How Technology Can Help Your Construction Business Avoid Shrinking Margins

It's no secret that the past 18 months or so have been challenging for the construction industry. Tariffs have largely been in flux, which, in turn, have caused the cost of certain construction materials to jump. At least three major hurricanes have ravaged the U.S., leading to labor and materials shortages, particularly in the Midwest. And with murmurs of a slowdown on the horizon, many construction companies and contractors are worried about shrinking margins.

Sean Boland December 20, 2018

Right now is not the time to stick your head in the sand. Instead, it’s important to be hyper vigilant about what’s happening in your business, so you can make adjustments as needed. To do this, you need technology that provides this information real-time, which, thankfully, can be found within most accounting software applications. Here’s how it could help you.

 

Monitor key performance indicators
Your key performance indicators, or KPIs, are quantifiable measures that can help you gauge your business’ performance over time. Labor and direct costs, for instance, are KPIs that every construction company should monitor. Depending on your specific niche, you may have a laundry list of other KPIs to watch, too. You should have a pulse of these daily, or at least for each job.
Compare your KPIs to other similar companies
It’s not enough to keep an eye on your own KPIs; you should also know how they stack up against your competition. To do this, compare yourself to other construction companies that generate similar amount of revenue and operate in similar markets. (And yes, this information is typically available through accounting software applications.) By making these comparisons, you can quickly see how your business measures up. You might see that your labor margins are below norm, or that you’re paying more to the union. With this insight, you can dig into the issue, and make adjustments as needed.
Keep it all at your fingertips

Things move at the speed of light in the construction industry. How quickly you react, especially in an uncertain market, can make or break your business. Most software applications deliver the data you need—both in regard to your KPIs and comparisons to others—right to your smartphone.

Having this information at hand means you can make critical decisions at the right time, such as re-bidding a project or pushing out a schedule to avoid paying overtime.

Know your numbers

When jobs are in full swing, it can be tempting to ignore the numbers behind them. But when markets are tight, staying on top of your KPIs and knowing where you stand in the field can help you plan your next step. Of course, analyzing the numbers is second nature for CPAs, and something our construction team at DS+B can help you manage. If you have questions about your numbers, don’t wait to contact us.