superintendents, subcontractors and suppliers — and they stay in close touch with these parties during the job. Of course, in-house communication is important, too. Consider holding at least weekly, if not daily, meetings with your crews to discuss job progress as well as to set and review production goals.
And the communication shouldn’t stop when the project is over. It’s often been said that the wisest among us are those who learn from their mistakes. The same holds true for project management teams. The standouts take the time after completion to review their work.
Do any of these mistakes sound all too familiar? If so, don’t beat yourself up — they’re called “common” for a reason. Doeren Mayhew’s construction CPAs in Michigan, Houston or Florida can help you address and improve on all of them to greatly benefit your construction company.
This publication is distributed for informational purposes only, with the understanding that Doeren Mayhew is not rendering legal, accounting, or other professional opinions on specific facts for matters, and, accordingly, assumes no liability whatsoever in connection with its use. Should the reader have any questions regarding any of the news articles, it is recommended that a Doeren Mayhew representative be contacted.
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