Job site Errors eating away at Profits

Monday, April 22, 2013

For the ill equipped builder losing profits are an everyday occurrence. It may not be one change order or purchase which upsets the accounting on a project. The accumulative changes and purchases however do make a heavy impact on the projects bottom line.

Does not matter how the contract is worded, change orders and purchases costing more than the allowance for user/owner approved items can and do impact the purchase price. And tracking all of these items is imperative in obtaining every dollar of profit to be derived. Over the years I have seen it all, CO's written up on scrap pieces of paper that may never make it to the project folder back at the office to paint swatch's with the buyers initials on the approved color.

portajohnNot only the Change Order needs to be added to the total price of the project but, the invoice for materials and or labor involved need to be added to the job folder as well. Having all the CO's along with the sign off for each makes the final closing much easier. This is also true for selections which have a allowance for each item. Cabinets, countertops, tile, paint are but a few of the items which might require the buyers approval. These approvals can be just to OK a paint color or layout pattern for tile or they can be to add dollars to the contract for items chosen which cost more than allowed for in the original contract price. 

Project Management systems should offer a complete history of the entire project, from original contract price to tracking all Change Orders and purchase selections which need to be both signed off on and tracked against budgeted allowances. A builder should never have to guess when a project come to an end. All the additional costs which impact the project should be organized and clear as to who issued the OK and when it was approved. This assists both builder and client in determining the total cost of the project along with all details as to how the amount is derived.

Systems which actively involve builder, sub/supplier and home buyer eliminates confusion when it comes to the accuracy of the project price along with the time frame for each project phase. A quality program will automatically send notifications to all involved, never allowing a phase, selection, payment schedule or meeting to go unannounced. Accurate date and time stamped history should be at the heart of all great project management systems. When did it happen, who approved it and when, and where in the task phase was it entered. Organized and complete in management scope, what more can you ask from a quality system. (We offer unlimited training and support to boot).

 

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