Things are humming along. You’re ahead of schedule. You’ve even had a chance to glance at the books to see how much money you’re making. However, as you dig into the nits and grits of receivables versus payables, you’re startled by what you see: lots of money going out and not enough coming in. Maybe you’ve got some of these profit stealers operating on your job site.
If you aren’t using reliable methods to track hourly employee time, you’re leaving a lot to chance. Handwritten time tracking—or time clocks that don’t offer secure matching of an employee to the timestamp—lead to inaccuracies in reported hours. If you have even one $20-an-hour employee who arrives five minutes late and leaves five minutes early three days a week, then you’re spending $500 per year on something that doesn’t directly contribute to getting the job done. What is more, it makes more punctual employees feel cheated and less motivated. Lower motivation results in lower production.
The other way you lose by not tracking time is when you don’t track time spent on tasks. If you don’t know how long it took a crew to complete a task, you can’t be sure whether your initial estimate was right. You also lose insights into how you can improve methods on tasks.
Broken tools, misplaced tools, and malfunctioning tools all contribute to lost time.
The two typical ways materials can lead to lost profits: theft and misuse.
You can use proper ordering and storage along with visual surveillance to lower your theft rate.
Misuse, though, is potentially a bigger money loser than theft. If you order 10-foot two-by-fours for top plates on a wall and carpenters burn through them for blocking, that’s misuse. The reason you order specific types of materials for specific functions is to lower waste. If you have to use two eight-footers to replace one 10-footer, you’ll waste six feet of lumber—or end up with a six-foot piece that you must find a place for.
The biggest issue with tools is the loss of productivity. Broken tools, misplaced tools, and malfunctioning tools all contribute to lost time. Many contractors require craftspeople to bring their own tools—but how much productivity do you lose just because your employees’ personal tools aren’t up to the task? If you hire carpenters and require them to bring their own tools, how many will show up with hammers instead of nail guns? What about the loss of productivity when their personal tools go missing, when they’re stuck in the pawn shop, or when they are unsafe?
During an OSHA investigation, investigators will consider if the worker had the appropriate tools for the task.
During an OSHA investigation triggered by an incident, investigators will consider if the worker had the appropriate tools for the task. If the worker was using the wrong tool, or the tool required maintenance, then those facts will inform decisions about violations and citations. And, if you want to run a safe job site, you need to have a job hazard analysis. If you don’t know the tools in use and their conditions, you can’t know the hazards they bring to the site.
Equipment Theft and Neglect
Equipment theft is a multimillion-dollar headache for the industry. Increasingly, it’s not even entire pieces of equipment getting stolen, but rather high-tech and high-cost parts. If you aren’t using a multi-prong approach to securing equipment on job sites, it’s just a matter of time before something goes missing.
Another big way you might be losing money is by deferring or neglecting equipment maintenance. Construction machines have to operate in wild weather extremes; the colder, the hotter, the dustier the environment, the more maintenance that’s needed.
You can recoup the costs of change orders approved by owners. On the other hand, when you have to make changes because someone you supervise made an error, then you’ll likely be the one to bear the cost. The money you’re losing here includes the cost of materials, equipment time, and labor. There’s no easy way to make up for these losses, so contractors drain their own contingency funds to cover them. Worse case, these costs start coming out of money intended for future aspects of the project.
When you have to make changes because someone you supervise made an error, then you’ll likely be the one to bear the cost.
The second way these costs bite you is the shortcuts you might take to make up for them. When you substitute materials, equipment, or change your resource allocation on other portions of the job, you risk the schedule and the budget.
Hopefully, you go to great lengths early in the project to understand the specifications and request substitutions where you think you can improve performance. However, what about your subs, their subs, and all of your suppliers? There’s only one word to describe what you face when unauthorized substitutions happen: rework. Rework always costs more than doing the job right the first time. Avoid this headache by having a clear policy on substitutions.