How do I stop losing money when building?

There seems to be a culture within the building industry where it is okay to lose money. What I mean by this is, many estimates are completed for a project and quite often the actual does not match the budget.

You may go over by $2,000 on the slab, the frame or extra carpentry work required (internally and externally). Many of these $2,000 additional costs can quickly add up to be a large number and suddenly you are not making money on the job or even worse, across your business. Making no money laying on the beach is a lot more relaxing and enjoyable than making no money running around on a job site.

Have you experienced this before? For some reason the building industry culture demonstrates it is okay to lose $2,000 on the job because it isn’t tangible. What I mean by this, is when it is on a computer screen, within your estimating program or on a piece of paper the emotion of losing $2,000 is lost because it is not physically coming out of your wallet.

I quite often ask builders would you walk down the street and throw $2,000 on the ground and keep walking? Would you drop a $50 note out of your wallet and not stop to pick it up? No you wouldn’t, so why is it okay to do this when building?

It is time to start controlling your budget to actual better and avoid the margin erosion that creeps into your daily expectations. Prevention is better than cure so start looking for ways that will keep your projects on budget.

Implement the use of detailed purchase orders with a thorough scope of works for every part of your project and make sure when you receive an invoice that the following four questions are fulfilled:

• Has the work been done?
• Has the work been completed correctly and to the appropriate standard?
• Does the invoice reference a purchase order?
• Does the invoice amount match the purchase order?

The ideal outcome is you nailing your estimates and everything runs smoothly, however we are in the building industry and there are so many moving parts, so it can be difficult – A good estimating program like Buildsoft is a great start. The secondary goal is to at least know where you may be losing margin so you can look for ways to fix it immediately or for future projects.